May 21, 2020

Powell “Fed Listens” Event Transcript: How COVID-19 Affects Communities

Jerome Powell hosts discussion on how COVID-19 affects communities
RevBlogTranscriptsPowell “Fed Listens” Event Transcript: How COVID-19 Affects Communities

The Federal Reserve & Jerome Powell held a virtual “Fed Listens” event where they talked about how coronavirus is affecting different communities. He said the US economy faces “great uncertainty” and lower income Americans are bearing the brunt of the impact.

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Jerome Powell: (00:00)
… flood of data that flows through the Fed every day. You give us perspective on the economic realities that don’t show up on a spreadsheet. You help us see those complex sets of data that analyze the American economy through the eyes of the people, businesses, and communities that make up the American economy. That information is very helpful to us as we make our policy decisions. This is a valuable exercise for us and an enjoyable one as well. We truly do appreciate it on a number of levels. The reserve banks are also continuing to hold conversations in communities across the country to help capture economic realities on the ground.

Jerome Powell: (00:37)
We are in the midst of an economic downturn without modern precedent. It was sudden, and it is severe. It has already erased the job gains of the past decade and has inflicted acute pain across the country. While the burden is widespread, it’s not evenly spread. Those taking the brunt of this fallout are those least able to bear it. The pain of this downturn is compounded by the upending of normal life, along with great uncertainty about the future.

Jerome Powell: (01:04)
In the best of times, predicting the path of the economy with any certainty is difficult. In fact, John Kenneth Galbraith famously said that economic forecasting exists to make astrology look respectable. We are now experiencing a whole new level of uncertainty. As questions only the virus can answer complicate the outlook.

Jerome Powell: (01:26)
Policies that address the resumption of economic activity or the province of elected officials at all levels of government in close consultation with public health and medical professionals, but all of us have our own decisions to make as well. Those decisions will depend on public confidence that it’s again safe to undertake various activities.

Jerome Powell: (01:46)
From an economic perspective, we hope to learn a lot from your experiences and from what you’re hearing from your colleagues, customers, and communities; how they’re coping with that uncertainty now, how they’re thinking about a future that’s harder to plan for and what matters most as they navigate the path. The feedback we get from our community and business contacts has always been crucial in how we conduct monetary policy in extraordinary times, such as these, it takes on even greater importance. I want to thank you again for providing that insight and I very much look forward to our conversation.

Jerome Powell: (02:21)
With that, I will turn it over to a Governor Brainard. Lael, over to you over to you.

Gov. Lael Brainard: (02:27)
Well, thank you. Well, thank you. This is the 15th [inaudible 00:02:32] event. Over 16 months, we have listened to diverse voices from every type of community, every sector and every district of our country. This rich set of perspectives is helping bring alive for us the importance of the review of our monetary policy, strategy, tools and communication practices led by Vice Chair Rich Clarida.

Gov. Lael Brainard: (02:53)
We’ve heard that maximum employment brings vital benefits, takes a very long time to arrive in many neighborhoods and is not captured in a single national statistic. We’ve heard that inflation matters. Households at different life stages and in different places are balancing the cost of living against their earnings while businesses are balancing wages and other costs against their pricing power. We have heard that access to credit matters and that it’s important to use a full range of tools to support the economy.

Gov. Lael Brainard: (03:27)
When we embarked on this listening journey, little did we know that our nation would experience the heartache associated with the COVID-19 pandemic, an emergency unprecedented in modern time. Last year, we heard from small businesses that were expanding their workforces and investing in their communities. Today, many of those same businesses are running low on cash reserves and struggling to make rent and payroll, especially those in consumer services, such as restaurants and retail.

Gov. Lael Brainard: (03:57)
Last year, national unemployment had fallen to its lowest point in over five decades. Today, it’s surged to levels not seen since the Great Depression. Last year, historically challenged groups were gaining a foothold in the workforce and employers were investing in training and loosening job eligibility requirements. Today, the fallout from COVID has clearly hit groups with the thinnest financial cushions hardest: Workers in the lowest quarter of earnings, people of color, low and moderate income communities and women disproportionately employed in services jobs.

Gov. Lael Brainard: (04:35)
As we think about how the Federal Reserve’s tools and presence in communities around the country could best provide stability at this trying time and strong support for the recovery to come, we wanted to turn again to many of the same voices we heard from earlier to learn how the COVID pandemic has affected your communities and what lies ahead.

Gov. Lael Brainard: (04:55)
So with that, I want to turn to the panelists. I’m going to ask each of you a question that references what we’ve heard from you in our interactions before the COVID pandemic to explore what has changed. I would invite my colleagues to jump in with their questions as we go. We’re going to start with Amanda Cage.

