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Minneapolis Fed President: Systemic Racism Hurts the Economy

Two days after George Floyd was killed at the hands of police and as videos of his death circulated on social media, the president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, did something unusual for an official in his position: He sharply and publicly denounced law enforcement actions.

The Fed is a famously tight-lipped institution when it comes to social issues, and most of its officials are not active on social media, so it was notable when Mr. Kashkari posted on Twitter that the killing indicated “institutional racism that is actively taught and reinforced.”

His colleague Mary C. Daly, president of the Federal Reserve Bank of San Francisco, followed two days later with a post stating that “hate thrives when people stay quiet.” And Raphael Bostic, the Atlanta Fed president and the Federal Reserve’s only black policy maker, published a June 12 post online decrying systemic racism.

The comments mark the latest stage in long-running evolution at the Fed, which has increasingly weighed in on societal concerns with an economic bent — like wealth and income inequality and job market disparities — in recent years.

In an interview with The New York Times, Mr. Kashkari, who joined the Fed in 2016, said he believed it was important to use his platform to speak up, and that race in America ties back to foundational economic issues, from who has the opportunity to obtain a good education to who has the resources to build wealth. Racial disparities, he said, are holding back workers from reaching their full potential.

Mr. Kashkari, a former assistant secretary in the Treasury Department who oversaw the Troubled Asset Relief Program, the $700 billion bailout that Congress passed in 2008, also discussed the lessons the Fed was taking from the financial crisis as it rushes to save a pandemic-damaged economy, and what dangers might lie ahead in the banking sector. The following is a partial transcript of that June 12 conversation.

JEANNA SMIALEK, Fed reporter for The Times: You wrote on Twitter that the fact that police treated George Floyd so violently while being recorded “indicates institutional racism that is actively taught and reinforced.” That is an unusually strong remark for a Fed president to make on a social issue. What prompted you to express your views?

NEEL KASHKARI: It was just an honest expression of my reaction. It had been in the news for the past day or so, and I’d seen it, and I’d seen other footage of black men being killed by the police, and I was struggling to figure out — why did this feel so different to me? And it felt so different to me because you could see, there were witnesses standing around the police officers and the police officers didn’t care. They were so confident in what they were doing, they were sending a message, that we’re not doing anything wrong.

I think I’ve just learned — if we don’t speak out about what we’re seeing, if everyone doesn’t speak out about what they’re seeing, then nothing changes.

SMIALEK: Do you think it’s the Fed’s place to weigh in on such matters, and, if so, why?

KASHKARI: I don’t think it’s the Fed’s place to weigh in on partisan political issues or picking sides Republican versus Democrat. But I live in Minnesota, I’m a voter in Minnesota, our employees live here. We live in our community, and if there are really pressing issues in our community, I think we have a responsibility to speak up. We’ve launched the Opportunity and Inclusive Growth Institute, we’ve already made a commitment that we’re going to do what we can to improve economic outcomes for all Americans. We’ve already said this is going to be an important issue for us, and then you have George Floyd being murdered in Minnesota itself — the epicenter of this — I think it’s totally appropriate for us to weigh in.

SMIALEK: Do you think institutional racism hurts the economy, and do you see that playing out in Minneapolis?

KASHKARI: If white children in Minneapolis had the educational attainment that African-American children have, this problem would have been solved a long time ago. I think racism is an undercurrent of the status quo, and then, you have huge chunks of our population who are not getting a good education, who do not have good job opportunities — it absolutely holds our economy back.

There are big chunks of our population whose innate human capital is basically being squandered because they are not getting an education that enables them to take advantage of their natural talents and gifts. That not only hurts them, that hurts all of us. It hurts our society and our economy.

SMIALEK: What role can the Fed play here?

KASHKARI: If we can use our economic research capabilities to analyze issues using the best data and evidence possible, and put forward policy recommendations that other policymakers can implement, that’s an important contribution for us to make.

The Fed has a big role to play, even if it’s outside of monetary policy, because people trust us as honest researchers.

(Mr. Kashkari has pushed for legislation in Minnesota that would make quality education a right in the state. The Minneapolis Fed is also conducting an analysis of what the impact would be of a local minimum wage increase, he said.)

SMIALEK: This isn’t the only thing on your mind right now, clearly. There’s a debate at the Fed right now about whether banks should be forced to conserve more capital as the pandemic continues, including halting dividend payments. You’ve been outspoken that they should. Why?

KASHKARI: The longer this crisis goes on, the more likely the losses roll up into the banking sector. When the virus crisis flared up, we didn’t know — maybe it will only be a two month crisis.

It seems very clear now this is a year, 18 month, even two-year journey that we’re on now until the economy fully recovers.

(Mr. Kashkari has called for a suspension to bank dividend payouts, and thinks that banks should raise equity instead. While the Fed Board in Washington could stop banks from making payouts, it has so far chosen not to. Officials have suggested that could change after the results of annual bank stress tests are reported on June 25.)

SMIALEK: The Fed is also a cornerstone of the government’s relief program for businesses and local governments. What lessons did you learn during TARP that should carry through to the current moment?

