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Industry sign banking california contract later

the data shows that the median white family has ten times more wealth than the average black family our next guest Mercer borough Durham is a law professor at the University of California Irvine in her award-winning book the color of money black banks and the racial wealth gap she examines how black communities have been systematically shut out of the banking system it's a big brick in the wall of structural racism and our Michelle Martin has been looking into these issues even before the current crisis that we've been talking about that is sweeping America but of course this conversation just shows how prescient these warnings have been this conversation is part of our ongoing initiative about poverty jobs and economic opportunity in America it's called chasing the dream professor mehrsa baradaran thank you so much for talking to us thank you so much for having me so your latest book is called the color of money black banks and the racial wealth gap it is specifically about the role of black banks but your work is so much more than that one of the things that you say at the book is the wealth gap is where historic injustice breeds present suffering but this is rooted not just in slavery but in the history immediately following slavery how does slavery which ended in 1865 have present-day consequences one of the things I try to do in the book is to look at the myths that we tell ourselves about some American capitalism and then kind of show the reality and show the gap between right so the myth is that once slavery was ended there was sort of capitalism and free markets and you know that since then there has been equality and the reality is in the on the economic front the the American markets were not open and capitalistic and free right specifically in the protection of black property which was never their exclusion from certain jobs and markets so after the Civil War and the Emancipation instead of getting land the freed slaves did not get right did not get land they got this Savings Bank they put their money in the Savings Bank trusting it thinking that it was backed by The Full Faith and Credit of the federal government and which it was not it was advertised to be and lost half their wages and this is in a time of heavy segregation and sharecropping right sharecropping is an arrangement that is a debt arrangement it was basically freed slaves going back to the plantation some of which they had just sort of escaped from and growing cotton in the same way they did under slavery except for they were no longer slaves they were you know sharecroppers of the land there were tenants and that was not a wealth building mechanism meanwhile a lot of you know white Southerners and Westerners and Easterners were able to get benefits from the Homestead Act if you look at you know the 1934 era New Deal measures those are much more consequential to today so if what the 1934 FHA and GI bills did is sort of cement that racial segregation into law and policy and what they did is go around drawing risk maps around the country so this is before credit scoring or anything like that and they said look if you live in this certain neighborhood the risks are low your property's gonna gain value and so we're gonna insure your mortgage and the way that they determine those neighborhoods is how white they were so if you live in a white neighborhood and it continues and remains white then you get your mortgage insured by the federal government if you live in a black neighborhood or one that is what they called racially in harmonious meaning there were you know other races living aside each other then you were in a high-risk neighborhood which meant that your your mortgage was not going to be insured so those maps are followed by banks and by private lenders well into 1950s 1960s and and you have you know contracts housing contracts putting racial covenants in the contract you have HOAs you've got neighborhood associations really just enforcing the boundaries of their neighborhood and excluding black and brown people you make the argument that credit really creates wealth and that if African Americans are locked out of the credit system it keeps them poor why is that so I want to distinguish between good credit and bad credit right so the good credit you know the FHA loans the GI bills the kind of stuff that is you know government subsidized guaranteed low risk credit 30-year fixed-rate mortgage things like that that's good credit right so now you can pay if you have a little you can pay basically less than you're paying in rent and you're building equity in a house that's a good mortgage credit that builds wealth because then you're taking that little equity that down payment that you put down and and creating wealth because your property's gonna increase if it's in a certain neighborhood or a student loan that is low-cost you can use to go to college and then hopefully make some money and use that good credit bad credit is the stuff you know we talk about payday loans and installment credit and and subprime credit and high interest high risk credit so we you've had as a you know I call it a a Jim Crow credit market that has developed on top of the segregate ory patterns and so what we've offered a lot of white communities since the New Deal to now is lower cost credit right and then to black communities it's been installment credit subprime credit and that sort of blew up in those spaces and credit that is not wealth building so I want to distinguish credit the two types of credit so we're not just talking about all accesses good access right so just you know payday lending is