Gov. Lael Brainard: (05:16)
Amanda Cage is president and CEO of The National Fund for Workforce Solutions, a role she assumed in March 2020 after eight years at the Chicago Cook Workforce Partnership. The National Fund invests in a national network of 33 communities taking a demand-driven, evidence-based approach to workforce development. Leveraging its local partners, the National Fund shares learning across the network.

Gov. Lael Brainard: (05:42)
Amanda, here’s a quote from you last October: “What we’re seeing is huge disparities in what unemployment looks like for neighborhoods: 17.2% in Englewood, 15.7% in Fuller Parks, 15.1 in West Englewood. That’s the best that they have ever been, and these are the same rates that we considered catastrophic for the national picture at the height of the recession.” That was at a time when average unemployment across the country was below 4%. Today, it’s 20% overall. How have things changed for residents of neighborhoods in Chicago, such as Englewood and Fuller Park over the past few months? Amanda, over to you.

Amanda Cage: (06:26)
Thank you for inviting me to be part of this conversation today. How have things changed for these residents? First of all, they’ve been hit hardest by the coronavirus. In Chicago, coronavirus cases are concentrated in black and Latin-X communities. Black residents represent 32% of the infections and half of the deaths. Latin-X residents, 45% of the infections, and those numbers are rising.

Amanda Cage: (06:55)
The jobs that sustained these neighborhoods disappeared overnight. If you worked for a hotel or a restaurant, you were a childcare or home care worker, a security guard, an administrative assistant, your services were no longer needed during shelter in place. If you were entrepreneur and had your own small business, it shut down. If your job didn’t disappear, they blew up. If you’re a truck driver or a warehouse worker or worked at a grocery store, you were working more now than ever and being asked to do more, to work more hours under riskier conditions. These workers are really facing a difficult equation, risking their physical health or making ends meet. This isn’t a hypothetical question for these folks. If you live in a black neighborhood in Chicago, you know of somebody who has died from coronavirus. You know scores of people who’ve been infected. This question is weighing very heavily on the family in these neighborhoods.

Amanda Cage: (07:53)
When I spoke last October, we were experiencing a lot of economic expansion and the lowest unemployment rate in 50 years, and the problem that we were focused on was shared prosperity. How could we use this tight labor markets to chip away at persistent racial inequities? How could we bring people back into the labor market who had been excluded? We’re working with employers who were desperate to recruit and train and retain workers. We were helping them figure out how to improve the quality of their jobs so they could be more attractive.

Amanda Cage: (08:28)
On March 1st, I walked into a new position as the CEO of The National Fund for Workforce Solutions to work on these issues on a national scale. Two weeks into my tenure, the world turned upside down. Now I work with communities across the country who are just trying to respond to the crisis.

Amanda Cage: (08:46)
The National Fund has collaborated with the United Ways, community foundations, workforce boards, and chambers of commerce. We’re trying to address the immediate need. We’re helping millions of people as they stand in virtual line for unemployment. We’re trying to figure out how to provide education and training services to people who don’t have access to computers or internet connections. We’re trying to rapidly deploy laid off workers because there are companies who are still hiring.

Amanda Cage: (09:17)
I just want to close by talking about this 20% unemployment figures. I keep hearing the same refrain, “Not since the Depression Era, not since the 1930s.” But we have a modern day image of what 20% unemployment looks like. It looks like Englewood, on the South Side of Chicago. It looks like our communities that are experiencing the most distress in our urban neighborhoods and our rural towns. I think that as a country, we don’t have a sense of what 20% unemployment looks like for the rest of us, even if it is short-lived.

Gov. Lael Brainard: (10:01)
Thank you, Amanda. I’m going to pause for just a second and see if any of my colleagues want to jump in and ask a question. Otherwise, I’ll go to the next panelist and give them another opportunity afterwards.

Gov. Lael Brainard: (10:17)
All right. Why don’t we go to the next panelist and invite you to come in whenever you choose. Next, I want to turn to Pat Dujakovich, who we commonly refer to as “Duke,” who is a former firefighter and the president of The greater Kansas City AFL CIO, which advocates for workers at all levels of the economic spectrum, from the players of the Super Bowl champions, the Kansas City Chiefs, to the men and women who maintain and clean the stadium.

Gov. Lael Brainard: (10:52)
Duke, last June, you reported that one of the really great things about the good jobs market is that it was providing the most vulnerable people in Kansas City with a foothold in the workforce. But you also talked about preparing for a downturn. Here’s your quote: “If the last people you hire are the people you’ve determined are not your first choice, they’re going to be the first ones gone. Let’s make sure we’ve got something in place where we will offer them some ability to move to part-time or some opportunity to train for something else to stay in the workforce. But once you lose them, it’s extremely difficult to get them back.”

