Picture this: It's 1950, and the Smiths,
a white family from New York,
want to buy a new home in the suburbs
for what would be about $62,000 in today's money.
Now meet the Johnsons.
They're a Black family who also dreams
of buying a new home in this neighborhood.
The Smiths apply for a bank loan and are quickly approved.
The loan was backed by the federal government to boot.
The Johnsons apply for a similar loan, but are rejected,
because banks will only lend to white Americans.
While the Smiths begin moving in,
the Johnsons can't find a realtor
who will show them homes in the Smiths' neighborhood,
even if they wanted to pay in cash.
The Johnsons then try their luck
in a predominantly Black neighborhood.
They're denied a loan again,
because the federal government
refuses to back Black buyers anywhere.
Flash forward to the year 2000.
The Smiths have paid off their home
that's now appreciated in value up to $149,000.
The Johnsons, on the other hand,
had to rent for the past two generations.
While the Smiths built wealth
and passed it down to their grandkids,
the Johnsons never saw a return on their rent.
This is not an isolated incident.
Scenarios like this have been plaguing Black Americans
for generations, and it's only getting worse.
Today, Black families have a median net worth
of $17,150.
Compare that to white families,
who have a worth nearly 10 times as much, at $171,000.
On average, every additional dollar a white family earns
grows to about $5.19 in wealth.
Black families see a negative return of about 69 cents,
which means they lose wealth over time.
And the racial wealth gap is widening in the United States.
That's not to say that other countries
aren't dealing with their own version
of a racial wealth gap.
But American capitalism is built on a system
that perpetuates the racial wealth gap.
And it will keep doing just that
until serious and systemic policy change happens.
Here's the thing about wealth:
You need to start out with some in order for it to grow.
Secured banking and low-cost credit
are two of the most basic means of building wealth.
Here's how that works:
Banks take in deposits.
They keep that money safe
and accessible to their depositors.
Then they loan that money out
and charge interest on it, therefore making a profit.
People can make money by depositing money into a bank,
getting a loan from the bank,
using that loan to build equity
through buying property or starting a business,
and then building their wealth from those endeavors.
But Black Americans have been denied
fair access to banking to build wealth
since emancipation in 1863.
Near the end of the American Civil War,
President Abraham Lincoln agreed to establish a settlement
that would include 40 acres of land and a mule
for each newly emancipated family.
After Lincoln's assassination,
President Andrew Johnson thought formerly enslaved people
should work to buy their own land instead.
Remember the thing about needing some wealth
in order for it to grow?
Well, President Johnson took all that away,
denying them the capital they needed
to start building wealth.
So instead of 40 acres and a mule,
the Freedman's Savings Bank was established.
Here's why that was a problem.
A bank must secure deposits
and offer loans to the depositor in order to build wealth.
And the Freedman's Bank was explicitly not a lending bank.
It was made to hold people's deposits
and not multiply it through the yields of a loan.
Still the bank was so successful
that in 10 years, it handled $75 million.
That's $1.5 billion in today's money.
That much money proved too tempting
for its white finance chairman,
who secretly invested deposits in high-risk enterprises.
The bank had been heavily advertised
to be a low-risk savings bank, not an investment bank.
This lie was the newest example
of Black capital being used to benefit white people.
The risky loans eventually failed, and in 1874,
the Freedman's Bank closed its doors,
wiping out $3 million of hard-earned Black savings with it.
W.E.B Du Bois said at the time,
that another decade of slavery
wouldn't have damaged Black wealth
as much as the Freedman's Bank collapse did.
For decades after the disaster,
African Americans distrusted the banking system.
The few banks that would take their deposits
wouldn't loan money to them,
effectively using African American money
to build more white wealth.
So, whilst white people bought homes
and started businesses and watched their wealth grow,
Black people's capital was once again
exploited and lay stagnant.
But then, at the turn of the century,
Black Americans decided to build their own wealth,
and this time, do it on their own terms,
by establishing Black banks.
From 1900 to 1930, about 130 Black-owned banks were formed.
But these banks could only succeed
as much as segregation allowed them to.
Black depositors generally had lower balances,
and withdrew money more frequently
than their white counterparts.
This meant that Black banks had less capital on hand,
which made it harder to lend.
Without enough lending, economic mobility
in Black communities was stunted.
Black banks were very separate, very unequal,
and most didn't survive the Great Depression.
Through the rest of the century,
one of the most common ways Americans held
and grew wealth was by owning property.
As a result, it's no surprise homeowners' median net worth
is now 80 times bigger than renters'.
Hefty government subsidies have played a huge part
in creating a once strong middle class,
but Black Americans have largely been left out.
One of the best examples of this
comes from President Franklin Roosevelt's
New Deal program, designed to build back American wealth
after the Great Depression.