not good you make the point that white immigrant groups have it points in their history faced the same kinds of restrictions that black people have I mean access to they were locked out of lending institutions they were segregated in certain neighborhoods at some point but you say that they've had a very different trajectory you know what tell me more about that in fact you saw you cite the Bank of Italy as an example which was formed when Italian immigrants faced discrimination and we get a wise what happened there a very different history than that of most of the banks that arose to serve black people what happened there and why so different if you look at the Bank of Italy's example it really does show the disparate impact did the disparate sort of trajectories of the two different races so Italians and Irish many other foreign-born Arabs you know Mexican immigrants all sorts of people were also non-white some are still non-white but looking at Italians and Irish specifically kind of just shows how how these markets and sort of whiteness work so pre a sort of New Deal let's say Italians and Irish were also excluded in the way that blacks were although I'm if you look at segregation patterns it was never quite as stark so when you look at the black segregation patterns in in certain spaces blacks were much more segregated than Italians and Irish but they were Italians Irish were excluded from a lot of these and these things but post FHA post sort of New Deal credit Italians and Irish sort of get included in that American suburban credit market so they do get the GI Bill they're not restricted from certain colleges they are able to buy in communities that are you know suburbs that are able to grow equity and then so you look at Bank of Italy and Bank of Italy starts as a bank just like a lot of the black banks that I highlight in the book as a response to exclusion so when you have a black community or an Italian community excluded from the mainstream credit system what happens a lot is that the entrepreneurs within the community established their own Bank so Bank of Italy establishes because Italians aren't getting banked by other mainstream institutions but once Italians do become part of this FHA and GI Bill I'm credit Bank of Italy is able to thrive and survive and it's in California it's in San Francisco and there's a lot of really great economic sort of tailwind and so Bank of Italy then becomes sort of you know Bank of California and then it is now Bank of America way to mean Bank of America started as the Bank of Italy I mean Bank of America is is a consortium of a bunch of different banks but yes it starts this Bank of Italy that becomes it turns into Bank of America and and really I mean so do Italians or very Italians are Americans and as are all of us but I think looking at the way that that Bank works really shows how certain immigrant communities have been included and others have not you also give a case study of the fact that African Americans even when they've attained some economic success are often targeted for it and you give the example of the Tulsa riots what I'm hearing from you and what I read in your book is that is that a lot of what we have sort of seen as you know police violence and you know other forms of oppression really are economic terrorism it's really intended as much to terrorize people in a physical sense as it is to kind of deprive them of the opportunity to gain equality through economic standing which is something that other groups have been able to attain is there any place that contradicted that pattern I mean you do talk about Durham North Carolina can you talk a little that yeah Durham I sort of contrast with Tulsa in the Durham understood that they were in a very precarious situation they were also very successful black businesses but they purposely did not build the tallest building in town they built the smaller more humble building right and so they kept that wealth more hidden and more sort of secondary to the white structure when you're a minority group in a majority environment what you know the the survival dictates apparently what would the drought the Durham with but I will say on that terrorism point in the riot point I mean the the majority of US history when we talk about terrorism we talk about riots and violence it is white violence against Blacks okay the paramilitary violence of the Klan the riots in the north and just quite frankly just particular domestic terrorism any time a black family moved into a white block I mean there are countless stories and I tell a few of them where a black doctor or you know some wealthy black person will move into a white community I'm Jesse Binga a black banker in Chicago that I highlight his house was bombed like 10 times and he kept moving it's he's like I'm an American citizen I can live where I want dr. Austin's ostian suite moved into a building and a white mob gathered and they started throwing you know bricks and setting a fire and they she was armed and brought his friends and they kind of shot out in self-defense which is their right sort of you know a pre to protect his home and he gets charged with murder because someone in the crowd is killed by one of the bullets and so you have actually a pattern of white violence against black homeowners so when we talk about capitalism we have to talk about whose property are protected by the laws right you know Max Weber talks about the monopoly of violence that a state holds and so we've chose property is the state protecting and whose property isn't not protecting you know on the question of capitalist I mean you sort of make the point in the book that black capitalism has been sort of embraced you know