Gov. Lael Brainard: (11:30)
Since that time, because of COVID, we’ve seen layoffs in some sectors skyrocket and rising concerns about health and safety in other industries. What worries you most about how workers and particularly vulnerable workers are doing?

Pat Dujakovich: (11:49)
Well, thank you, Governor Brainard. I really appreciate that.

Pat Dujakovich: (11:53)
The biggest worry for me is that some of the most vulnerable will lose hope. Hope is another very important intangible that has an impact on the economy. I mean, I kind of look at it as kind of like consumer confidence, but probably a lot harder to measure because the people without the education or skills to be considered for a job or the people who made a mistake and possibly had a criminal record, they were knocked out of contention for employment. Those people were getting jobs. They had the ability to make the future brighter. Now we saw movement in the right direction for women and people of color. Now far too many of them are once again, out of the workforce. We all hope it’s just for a little bit longer, until everybody’s back and everybody makes it out and survives and is on the other side of this, but that just might not be the case. It’s really scary.

Pat Dujakovich: (12:49)
The stimulus checks and the increases in unemployment have worked very well to keep family solvent, but it’s going to end soon. Here’s the big question we’re struggling with: What’s going to last longer, the money or the virus?

Pat Dujakovich: (13:02)
What’s going to last longer, the money or the virus? Will we be back at work with paychecks when the unemployment payments end? If not, how big is that gap going to be? Because a lot of people don’t have the resources to be able to cover that gap for very long. So many people are living paycheck to paycheck. There’s a real fear we’ll see more homelessness when this is all over. Now in 60 Minutes, Chairman Powell said that when people are out of a job for long periods of time their skills atrophy, and they lose contact with the workforce and that longer and deeper recessions do damage people’s careers. That’s very true. And it’s also true that employees with more experience tend to have more sustainable skills and a stronger connection to the workforce that won’t fade as fast as newly employed people. Most of us don’t even exactly know when it happened or some don’t even realize it happened, but at some point in almost everyone’s life, your job becomes a part of your identity.

Pat Dujakovich: (14:06)
We use it when we describe or introduce ourselves to others and the career damage is going to be more severe and longer lasting to those that haven’t formed that bond yet. We all have safety nets in life. We have families, friends, there’s government programs, there’s even charities to fall back on. But a lot of the people that we’re talking about here have used up all of those resources previous to being employed.

Pat Dujakovich: (14:37)
I’m also really concerned with what it’s going to take to get back to the point where labor was in such high demand, that wages were headed in the right direction. I mean, prior to the crisis, employers across the country, and pretty much in every sector were saying the same thing, “I can’t find qualified workers.” Then this hit and again, it is across the country and in pretty much every sector where people are losing their jobs.

Pat Dujakovich: (15:03)
So how far do we have to get back to the point where we’re seeing people who weren’t the first choice, getting employment. What’s it going to look like for workers when they’re on the other side of this? We all understand that companies want to restart and produce things and please, trust me, workers want to go back to work, everyone does. We all know that there are going to be risks and they’re going to have to be taken. But when we get America back open for business and fully open, there’s just not going to be a good way for people to work safely for so many people. Manufacturing and assembly lines, a lot of times takes two people in a very close proximity to be able to complete a task. There’s just not really going to be a good way to try to separate them. The meat processing plants are basically assembly lines in reverse. People are working very closely and they have got no choice, but to be there. Thank you.

Speaker 1: (16:12)
Thank you Duke. All right, I’m going to again, pause and just see whether my colleagues have a question for Duke or Amanda.

Jay: (16:22)
Duke or Amanda, this is Jay. I’ll go ahead and just say, first of all, thanks to both of you so far for your comments. We all know it really was… it’s a time over the past year or so where we’ve had the tightest labor markets in 50 years, discuss this with many, if not, all of you and how things felt different and a tight labor market really has a lot of benefits. And so it’s tragic, it’s heartbreaking to see that go away. Our commitment, of course, is to get us back on the road to recovery and try to get back to that. We will not rest until we are back on that road and we’ll push as hard as possible.

Jay: (17:01)
I was interested to hear you say Duke, that the relief from unemployment insurance and the checks is getting through. That’s good to hear. I’d love to hear if others feel the same way. The other thing is, are people beginning to see…. Is there any sense of going back to work yet in your community or others? Do you start to feel people going back into the workplace now, or is it still too early for that? How are people thinking about that?