KASHKARI: We have to err on the side of being generous.

We tried to be very targeted in our assistance, helping homeowners who were deserving, who needed only a little bit of help. It ended up that we didn’t help very many homeowners and the housing correction was more severe than it needed to be. It’s better to be generous in your assistance, even if that means you help people who are quote-unquote not deserving.

SMIALEK: Will more be needed, especially on the fiscal side, and if so, what?

KASHKARI: I think more will be needed on the fiscal side.

Many of these jobs are not going to come back for a long time. Those workers who have been laid off are going to need to be able to pay their bills.

More focus on unemployment assistance for those jobs that are not coming back anytime soon, I think that’s going to be critical. Not only for the families themselves, but also for the economy as a whole. If people can’t pay their rent, can’t pay their mortgage, that’s how things start to spill over.

SMIALEK: When the economy does rebound, should the Fed pay attention to racial unemployment rates when it thinks about when to raise rates?

KASHKARI: I don’t think we have the ability to say “we’re going to target a reduction in this type of inequality through interest rates.” But I do think paying attention to these disparities gives us better insight into labor market slack in general.

“The fact of the matter is — the Fed raised rates too quickly and too soon,” Mr. Kashkari said, referring to increases that began in late 2015 as the central bank tried to make sure inflation didn’t rocket higher as the jobless rate fell. “We thought there was less slack out there than in fact there turned out to be. We have to learn from that. And how were we surprised? It turned out that there were more minorities who wanted to work, and more old people who wanted to work, than our models anticipated.”

“We need to understand the disparities,” he said.

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Twitter Places Warning on Trump Minneapolis Tweet, Saying It Glorified Violence

Credit…Doug Mills/The New York Times

WASHINGTON — President Trump raged against Twitter on Friday morning after the social media company added a warning label to a tweet he posted in the middle of the night implying that protesters in Minneapolis could be shot, escalating tensions between the president and his favorite online megaphone.

Amid the unrest in Minnesota, the president took time out to expand on his feud with Twitter, accusing it of targeting conservatives and him in particular and calling for legislation to revoke the company’s legal liability protections that are foundational to its business. The official White House account then reposted the tweet that had been flagged in a move meant to defy the company. Twitter responded by adding the same notice on the White House account.

The company said Mr. Trump’s original post violated its rules against glorifying violence, and it prevented users from viewing the tweet without reading a brief notice, the first time it has restricted one of the president’s messages in this way. Twitter also blocked users from liking or replying to Mr. Trump’s post, though they were still allowed to retweet it if they added a comment of their own.

But Twitter did not take the tweet down, saying it was in the public’s interest that the message remain accessible.


In the tweet, posted early Friday morning, Mr. Trump called the protesters “thugs” and said he had told Minnesota’s governor that the military was “with him all the way.”

“Any difficulty and we will assume control but, when the looting starts, the shooting starts,” the president wrote. “Thank you!”

Twitter said it had decided to restrict the tweet “based on the historical context of the last line, its connection to violence, and the risk it could inspire similar actions today.”

The company’s decision came a day after Mr. Trump signed an executive order that seeks to limit the legal protections under Section 230 of the Communications Decency Act, which generally shields social media companies from liability for the content posted on their platforms. The president had fulminated over Twitter’s decision earlier this week to add fact-checking labels for the first time to two of his tweets. In response, he accused Twitter of stifling speech and said that he would end the interference.

By Friday morning, he was lashing out again, using his Twitter feed to complain about Twitter.

“Twitter is doing nothing about all of the lies & propaganda being put out by China or the Radical Left Democrat Party,” Mr. Trump wrote. “They have targeted Republicans, Conservatives & the President of the United States. Section 230 should be revoked by Congress. Until then, it will be regulated!” He posted a few other tweets citing similar views by his favorite Fox News hosts.

In its separate Twitter account, the White House added a jab directly at Jack Dorsey, the company’s chief executive: “The President did not glorify violence. He clearly condemned it. @Jack and Twitter’s biased, bad-faith ‘fact-checkers’ have made it clear: Twitter is a publisher, not a platform.”

And Dan Scavino, the president’s deputy chief of staff, said Twitter should be targeting the protesters in Minneapolis. “Twitter is targeting the President of the United States 24/7, while turning their heads to protest organizers who are planning, plotting, and communicating their next moves daily on this very platform,” he wrote. “Twitter is full of shit — more and more people are beginning to get it.”

One of the president’s appointees to the Federal Communications Commission, which he has asked to develop new regulations cracking down on social media companies, backed him up on Friday morning.

“Twitter has abandoned any attempt at a good faith application of its rules,” Brendan Carr, who has served on the F.C.C. since 2017 and previously served as its general counsel, wrote on Twitter. “No one should take comfort in that. Here it is punishing speakers based on whether it approves or disapproves of their politics.”

First Amendment scholars said Friday morning that Mr. Trump and his allies had it backward and that he was the one trying to stifle speech that clashes with his own views.

“Fundamentally this dispute is about whether Twitter has the right to disagree with, criticize, and respond to the president,” said Jameel Jaffer, executive director at the Knight First Amendment Institute at Columbia University. “Obviously, it does. It is remarkable and truly chilling that the president and his advisers seem to believe otherwise.”

