WASHINGTON (Reuters) – U.S. Vice President Kamala Harris and Treasury Secretary Janet Yellen on Tuesday announced more than $8.7 billion in capital investments in community development financial institutions and minority-owned banking firms to boost lending in disadvantaged areas, the Treasury said.
The capital allocation for 186 institutions is part of $12 billion in funding provided for CDFIs and minority banks that was included in coronavirus relief legislation passed at the end of 2020.
Harris had helped author the lending provision as a senator and it was signed into law by former president Donald Trump.
“We know that the communities hurt most by COVID-19 have often been communities of color, and Treasury has implemented relief legislation with equity in mind,” Yellen said in a statement.
The investment follows an initial allocation of $1.25 billion from the COVID-19 relief funds to 863 community lenders in June.
The states with the largest number of institutions being offered new capital include Mississippi, Louisiana, North Carolina, California, and Texas, the Treasury said.
Among the institutions recommended for capital investments of less than $100,000 to over $200 million, approximately 54% are banks and 46% are credit unions. Treasury said it was offering $3.1 billion to 57 minority institutions.
The announcement came at the Treasury’s annual Freedman’s Bank Forum, launched in 2016 by then-Treasury Secretary Jack Lew when he renamed the Treasury Annex building across from main Treasury the “Freedman’s Bank Building.”
Abraham Lincoln created the Freedman’s Savings and Trust Co in 1865 for newly emancipated Black Americans to safeguard their earnings, build financial security and generate family wealth. The bank helped some 100,000 Black people and institutions amass $57 million in savings and wealth, and paved the way for today’s minority depository institutions.
But the racial wealth gap persists. U.S. data shows the typical white family has eight times the wealth of the typical Black family and five times that of the typical Latino family.
Yellen said that Treasury was working to channel the CDFI funds to those institutions best able to get more lending into disadvantaged communities, particularly those of color.
Yellen recently appointed the Treasury’s first ever counselor on racial equity, said she will soon make appointments to a new racial equity advisory committee.
(Reporting by David Lawder; Additional reporting by Nandita Bose; Editing by Paul Simao and Marguerita Choy)