Pat Dujakovich: (17:34)
Well, I can take a stab at that if [inaudible 00:17:39]. So under the Defense Production Act, the meat processing plants, we just talked about were classified as essential infrastructure that have to remain open. And so the people there faced a decision that they needed to return to work or stay at home with probably very little or no income. It’s a very tough decision. And it became even more difficult for people who lived with somebody who’s a high risk family member. So many of the people that I know, they view their parents and grandparents as fragile family treasures, and they’ve been very, very protective of them and keeping them sheltered in place. It makes it tough if you’re going there and you’re working a shift. I can tell you personally, I provided care and transportation for my brother when he was battling cancer. There is no way I would have taken him to chemo after doing a shift right beside somebody who we now, no, in fact, did test positive for it one of these facilities.

Amanda: (18:44)
I would just add, I think originally many of us thought businesses would just close down and reopen. In particular, in certain industries, we are just seeing that those industries are shifting in a way that we didn’t anticipate. I think hospitality and healthcare in particular, who hire a lot folks who we care about, who we’re talking about, they’ve just changed in fundamental ways. I think healthcare and hospitality were these industries that we thought were sacred and protected from a lot of the other forces in the economy that we’ve worried about in the past. We’re just seeing that that’s not true.

Amanda: (19:29)
If you worked in hospitality, it has very little barriers. You can walk into that job. If you have a union hotel job in Chicago, you’re making $20 an hour off the bat. There’s not a parallel job to that for these folks and those jobs aren’t coming back. Not coming back anytime soon. Healthcare, which we thought was again, was sacred, we’re seeing lay offs. We’re seeing people who are disconnected to these two industries that were experiencing growth before. So I don’t think we’re seeing the people being reemployed like we thought we would see either three weeks ago or four weeks ago.

Speaker 1: (20:11)
Thank you, Amanda.

Jay: (20:12)
Thank you.

Speaker 1: (20:14)
So let me continue on. And then again, I invite my colleagues to come back in after we’ve heard some more of the panelists. So now I want to turn to Juan Salgado who is Chancellor of the City Colleges of Chicago. Juan has focused his career on improving education and economic opportunities for residents in low income communities. As Chancellor, he oversees Chicago’s community college system, working to put more than 70,000 students across seven colleges on the path to upward mobility.

Speaker 1: (20:53)
Juan, at our conference last June, you said that your students at the City Colleges of Chicago who are largely African American and Latin X were benefiting from apprenticeship programs with local businesses and from having pathways to entry level jobs, that might historically have gone only to students with four year degrees. These apprenticeship programs have been created in response to difficulties locating employees in what was then a very tight labor market. What’s the state of these apprenticeship programs today? Do your students see the pandemic as a surmountable setback or are they worried about lasting effects on their ability to get ahead?

Juan Salgado: (21:35)
So again, thank you for the invitation. Can you hear me well?

Speaker 1: (21:39)

Juan Salgado: (21:40)
Very good. I think I want to start by speaking about our students overall. When you think about our students overall, they are students that are in the low labor market. They are working to up-skill to get better opportunities. This has been devastating to the wide, large number of students that we have in our system. They are feeling the impacts in very formidable ways, but when it comes to the apprenticeship initiative, I do want to give a little bit of hope here, right? Because the reality is that we have not seen our employers pull back, okay. We in fact, had an employer just the other day, took four of five apprentices as full-time employees and re-upped the double number of apprenticeship they were doing before now.

Juan Salgado: (22:40)
The apprentice program is still very small, but I do want to say that for those students that became apprenticeships, they have a different and privileged place in society, in relationship maybe to all the people around them. That is that they’re working from home. They still have jobs. They have an employer that’s supportive of them, like you and I and all of us on this phone call have. When you think about what’s happening to Latin X and African American communities, keep in mind that only one in five African Americans can work from home. Only one in six Latinos can work from home. And so, what have done in the past through apprenticeship is creating circumstance where that is going to be life changing for these students, right? If they can keep that employer attachment. So far, they have been, because of the value they’re providing to the company and the value that the companies provide and the workplace flexibility that exists in these particular industries.

Juan Salgado: (23:58)
Of course, these were higher growth industries that are still fairly stable. So what I want to say is that we should be looking into the things that were working before the pandemic, as strategies that we need to be going to, doubling, tripling down on, to get out of the pandemic, to make sure that equity is taking into account and more than taken into account is at the forefront of how we respond to the pandemic.

Juan Salgado: (24:31)
This is an opportunity for us to dream of and then realize never again to have double digit unemployment in one community in the same city where you have single digit employment, just a few miles away… unemployment, just a few miles away, to have a nation with that kind of disparity. So how do we design our solutions to ensure that that fact is what occurs? I got to think that apprenticeship learning and learning is a key component. I think that the attachment and the sustainability so far of that strategy is a bearing out that we ought to continue on that road.

