In my last post, I wrote about how race and ethnicity will figure in President Obama's second term, whether anyone wants it to or not, and promised that this time I would lay out some steps to begin addressing America's growing racial wealth gap. Tempting as it is to address the spirited comments from readers who think we either shouldn't discuss race or that we already discuss it too much, for now I'll resist that temptation and stay focused on solutions that deserve a spot in the upcoming State of the Union address.
Nothing I'm suggesting is meant to denigrate any of the second term agenda the president has already laid out. Immigration reform, tax reform, the deficit and gun violence are all serious issues and the attention they are getting is warranted -- and in some cases long overdue.
But none of these things, important as they are, will address the societal tremors that are inevitable in a nation where, for every dollar a white family owns, the median Asian, Latino and African American families have, respectively, 63 cents, seven cents, and less than a nickel. In a nation where "minorities" will soon be the majority, that level of inequality is an invitation to disaster. So let me propose two additional agenda items for the president:
First, the administration urgently needs a homeownership agenda. The American Dream of homeownership is slipping away from millions -- disproportionately people of color -- and it doesn't have to be this way. This does not mean a return to the irresponsible and dangerous subprime lending of the bubble years. Pioneering efforts like the Community Advantage Program have shown that sustainable homeownership for working families of modest means is not only possible, it's good for both families and communities.
Models like Community Advantage have been proven to work, but haven't had the resources to reach anything like the scale needed. So a key element of second term housing agenda must be to promote and back such responsible homeownership models.
Meanwhile, Congress and bank regulators are looking at regulations that may make it much harder for working families to afford a loan. It's a bit too complicated to go into in detail here, but it's important to get these things right. For an introduction to some of these issues, check out this page.
Other prongs of a homeownership strategy should include public/private pools for down payment assistance and a plan to clear "shadow inventory" through homeownership. Millions of foreclosed properties are being snapped up by speculators when they could be used to provide affordable ownership opportunities for working families. Ultimately, that's bad for both families and neighborhoods.
In addition, the government should energetically support housing counseling programs. These programs don't cost a lot of money but can ensure that homeowners and potential homeowners are armed with the knowledge they need to make wise decisions. Given the way low-income and immigrant communities were targeted by predatory lenders during the bubble, this is critical. Unfortunately, access to counseling has been hampered by lack of funding.
Finally, we need to acknowledge that credit reporting is a mess. Millions of victims of predatory lending had their credit ratings trashed, often due to no fault of their own but because of trick loans or mishandled foreclosures exemplified by the robo-signing scandal. And quirks in the credit reporting system (for example, bank loans count in your credit score but rent and utility bill payments generally do not) put people of color at a systematic disadvantage. The president can't fix this all by himself, but he can take the lead in putting it on the nation's radar, as he's effectively done with other issues.
The other agenda item I propose involves small businesses in minority communities. If we want to bring prosperity to struggling communities, entrepreneurship is key. But all over the country thousands of businesses owned by people of color, from accounting firms to caterers, are doing great work but losing out on major contracts simply because it's hard to break through long-established "old-boy networks."
A while back, the California Public Utilities Commission developed an ingenious way of solving this problem via what's known as General Order 156, an amazingly successful program to encourage the utility and telecommunications companies it regulates to utilize diverse suppliers.
GO 156 is quite simple: Regulated utilities and telecoms are asked to report to what degree they contract with firms owned by women, minorities and disabled veterans. No one tells them whom to contract with or how many contracts they have to give to diverse-owned firms; they just need to report the information, which becomes a public record.
Every year my colleagues at The Greenlining Institute crunch the numbers and issue a supplier diversity report card. The results have been remarkable. The simple act of shining a light on these companies' contracting practices has led to a steady increase in contracting with diverse-owned firms, reaching nearly $3.5 billion in 2011. This is direct economic stimulus to the communities that need it most.
The GO 156 model deserves to be replicated elsewhere, and federal banking regulators have been handed a golden opportunity. The Dodd-Frank financial reform law established Offices of Minority and Women Inclusion in all of the major financial regulatory agencies. In addition to looking out for diversity issues within the agencies, the OMWIs are tasked with developing standards for "increased participation of minority-owned and women-owned businesses in the programs and contracts of the agency" and evaluating the diversity practices of the entities the regulators oversee.
The OMWIs are still sorting out how to approach their new responsibilities. California has given them a road map that they should follow as quickly as possible, but bureaucratic inertia can get in the way. President Obama, still struggling to find ways to stimulate a weak economy, can make a huge difference by using the State of the Union to give a shout-out to this important effort.
America really can have prosperity that reaches all of our communities, but to make it happen, the president needs to lead.