Does Fed already have the power to tackle racial inequality?
By Neil Haggerty
Democrats in Congress have been calling for legislation to require the Federal Reserve to address racial inequality, but observers say that the central bank already has several regulatory tools at its disposal to tackle the issue. …Karen Petrou, managing partner at Federal Financial Analytics, said there are a lot of moves that the Fed can make that are “possible under current law.” She suggested that the Fed consider easing its risk-based capital rule, which is aimed at maintaining a capital cushion at banks that engage in substantial trading activities. “I think we need to relook at the risk-based capital rules, which unintentionally but significantly penalize lending to lower-income households and small businesses,” Petrou said.