Speaker 1: (25:24)
Thank you very much Juan. So let me pause for a second, let’s see if we have any questions

Amanda: (25:31)
… Continue with classes and enrollment, are you struggling with remote learning and tuition and all those sorts of things and how are you thinking about the fall?

Juan Salgado: (25:46)
[inaudible 00:25:46] appreciate you asking us that. We actually had a very successful transition to remote learning, but we were prepared for it in many respects, learning management systems, employees that were trained already on Zoom, that were utilizing this kind of technology.

Juan Salgado: (26:02)
… that we’re utilizing this kind of technology and to some degree, students that were as well. I think that our pain points relate more to our students’ pain points. As it relates to the fall itself, one of the things that for any business, and certainly for an education institution, you’ve got to have some level of certainty that you can drive to the people you’re going to serve. And that’s probably the hardest part right now, is that all we can give them is scenarios of what the learning environment might be. And the good news is, they’ve had some exposure and some experience with the remote capability and the remote platform, albeit forced upon them. I don’t know how many are going to choose that platform, right, voluntarily because of health and safety reasons, how many will choose to come to campus should we be able to come to campus and we are certainly preparing for that.

Juan Salgado: (27:04)
And so, I think that we should keep our eye on the choices that people are making during this time and the impact that’s going to have and certainly, we’re guided by trying to provide as many choices as possible because every student is a world upon themselves. The family networks, as was talked before, they may make different choices based upon their living conditions, housing conditions, family support structures, all of those things, and we have to be flexible for them in that regard.

Juan Salgado: (27:39)
The last thing I’ll say Chair Powell, is that community colleges I think will play a big role in the recovery because of our accessibility and our affordability, and increasingly, because of the quality that we provide.

Jerome Powell: (27:55)
You’re saying you’re providing them. Do you expect that most of them at least will be able to continue with this in the current environment, with the education they’re getting from you?

Juan Salgado: (28:10)
We are doing everything we can to support them. We do know that greater financial supports are going to be necessary, because they are these workers that have lost their jobs, and certainly they’ve gotten… Some of them have gotten checks, and some of them have gotten emergency student relief from us as well through the CARES Act, but we’re going to have to find ways to support those students and we’re raising philanthropic resources.

Juan Salgado: (28:38)
For instance, we’ve raised nearly $3 million in the last three weeks to actually help pay for tuition and looking at other mechanisms to have a retention high.

Jerome Powell: (28:52)
Thank you.

Lael Brainard: (28:54)
All right, so let me now turn to Darrin Williams. Darrin’s the CEO of Southern Bancorp, a family of three community development financial institutions, consisting of a bank holding company, a community bank, and a non-profit loan fund serving low to moderate income communities in Arkansas and Mississippi. Offering financial products and financial development services focused on helping families build wealth and increase economic mobility, Southern Bancorp is a certified B corp, and member of the Global Alliance for Banking On Values. It has $1.5 billion in assets and 400 employees, serving 65,000 customers.

Lael Brainard: (29:39)
Darrin, a few years ago, you introduced me to [Vernetha 00:29:43] Jackson, one of your customers in Helena, Arkansas, who had gotten her first mortgage at the age of 63. We visited towns in the Mississippi Delta that has had a hard time retaining bank branches. Mission-oriented banks and CDFIs are truly financial first responders. Can you give us a sense of how low and moderate income communities in the Mississippi Delta are getting access to PPP loans and the recovery rebates that were included in the CARES Act and how those communities are weathering the COVID crisis?

Darrin Williams: (30:18)
Thank you, Governor Brainard and to you and Chairman Powell and distinguished members of the Federal Reserve Board, we appreciate you including Southern Bancorp as a part of this important discussion. Governor Brainard, in anticipation of your question, I reached out to Vernetha Jackson yesterday and she still remembers the meeting, and she told me to tell you hello. She wanted you to know that she’s still enjoying her home, that she’s worked diligently on their yard. Wish I could send you a picture, but she wants you to know that she’s doing well and building her wealth through home ownership, and very, very proud of her. Fortunately for her, she’s not impacted directly by COVID. Her job is still safe in the school district, and she has a beautiful home to come home to every day. Now, with regard to the Paycheck Protection Program, recognizing the importance of the loan [inaudible 00:31:07] Paycheck Protection Program, Southern really aggressively reached out to our customers when the Paycheck Protection Program first rolled out. We recognized that those proceeds would be the lifeline of the communities that we serve in the Arkansas Mississippi Delta. So, on the very first day the program opened, on April 3rd, we actually processed and funded our very first loan but many larger banks kind of stumbled out of the gate and did not really know how to access the program.

