January 28, 2021

HUD Secretary Nominee Congresswoman Fudge and Chair of the Council of Economic Advisers Nominee Dr. Rouse Agree with Senator Warren That We Must Work to Close the Racial Wealth Gap

As the pandemic continues to exacerbate racial disparities, Senator Warren provides two ways to stop a widening racial wealth gap: provide down payment assistance for families living in formerly-redlined neighborhoods and cancel up to $50,000 in student loan debt; Senator Warren: "It's time for an all-hands-on-deck approach to tackling the shameful racial disparities in our economy."

Video of Exchange (Youtube)

Washington, DC - In a Senate Banking Committee hearing today, United States Senator Elizabeth Warren (D-Mass.) spoke with the nominees for U.S. Department of Housing and Urban Development (HUD) Secretary, Congresswoman Marcia Fudge, and Chair of the Council of Economic Advisers, Dr. Cecilia Rouse, about how providing housing down payment assistance for families living in formerly redlined neighborhoods and cancelling up to $50,000 in student loan debt would help narrow the racial homeownership gap and racial wealth gap. In response to Senator Warren's questions on the need for the government to help address these racial disparities that have been exacerbated by the ongoing pandemic, both nominees agreed that we need to pursue policies to close the racial wealth gap. 

U.S. Senate Committee on Banking, Housing and Urban Affairs
Thursday, January 28, 2021

Senator Elizabeth Warren: Thank you, Mr. Chairman. And congratulations to both of you on your nominations. Thank you for being here with us. 

We live in an America today where a typical white family has eight times the wealth of a typical Black family, and five times the wealth of a typical Latinx family - gaps that haven't budged in decades.

Now, Dr. Rouse, you have done important research on racial and economic equity throughout your career. Could you tell us what it would mean for American families and for our economy if we pursued policies that closed the racial wealth gap substantially? 

Dr. Cecilia E. Rouse: Senator Warren, I think we share a concern about the increasing wealth gap, and I think if we step back and first consider why wealth is important and why the racial wealth gap -- or any wealth gap -- is important.

First, wealth represents a cumulative impact of inherited resources. Right, it's income over one's lifetime and expenses incurred. It's a reflection of family circumstances, it can be luck, but it also reflects obstacles in the labor and financial markets. And so the Black-white wealth gap, in particular, can be attributed to a history of discriminatory policies, such as redlining. And importantly, this legacy continues to replicate itself  generation to generation as those without accumulated wealth cannot pass it on to their children. 

The second part of why I believe it is important is that these differences are consequential. So, wealth is protective and is important for wellbeing. So, increased wealth has been associated with better health outcomes and better financial resilience. And during this pandemic, what we've seen is that those with greater wealth had more resources to fall upon when the economy slowed. So, it provides a kind of self insurance against economic adversity. It also provides access to housing and safe neighborhoods, with good schools, which confers additional advantages on those who can afford such opportunities. And so, closing the wealth gap is not about trying to literally take away, but it's trying to ensure that everybody can participate in this economy. 

Senator Warren: Well that's powerfully important, thank you. You know, one big contributor to the wealth gap is student loan debt. Black and Latinx students borrow more money to go to college and they have a harder time paying it off.

If the President cancelled up to $50,000 in student loan debt, as Leader Schumer and I have called for, it would close the racial wealth gap among people with student loan debt by about 25 points.

Cancelling $50,000 in federal student loan debt is the single biggest thing the Administration could do on its own to narrow the racial wealth gap. So I hope we'll get a chance to work together to make this happen.

I want to turn to another piece of the racial wealth gap, and that is homeownership.

Owning a home is the number one way that middle-class families build wealth.

But here's the ugly truth: the racial homeownership gap is now wider than it was when Congress outlawed housing discrimination back in the mid-1960s.

And this difference can be traced directly to decades of racist federal policies, including redlining, that denied Black families the same path to homeownership that was available to white families.

Since the government created this problem, it seems only right that the government should help fix it. 

So, Congresswoman Fudge, you've spent your career working to improve the lives of people in communities of color. If the federal government provided help with down payment for families living in formerly-redlined neighborhoods, would that make a difference in narrowing the racial homeownership gap and the racial wealth gap?

Congresswoman Marcia Fudge: Thank you very much, Senator. It would make a huge difference, because that is the biggest impediment to homeownership for communities of color --- is the down payment. We meet all of the other qualifications. It's like us being in a race with people who have already had a head start. Because we don't have a mother or father to give us a downpayment. We don't have the wherewithal, the same kind of income, the same kind of access, and so it is like we are starting out of the blocks with somebody who was out ahead of us by a hundred yards. Down payment assistance is a major, major impediment, and if we can fix that, you would see a tremendous growth because no matter what they say, homeownership amongst Blacks right now is the same as it was in 1968.

Senator Warren: Thank you, Congresswoman. You're very powerful on this. We need to take action before the pandemic widens the homeownership gap even more. 

It's time for an all-hands-on-deck approach to tackling the shameful racial disparities in our economy. Providing down payment assistance is one powerful way to do that. Administratively cancelling billions of dollars in student loan debt is another.

I know you both care deeply about these issues. I'm looking forward to working with you in your new roles.