The Fed faces calls to do more to battle systemic inequality

From local governments to sports leagues, a host of institutions have started taking real action to address systemic inequality in the wake of nationwide protests over police brutality and racism — and the Federal Reserve may not be immune.

Driving the news: Chair Jerome Powell chafed at a question during the Fed's latest policy meeting about the way the central bank's policies have contributed to wealth inequality — a longtime grievance of politicians and market watchers, but a subject rarely broached at Fed press conferences.

• If the Fed pulled back its support for the economy because it was worried about its impact on equity prices, "What would happen to the people that we’re actually, legally supposed to be serving?" Powell huffed.

The backdrop: In his time as Fed chair, Powell has worked to change the image of the Federal Reserve from a clandestine vessel of Wall Street to a force to uplift all Americans.

• He's made the Fed more visible with more press conferences and media appearances, started the national "Fed Listens" tour and created the first-ever Main Street Lending Program.

Yes, but: The striking dissonance between the fortunes of Wall Street and Main Street over the past two months has been a clear reminder of just how much the Fed has helped big banks and wealthy investors and how little it has provided directly to average Americans.

That could change. The Fed is slowly pushing the envelope on its special purpose vehicles so that they serve more functions that would typically require funding from elected officials.

• The Fed's Main Street Lending Program and its Municipal Liquidity Facility will allow the Fed to get money to cities and states as well as medium-sized businesses, and the Fed recently has expanded eligibility for both.
• That money can help avert layoffs for local government workers like teachers and firefighters and provide a lifeline to struggling business owners.

What we're hearing: "They’re not necessarily done yet," Vincent Reinhart, chief economist at Mellon who previously spent 20 years at the Fed, tells Axios.

• The Fed could use the Main Street facility or a similar special purpose vehicle to get money to working families or small business owners through a series of packaged or collateralized loans from banks and get the same favorable lending terms and features.
• "That’s not out of the question," Reinhart says. "They may go down that road."

A radical change at the Fed spurred by civil rights upheaval and designed to battle systemic inequality would not be unprecedented.

• The Fed's dual mandate of price stability and full employment (the only central bank dual mandate on earth) is in part the result of Coretta Scott King's work on passing the landmark 1978 Full Employment and Balanced Growth Act, also known as the Humphrey-Hawkins Act.

What it means: The Humphrey-Hawkins Act "clarified the role that monetary policy can play in improving the employment picture and required the Fed to weigh the impact that its interest rate policy would have on the job market," a policy paper from the Center for Economic and Policy Research notes.

Go deeper: Coretta Scott King and the Fed's full employment mandate