It was 1934, and the Federal Housing Administration
had just been created to insure home loans.
With the FHA guarantee that mortgages would be covered
even if homeowners couldn't pay,
banks could make out loans without fear of losing money.
This was one of the biggest
wealth-building measures of the century.
Historians have gone so far
as to call it "white affirmative action."
Purposefully and critically, it left out Black Americans.
The federal government didn't just
insure mortgages anywhere.
They published risk maps
where the least desirable,
riskiest areas were colored in red.
Risk was completely determined by race.
The more Black residents in a neighborhood, the more risky.
This practice, called redlining,
meant that residents of mostly Black neighborhoods
were denied housing loans,
and therefore the opportunity to buy property.
Black families like the Johnsons
were also shut out of mostly white neighborhoods,
for fear that their purchase
would flip the neighborhood to "risky."
Even though housing discrimination was outlawed
by the Fair Housing Act of 1968,
Black people today still face unequal barriers to housing
by way of denied home loans and undervalued properties.
Black Americans still face
exploitative financial conditions,
whereas white Americans
have a better chance to build wealth.
In this system, reasonable loans and low-cost credit options
are made available to white communities,
whereas predatory and higher-risk loans and credit
is offered to Black communities.
Take the subprime mortgage loans of the 1990s.
Subprime loans were intended for borrowers
who had less than prime credit, assets or income.
These loans had high interest rates
that got very expensive, very fast.
They were also discriminately being sold to Black borrowers,
even though many qualified for prime loans.
Between 1993 and 1998, high-cost subprime loans
were five times more likely
in Black neighborhoods than white ones.
And when the housing market crashed in 2008,
Black Americans lost more than half of their wealth.
Sound familiar?
A home in a mostly Black neighborhood
is still undervalued by $48,000 on average,
compared to an almost identical home
in a mostly white neighborhood.
That's $156 billion in lost equity
across all Black-owned homes in the U.S.
When it comes to banking, expensive penalties
for having low balances or withdrawing frequently
means that nearly half of the Black population
is unbanked or underbanked.
Leaving them prime targets
for check cashers and payday lenders.
As it turns out, it's really expensive being poor.
Exploitation of Black capital,
breaching contracts, redlining, Jim Crow laws,
have undoubtedly created a racial wealth gap.
These tactics have done much worse
than impact Black wallets.
A pattern of poverty and violence emerges
when you look at the history
of the places where recent police killings
and uprisings have happened.
The Minneapolis neighborhood where George Floyd was killed.
The Staten Island neighborhood where Eric Garner was killed.
The Baltimore neighborhood where Freddie Gray was killed.
All these areas were once deemed "hazardous,"
and redlined in risk-assessment maps.
The federal government intended
to keep these redlined neighborhoods
poor and heavily policed,
widening the wealth gap even further.
So where do we go from here?
Let's start by thinking about equality under the law
as a legal contract.
And then let's acknowledge
that that contract has been breached.
When contracts are breached,
settlements need to be made.
Academics, activists and even some politicians agree,
and are calling for reparation.
Beginning in 1989, Democrats started introducing bills
to study reparations, which would include
a formal apology from the government
and compensation to descendants.
Reparations are not unheard of to Americans,
and they can come in many forms.
In 1988, the government paid $20,000
to every living survivor of the Japanese internment camps.
And Native Americans have seen reparations,
albeit to a much lesser extent, as well.
Reparations for descendants of slavery
could look like compensations for wages lost,
or discriminatory practice.
It could be a more holistic approach
that would see a bolstering of community growth.
Since so much discrimination has occurred around housing,
one solution could be creating
a down payment assistance fund -
real money that could appreciate through home ownership.
The government could also fully fund child care,
allowing more Black parents to stay in the workforce.
Evidence shows this would create economic benefits
to the state and federal governments in turn. Win-win.
Wiping out student loan debts and cash bail systems,
or creating business grants for startups:
These could all be forms of reparations.
And it doesn't have to stop with the government.
Some private banks and universities
with a history of enslaving Black people
have set up college scholarship funds
to start chipping away at their wrongdoing.
And in 2016, rapper and activist Killer Mike
called on people to #BankBlack
after protests to protect Black lives gained momentum.
This time, the hope behind the success of Black banks
was to provide the variety of deposits it needed
in order to reduce overheads and lend more generously.
Wealthy depositors flooded banks
with much needed capital that year.
And it didn't stop there.
Companies like Netflix, PayPal and Costco joined in.
If policy change follows in other sectors
like job creation and education,
Black banks today could begin serving their communities
in a mutually beneficial and profitable way.
All of this to say that if the promise of equality
cannot be made good, and true reforms targeting
the many ways that Black Americans have been treated
like second-class citizens are not forthcoming,
then there will be no end to demands for justice
and no possibility of lasting peace.