Revoking Section 230 protections would expose Twitter and other online platforms to such expansive potential legal vulnerability that it would undermine the fundamentals of their businesses and perhaps make it untenable to continue in anything resembling the current system in which they provide online marketplaces of ideas where almost anything goes.

Paradoxically, it would also remove the very legal standard that has allowed Mr. Trump to use Twitter so effectively to communicate with his 80 million followers no matter how incendiary, false and even defamatory his messages may be. Without a liability shield, Twitter and online companies would be forced to police accounts like Mr. Trump’s even more closely to guard themselves against legal action.

Mr. Trump’s middle-of-the-night tweet about the Minneapolis protests echoed a comment by Walter E. Headley, the Miami police chief who attracted national attention in the late 1960s for using shotguns, dogs and a heavy-handed “stop-and-frisk” policy to fight crime in the city’s black neighborhoods.

Mr. Headley announced a “get tough” campaign in a December 1967 news conference that prompted anger among black leaders, The New York Times reported at the time.

“We haven’t had any serious problems with civil uprising and looting,” he said, “because I’ve let the word filter down that when the looting starts, the shooting starts.”

“We don’t mind being accused of police brutality,” Mr. Headley also said at that news conference. “They haven’t seen anything yet.”

Twitter has for years faced criticism over Mr. Trump’s posts on the platform, which he has used to issue threats, bully critics and spread falsehoods. The company has said repeatedly that the president did not violate its terms of service, however much he appeared to skirt the line.

The company has also said that blocking world leaders from the service or removing their tweets would hinder public debate around their words and actions. Twitter did announce last year, however, that it would in certain cases place warning labels on posts from political figures that broke its rules, the feature it used with Mr. Trump’s tweet about Minneapolis.

Twitter’s attitude appeared to shift as Mr. Trump posted several times in recent weeks spreading false conspiracy theories suggesting that Joe Scarborough, the MSNBC host, may have murdered Lori Klausutis, a member of his staff when he was a Republican congressman from Florida. Ms. Klausutis died from complications of an undiagnosed heart condition that caused her to pass out and hit her head, authorities concluded.

Mr. Scarborough, now one of Mr. Trump’s most outspoken critics, was 800 miles away at the time. Timothy Klausutis asked Twitter to take down the president’s false tweets about his wife, calling them deeply hurtful.

“I’m asking you to intervene in this instance because the president of the United States has taken something that does not belong to him — the memory of my dead wife — and perverted it for perceived political gain,” Mr. Klausutis wrote to Mr. Dorsey, the chief executive.

Twitter did not honor the request. Instead, it placed links and warning labels on other tweets Tuesday in which Mr. Trump said mail-in ballots would cause the November presidential election to be “rigged.” That led him to sign the executive order, which he framed as an effort to fight social platforms’ biases.

Facebook appears to be trying to forestall such criticism. Mark Zuckerberg, the company’s chief executive, told Fox News this week that he was uncomfortable with Facebook’s being “the arbiter of truth of everything that people say online.”

Mr. Trump’s message implying that the Minneapolis protesters could be shot was also posted on his official Facebook page, where it appears without any warning labels.

Frederike Kaltheuner, a tech policy fellow at the Mozilla Foundation, said that Twitter’s confrontation with Mr. Trump raised questions about how the platform would treat other world leaders. In March, the company deleted posts by the presidents of Brazil and Venezuela that contained unproven information about Covid-19 treatments.

“I doubt that Twitter has the resources to consistently apply rules to all heads of states that use their platform in all sorts of languages,” Ms. Kaltheuner said. “From all we know about the many inconsistent ways in which other policies are being enforced, my guess is that places that rarely make U.S. news will likely be overlooked.”

In Mr. Trump’s tweets about Minneapolis on Friday, he also criticized Mayor Jacob Frey’s response.

“I can’t stand back & watch this happen to a great American City,” the president wrote. Mr. Trump said Mr. Frey, a Democrat, must “get his act together and bring the City under control, or I will send in the National Guard & get the job done right.”

It was unclear if the president intended to send additional troops after Gov. Tim Walz activated the Minnesota National Guard to help restore order in the Twin Cities. Protests have raged there over the death on Monday of George Floyd, a black man who had been pinned down by a white police officer who pressed his knee on Mr. Floyd’s neck.

Mr. Trump had previously described the video of Mr. Floyd’s death as a “very shocking sight” and “a very very sad event,” saying he had asked the F.B.I.’s investigation to be expedited.

Mr. Frey did not know about Mr. Trump’s tweets until a reporter read them aloud during a news conference early on Friday. The mayor shook his head and then gave a fiery retort, slamming a podium for emphasis.

“Weakness is refusing to take responsibility for your own actions,” he said. “Weakness is pointing your finger at somebody else during a time of crisis.”

“Donald Trump knows nothing about the strength of Minneapolis,” he continued. “We are strong as hell. Is this a difficult time period? Yes. But you better be damn sure that we’re going to get through this.”

Adam Satariano contributed reporting.