Darrin Williams: (31:38)
I’m proud to say that as of yesterday, we’ve done over 1,225 PPP loans for over $110 million. I can assure you that the loans that we’ve done have really reached the smallest of small businesses. In fact, in the first round, where we saw some of the larger small businesses, our average loan size was only $147,000. But in the second round, that average loan size has gone down to about $44,000. I will say over the last 300 or so PPP loans that we’ve done, the average loan size is about $15,000. And in fact, in the first round, we did 553 PPP loans. 75% of those loans in round one went to businesses with 25 or fewer employees.

Darrin Williams: (32:26)
We’re seeing many, many more sole proprietors and independent contractors and so the average loan size continues to come down. And over the last week, we’ve been averaging about 10 loans per day coming through our channels, through our 48 locations throughout our communities. And so, we think that we and other CDFIs across the country are really helping to reach some of the smallest of small businesses. And we really applaud Congress and the administration for having the foresight to carve out in round two a small amount of resources that went directly to the small businesses through CDFIs and through small community banks.

Darrin Williams: (33:07)
I might note that the $30 billion that was carved out for CDFIs and small community banks actually was exhausted in one and a half days. So you can see there’s a rich demand for the Paycheck Protection Program. I guess I might also point out that in Phillips County, Governor Brainard, where you visited Ms. Jackson, we actually did 125 PPP loans for about $7.6 million. That’s a county of less than 12,000 people. And so again, the PPP loan proceeds have been a lifeline for the employees that have been able to access that program.

Darrin Williams: (33:46)
Now, with regard to some of the other CARES Act programs, particularly the Federal stimulus checks, we have been inundated with people wanting to cash those checks. In fact, between April 15th and May 17th, $32 million in stimulus proceeds have come through our bank either through direct ACHs to our customers who had their account on file with the IRS or through people who came through our drive-throughs to actually cash those checks. And because it was so important for us that customers and non-customers have access to cash those checks, we cashed non-customers’ checks without any fees at all, to make sure that they were able to secure the vast majority of those proceeds.

Darrin Williams: (34:39)
The markets we serve typically in Mississippi, and Governor Brainard, you saw this. They’re just inundated with payday loan service centers and check cashers, which take a large percentage of even government checks to cash, and so we cash those at no fee to folks that came through our drive-throughs since we of course now, our lobbies are closed. So that was about 20,000 transactions we’ve seen so far, and they still continue to trickle in. Unfortunately, Arkansas and Mississippi have some of the highest un- and under-banked rates in America, with about 26% and 38% respectively in Arkansas and Mississippi that are un- or under-banked, and so it’s important that we provide that support.

Darrin Williams: (35:21)
For other customers, we really try to make sure that we’re helping them bear the impacts of COVID-19. So for our consumer loan customers, we provided a three-month payment holiday of principal and interest on any loan for our consumer customers. And on a case-by-case basis, we talk with our commercial loan customers and provide them with also various forms of payment relief from interest-only payments to complete deferrals of payments. And then of course, the SBA provided payment relief for our SBA borrowers. I will say that since we’ve done that, about 15% of our entire portfolio has taken advantage of some form of payment relief. So we’ve got about $150 million in some type of payment deferral out of our billion-dollar loan portfolio.

Darrin Williams: (36:12)
Now, I’m not sure that everyone needed that relief, but people are frightened. They’re scared, they’re nervous, so people wanted to hold onto as much cash as possible. And so they took advantage of that debt relief. Additionally, we are really promoting right now online and our mobile products, really trying to move people to those platforms. We’ve also waived various fees as we experience these COVID-19 issues for mobile [inaudible 00:36:41], late payment fees, we’ve waived many of those. And as a CDFI that focuses heavily on providing financial literacy, financial counseling, what we call financial development services, we are really pushing our financial counseling and we’re doing that more and more through Zoom.

Darrin Williams: (36:57)
And so our credit counselors are actually talking to people via Zoom, from their home to peoples’ homes, really trying to help them weather the impacts of COVID-19. So, all in all, I would say that in the Delta community that we serve, we have faced tough economic conditions for a very long time. The markets that we serve look very, very much like what Amanda talked about earlier, with double-digit unemployment even pre-COVID when employment rates throughout the country were much less. So, these markets have faced higher unemployment, higher job loss, higher poverty as a result of structural inequalities and inefficiencies in our economic system and this hasn’t gone away.

Darrin Williams: (37:37)
My fear is that long term impact of COVID-19 will only broaden these inequalities in income and in wealth in the communities that we serve. You can look at the research by the Surgo Foundation which really talked about those communities that are… have a community vulnerability index. And it’s not necessarily communities that are having the most health impact from COVID-19. It’s those that had a number of structural challenges like the Arkansas and Mississippi Delta that would have the longest term, long term impact of COVID-19. In fact, the FEMA Disaster Studies show that 40% of the businesses that [inaudible 00:38:12] never return.

