Related Links

• Maggie Walker: Richmond's Banking Pioneer
• The Daily Commute: Connections Between Communities
• Start-Up Surge
• The Highs and Lows of the Housing Market
• The Fed Enters the World of Real-Time Payments

Transcript

Tim Sablik: Hello, I'm Tim Sablik, a senior economics writer at the Richmond Fed.

I've talked to a lot of people this year about a lot of interesting topics. Today, I'm going to be taking a look back at some of our most popular episodes of 2023, as determined by your downloads.

There's just one catch. I won't be including any of our episodes about inflation or monetary policy.

Why? Well, it should probably come as no surprise that those have been some of our most popular topics. But today's episode is airing during the two-week period before the December FOMC meeting. During this time, Reserve Banks refrain from discussing monetary policy and economic conditions. So, it seemed like the perfect opportunity to look back at some of the other topics we have covered this year.

Let's start with the fifth most popular episode that wasn't about inflation. In February 2023, I interviewed Ethan Bullard, curator at the Maggie L. Walker National Historic Site. Bullard told the story of Ms. Walker, a Richmond bank executive, entrepreneur and activist who worked to overcome discrimination against women and Blacks. One of the topics we discussed was the role that banks played in financial segregation during Walker's life and how her bank worked to overcome it.

Ethan Bullard: It's important to emphasize just how pervasive racial discrimination and racial profiling was in a segregated society. During Jim Crow, banks were no exception to that attitude. Black customers could face outright exclusion, predatory lending practices, [and] arbitrary and discretionary terms and fees.

So, when thinking of Richmond's Black population, we must remember that the well-dressed, well-spoken figure of Maggie Walker was an exception, not the rule. Richmond was starting to earn that reputation, as I mentioned, as the birthplace of Black capitalism but was still very much comprised of a poor and working-class population. Frankly, it would not have been unheard of for a White banker to take one look at a factory worker or a farmhand or a washer woman and flatly deny them entrance to the bank.

What Walker created through her bank were features that directly addressed the needs of the Black community here in Richmond, offering a model for other Black communities far and wide. She created employment options for middle-class professions. These were cashier positions, tellers, clerks, and bookkeepers. These were positions that were unavailable elsewhere. In fact, at the time that Walker opened her bank at the turn of the century, in the 1900 census 90 percent of Richmond's working-age Black women were employed as factory workers or domestic servants or other types of menial positions, doing menial labor.

Walker is creating something brand new, a completely different outlook, different expectations for what Black women could participate in. The bank offered checking and savings accounts to female account holders and often also encouraged women to be co-signers of their husband's loans. The bank also offered low down payments for mortgages, something that made it a little more affordable for home loans as well as business loans. She would also keep the bank open for late hours, sometimes as late as 10 PM, to accommodate the schedules of industrial workers and other menial professions that otherwise might not be able to escape work to do their banking.

Lastly, she fostered financial literacy programs for youth. She issued pocket banks that could be filled at home and then brought into the bank to open a savings account. She believed that fiscally responsible children would grow up to become fiscally responsible adults and, to use the slogan of the juvenile division that she established, "As the twig is bent, the tree is inclined."

Sablik: In March 2023, Santiago Pinto, a senior economist and policy advisor at the Richmond Fed, shared his research on commuting patterns in the Fifth District. Studying the flow of people between communities can tell us a lot more than just where the traffic jams are during the morning rush.

Santiago Pinto: By studying commuting patterns, we can have an idea of the economic linkages between the regions. Our underlying assumption is that these flows contain information on how labor markets spread across geographies and provide employment opportunity to residents in neighboring jurisdictions. When we see workers commuting to a location for work, that also indicates that regular travel to those locations — and for other reasons such as commerce or recreation — is feasible.

Overall, I would say that these commuting patterns reflect two basic things. On one hand, they show the degree of economic interactions or connectivity across locations. But on the other hand, they signal the ability of these communities to share the benefits of belonging to a much larger regional economy.

Sablik: Was there anything unexpected that surprised you when you looked at the commuting data for the [Fifth] District?

Pinto: When we examined closely the commuting flows, many rural areas are just as connected as some other urban counties. Rural areas are not completely the same. They look different and they face different restrictions and constraints. This difference within the rural counties is extremely important from a policy standpoint.

We also know that, for the Fifth District, residents in rural areas are more likely to commute intracounty or to another rural county. In the case of urban areas, about two thirds of residents tend to commute to a different urban area.

We also noticed that the behavior across states within the Fifth District is far from uniform. For instance, residents in rural counties in Maryland, central Virginia, and central North and South Carolina are more likely to commute to urban counties. But residents in rural West Virginia, western Virginia and eastern North Carolina counties are more likely to commute to other rural counties.

Sablik: The third most popular non-inflation, non-monetary policy episode was about an interesting trend that emerged from the pandemic. There has been a significant rise in applications to start new businesses, as measured by the Census Bureau's business formation statistics. Richmond Fed economist Chen Yeh offered his take on what seemed to be behind this start-up surge in the January 2023 episode.

Chen Yeh: There are two salient facts that you can read off the data, especially when you look at the industry breakdown.

For example, when you look at the industry [of] non-store retailers, a big chunk of the surge was coming from that industry alone. About a third of the spike between 2019 and 2021 came from that industry. That industry, for example, also includes online retailers. Think about people who want to earn extra money by having a side gig or people who were laid off during the pandemic and needed to make ends meet. They think, "Maybe I can create something myself and start a business." Think about someone crafty who posts something on Etsy.