Darrin Williams: (38:13)
And of the 60% that do return, about one-third don’t last two years after the disaster. So we’re concerned about the impact. We’re resilient, we’re going to try to make it through but the structural inequalities in our system really make it difficult for the markets that we serve. I really appreciate you all inviting us to be a part of this conversation. Thank you very much.

Lael Brainard: (38:36)
Thank you very much, Darrin. It’s a good reminder that financial services are often emergency services when we have national emergencies such as this. I think we’re all proud also of role we’ve been playing helping to make sure those ACH transfers get there, and helping banks and CDFIs get access to their PPP funds. I’m wondering whether Mickey wanted to come in on that front?

Lael Brainard: (39:02)
That come in on that front.

Michelle Bowman: (39:05)
Yes. Thank you, Lil. And Darren, it’s wonderful to hear those stories of you meeting the needs of your customers and waiving fees, and meeting the needs of the unbanked and underbanked to cash their stimulus checks. That’s the role that I see community banks playing across the country, and it’s refreshing to hear you reaffirm those activities. I wondered if you might be able to cast a little light on the differences that you’re seeing between rural areas and the economic impacts you’re seeing there, or any developments, versus your more urban areas. And is there anything more that the FED can do to manage the current environment there?

Darren: (39:45)
Governor Bowman, thank you for that question, and really appreciate your always bringing the angle of community banking as you think about the work having been a community banker. So Southern, the markets we serve and by most accounts, would all be considered rural. The largest town that we serve is probably a city of 45,000 people. Now we call that urban or large, but we also serve towns of less than 1,000 people. We do see some differences in those communities. So those more populated communities where people have access to more business, technical assistance and access to CPAs and other business technical providers, they’re having opportunity to really access those PPP programs. So I was talking just recently to a gentlemen in Forrest City, Arkansas, one of the most economically challenged communities in our state of Arkansas, and he had about 15 of his customers he was working with that were not being able to access the PPP program.

Darren: (40:48)
And I really started digging into it and trying to figure out, could we help him? And these were businesses that unfortunately have relied on informal accounting systems, cash based businesses or even some who have just a complete mistrust of banks and don’t have any banking relationship. And you see that in more of your rural, underserved communities. So there is somewhat of a difference. And we’re [inaudible 00:41:13] through our nonprofit loan fund. We’ve created a philanthropic grant program where we’re trying to provide forgivable loans or really grants to those who’ve not been able to access the PPP program. Those dollars are very limited, but they’re important because we know so many people have not had access to the PPP program.

Lael Brainard: (41:34)
Thank you very much. So what I’m going to do now is turn to some of our small business or business owners. I’m going to start with Bob Ukrop, who is chairman and CEO of Ukrops Homestyle Foods, located in Richmond. The company employs 400 associates and produces high quality, chilled, prepared foods and baked goods for supermarket chains that we all have heard of, Food Lion, Harris Teeter, Kroger, Publix, [inaudible 00:03:05]. The family owned business was formed in 2010 after the family sold its previous 73 year old retail business, which were supermarket stores. So Bobby, one year ago, I heard you talk about how your food preparation firm couldn’t raise wages because you couldn’t easily pass on those price increases to your customers given the thin margins in grocery and fierce competition from other sellers. You also described challenges you were facing in finding and retaining good employees who could maintain high quality food standards while also working in challenging conditions. Wondering what kinds of changes you’ve been seeing with the COVID crisis in terms of working conditions and employee availability and how the demand for your products and your pricing and margins changed in this period?

Bobby Ukrop: (43:07)
Thanks for the opportunity to participate today. It was great to hear what Darren said most recently [inaudible 00:04:14] organization is doing to help folks. It’s just wonderful to hear that. Our sales are down 25% since the COVID-19 crisis began. And of course, some people are in a lot worse shape than that. But there are reasons why. Although supermarkets report sales are up significantly, there has been a shift in what consumers are buying, resulting in lower margins for retailers. Reluctant to go to the grocery store frequently, consumers are spending much more per trip as they buy more shelf stable products and more proteins from the meat department.

Bobby Ukrop: (43:47)
For our company, sales of fresh products to support food service areas like salad bars and hot food bars went to zero as stores stopped offering these options. Sales of packaged, chill prepared foods, including entrees, sides and deli salads, have remained strong. However, sales of sandwiches and green salads, most often purchased by office workers for lunch, are down significantly. Sales of baked goods, especially iced and decorated cakes, are much lower because of fewer gatherings and celebrations. Consumers are using the extra time at home themselves to bake pies and cakes. There are even more unintended consequences. For example, the huge disruption of the food industry supply chain. Many food retailers’ distribution centers are overwhelmed by demand for cleaning supplies, paper goods, and frozen foods like pizza. So in some cases, our products were not deemed to be priority items, and they stopped ordering. Also to avoid hoarding by individual stores and the store personnel who might try to stock up on extremely fast selling items, some retailers prevented employees from making adjustments to computer generated orders. As for pricing and margins, not much has changed since last year when we instituted the 2% price increase and raised wages 3%. In our business under normal circumstances, it’s taken more than six months for a retailer and retail customers and our partners to accept and then execute price increases. Before the COVID-19 crisis arrived, we had planned to implement a wage increase this fall. That initiative is up in the air at this point.

Bobby Ukrop: (45:43)
The only price increase we anticipate would relate to recent spikes in proteins, especially beef, as the supply chain has been very disrupted. As for our workforce and our working conditions, our associates are accustomed to stringent health and sanitation protocols. And the temperature in our kitchen is 35 degrees. All of us have heightened awareness about health and safety. Our associates want to work. And we did receive support from a PPP loan. That loan was very timely as it enabled us to keep everyone on the payroll when sales were significantly down and much uncertainty was present. We applied for the PPP loan through Atlantic Union Bank, the largest community bank in Virginia, on the first day. Pleased to report that within a week, we had the money, and that gave us confidence in our decision to keep all of our associates on the payroll.

Bobby Ukrop: (46:38)
Frankly, I was amazed how quickly the delivery system worked. Numerous business friends and area organizations had similar experiences because of their relationships with locally controlled banks. Across homestyle foods that PPP loan is a bridge to the summer, where we anticipate somewhat of a sales revamp. Unfortunately, many smaller businesses did not have a personal relationship with a bank or even a bank. Some may have known only a teller, and others had no connectivity. These businesses really, really need help. And back to our wonderful associates, our absenteeism rate has not changed. One reason our associates come to work is they need a stable paycheck because many also work part time jobs, and a good number of those jobs no longer exist as I mentioned earlier. In addition, other members of their family may have lost jobs. So a secure job at Ukrops is appreciated. A number of our associates do get irritated some of their out of work friends and family members are making more money by drawing unemployment benefits, which include the temporary Federal subsidy. We strongly believe the vast majority of this was set by the people. The vast majority of people want to work.

Lael Brainard: (48:00)
Thank you very much, Bobby, for that update. I’m going to pause and see whether I have any questions from my colleagues. And if not, what I’m going to do is go on to hear from Joanne Chang and then pause again because both Joanne and Bobby are running businesses, and so similar questions might arise. So Joanne Chang is the co-owner of Flower Bakery and Myers Chang, along with her husband and business partner, Christopher Meyer. She’s also a cookbook author and her most recent cookbook, Pastry Love, has just been nominated for best pastry book by the James Beard Foundation for 2020. So congratulations, Joanne. Joanne, last May, you spoke of the squeeze your Flower Bakery restaurants faced, stuck between raising the wages you pay in order to attract workers in the Boston area and intense competition in the restaurant business that made it difficult for you to increase prices. With social distancing, the landscape for restaurants has changed dramatically. How have you adapted your restaurant business model to COVID requirements? And what does this mean for the people that you employ?

Joanne Chang: (49:23)
Thank you so much. It’s an honor to be here. Thank you, governor and chair. So Christopher and I own and operate eight sit down cafes. We were in the middle of opening up a ninth and a sit down restaurant. Pre-COVID, we saw between 10 and 12,000 people a day. And we made the decision to shut down all of the locations for about five weeks middle of March because Massachusetts, especially some areas in Boston, were considered a hotspot. So we ended up furloughing 490 out of 500 team members immediately. We went from over 100,000 in sales daily to zero just overnight. And we needed that time to figure out how to operate safely for our teams and our guests amidst this crisis. Luckily for us, we are a popular takeout spot, both the bakeries and the restaurants.

Joanne Chang: (50:17)
So to answer your question of adapting the COVID requirements, honestly, there haven’t really been COVID requirements that have been established for cafes and restaurants. So, we are kind of playing it by ear and doing our very best to anticipate and act on what we can parse together just from reading everything we can and watching everything we can. We’re starting to open our locations slowly. And at this point, about half of our locations are back open and our sales are down about, I wish they were at Bobby’s percentage at 25%, but we’re actually down about 75 to 80%. And so because of that and because of social distancing, we’ve actually reduced our staffing by 80%. Again, we just furloughed everybody, and now we’re slowly starting to bring people back and we’re at about 80% of what we were. We have reduced our-

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