Another thing that you see popping up very clearly from the data are industries that provide a supporting role for other industries. Think about professional, scientific, and technical services, so interior designers and computer system designers. You can imagine during a pandemic, we all wanted to stay at home. We wanted to spruce up our living room or decorate our home office, so you hire an interior designer. Sometimes your employer requires you to work from home, so you would need this advanced computer system.

You also see a surge in administrative and support services, so think about businesses that had a hard time retaining people on payroll. They were uncertain about their demand. So, what did they do? They go to a leasing agency to have the flexibility of hiring a certain [number of] people.

Another industry that people like Ryan Decker and John Haltiwanger pointed out had a large surge in applications is truck transportation. We stopped going to restaurants, for example, and we just started buying a lot of stuff on Amazon. Someone needs to deliver those goods, so you see a large surge in that.

Sablik: Another episode from March 2023 made it into our top five. It was about a topic that the Richmond Fed has been focusing a lot of its attention on: housing. We held a District Dialogues event about it and invited two subject matter experts to offer their insights: Greta Harris, CEO and president of the Better Housing Coalition in Richmond, and Jim Tobin, head of the government affairs team for the National Association of Home Builders.

One of the things I asked Harris and Tobin about was what policies could help improve the availability of affordable housing.

Greta Harris: There are really innovative things that are going on around the country. More and more local and state governments are issuing bonds that create that source of financing for the capital stack for the affordable end. We haven't done it that much here in Virginia and so I'm hopeful. We're having more positive conversations with local and, in some cases, state government.

Places like the Twin Cities have done away with single-family lot zoning. If you go into a neighborhood that's traditional single-family homes, you can now, when a lot is available, come in and do a duplex or three or four townhomes in that same spot. You diversify the product of that particular community.

In Philadelphia, the city leaders were willing to reduce their real estate tax revenue by putting a cap for long tenured — probably income-restricted and maybe age-restricted — residents who had been in a neighborhood for a long time, was seeing a market surge and saw their values of their home double and triple, which has some value — there's equity there. But if you're a fixed-income senior, you may lose your home because you can't afford to pay your real estate taxes. So, they put a cap on that for certain residents in order to ensure that they would be an inclusive community and have both newcomers coming in and long-term residents to be able to stay.

Jim Tobin: From the homebuilders' perspective, it starts and ends at the local level of government. The impediments that are put in front of builders and developers are adding to the cost of housing. We have a survey — 25 percent of the cost of a new single-family home is embedded in regulatory burdens at the federal, state and local level, 42 percent in regulatory costs for a multifamily unit.

What we would like to see is local governments take ownership of the fact that they are slowing development down. In the development world, time is money. If you have to go to 12 or 14 different stops in City Hall in order to get a permit and a project approved, that is slowing them down.

An example I was given recently: there was a three-townhome infill project in Arlington, Va. The developer or the builder was required to submit a 65-page document about the project. That's not economical. I believe the builder decided it's just not plain worth it, so he just took three units out of production because local government got in the way.

Every government cares about more housing, but they've got to be a partner with the developers. Whether it's affordable or market rate, ownership or rental, it doesn't matter. They've got to walk the walk.

Sablik: And now, our most popular episode of 2023 that wasn't about inflation or monetary policy.

In May 2023, I talked to Vanity McDaniel, a senior payments business advisor at the Richmond Fed who provided an update on FedNow, a new real-time payment service that the Fed launched in July. In this final clip, Vanity explains what a real-time payment is and how it compares to other payment methods.

Vanity McDaniel: Instant payments allow individuals and businesses to send and receive payments within seconds at any time of the day on any day of the year. Those transactions are able to occur essentially 24-7 by 365, allowing the receiver of a payment to use the funds almost instantly rather than waiting a few minutes, hours [or] days for the transaction to clear or settle.

Financial institutions with master accounts at the Fed will have direct access to FedNow. Consumers and businesses will have access to FedNow via their financial institution or a third-party payment platform.

I also want to specifically mention that FedNow isn't related to digital currency and it isn't replacing cash. It is simply another payment rail or financial service we provide to institutions.

In addition to the Federal Reserve, there is only one other instant payment option that is currently available in the U.S. and that is currently through the Clearing House, which is owned by some of the largest financial institutions in the U.S. Their instant payment is called Real-Time Payments or RTP, because we all love acronyms. Similar to FedNow, financial institutions have access to real-time payments and consumers and businesses have access via their financial institution or a third-party payment platform.

The immediacy of instant payments is what really distinguishes it from traditional retail payment methods such as ACH, checks and wires. The payment methods I just mentioned operate based on traditional banking business days. Typically, payment transactions at your financial institutions occur Monday through Friday and occur within traditional banking business hours, except on holidays. Once those transactions are submitted during their designated timeframe, there's still a lag in time for transactions to clear or settle, which impacts how quickly a person would have access to those funds.

There is an exception and that is wires. Once a wire is submitted correctly, again Monday through Friday except holidays, those funds are available immediately and they are irrevocable.

Sablik: Thanks for joining me for this special episode of Speaking of the Economy. I hope you all have enjoyed listening to the many topics we have covered this year. We still have some great episodes coming out this month, including a Q&A with our research director, Kartik Athreya. So, stay tuned.

And from all of us at Speaking of the Economy, we wish you Happy Holidays!