across the political spectrum throughout time I mean from Frederick - you know Richard Nixon - Barack Obama who we're all you know obviously very different people you know in theory it should work right it's in theory it should work I mean it goes back to one of those sort of the the core principles of your book is that you know without wealth there is political equality is very hard to attain so why hasn't it work so so Nixon really staked his administration on black capitalism and I focus on it a lot in the book because that's kind of the world we live in right this theory that look what black communities need is more capitalism more entrepreneurship his opponent during that election in 1968 Hubert Humphrey um who says you can't have black capitalism without capital right and that's essentially the point I'm trying to make in the book that's the point Frederick Douglass make so Frederick Douglass believes in capitalism but he says you can't have freedom you can't have capitals them without land right because if you don't have land you actually don't have freedom and that's essentially what happened Frederick Douglass was proved right in the post civil civil war era is what because slaves didn't have land they lost the vote they lost access to political systems they lost equality and freedom we can keep talking about entrepreneurship and Opportunity Zones and things like that but we have to look at the structures of how Capital capitalism works and what cap their laws of capitalism our capital just grows unto itself right and if you don't have capital you it's really hard to get capital if the structure of capitalism is just going to keep sort of perpetuating certain things toward capital right so I think looking at homes today right looking at the way that property increases in value or decreases in value when you still see that wealthy black people their properties aren't increasing in value if they live in a predominantly black neighborhood that's that's capitalism right that's the market coding the racial preferences of market participants right and insofar as the market is coated with racism capitalism is not going to work but I also want to make the point that we have to actually have never really had true capitalism in America I think that's one of the biggest myths is we have had a lot of subsidies for white families the FHA the New Deal GI bills FHA that was not capitalism that was the government coming in I'm making maps of certain neighborhoods and guaranteeing mortgages in white neighborhoods and not guaranteeing him in black neighborhoods so if you're gonna look for where capitalism has has been it's been in the black neighborhoods they've had no government subsidies whereas white neighborhoods have had government subsidies looking at the the tax code right we have a tax code that benefits the middle class you know through our mortgage interest deductions college saving bill so so I just want us to think hard about what we mean when we talk about capitalism so give us some ideas some of your ideas for how you would correct this it really it's simple I mean we know how to create wealth for families we did it through the FHA we did it through the New Deal so I've suggested you know a new Homestead Act that takes some of the benefits of the last Homestead Act and without some of the bad parts and and looks at how you know cities evolve and in looking at sort of revitalization that is not gentrification right so what you have in a lot of spaces right now is the stripping of black spaces whereas whites are coming back in right so the FHA White's left to go to the white suburbs and we're able to you know gain from that and now you have the reverse trend and so a lot of black families are getting just dispossessed of their homes and being resegregate it into different areas so disrupting those patterns and allowing people to have equity as their properties and revitalize I think looking really hard at what reparations looks like every society that has taken from you know when you look at you know the Holocaust you look at South Africa you look at the Japanese internment we have done reparations we as Americans have done reparations other countries that have done significant harm to a minority in reach of the social contract that we've promised our Constitution promised equal protection under the law in the 13th 14th and 15th amendment and those promises were violated so what does damages look like right what how do we make that right you can call it reparations you can call it damages you can call it whatever it want you want to but when you have to acknowledge is the harm and then go to step two and three is how do we actualize some some remedies talk abri flee if you what about postal banking that's one of the ideas that you've that you become known for what is postal banking and why is that something that you think would help yeah so postal bank ng is actually a an idea that is beyond just for for the racial wealth gap but for any communities that are sort of you know in banking deserts now what you've seen in the banking sector is this conglomeration and homogenize a ssin of banks and they've as Bank of America going back to that example has you know gobbled up a bunch of different banks in this you know 10-year a merger wave that it's done is is what it does is it it closes up banks in areas that are less profitable so we're talking about rural areas and you know in the south in the West in the middle of the country white black areas that are just low income that are just not profitable for a bank so what happens in these areas is people have to drive you know 30 miles to an ATM in a 7-eleven and pay 750 right or they can you know go to go to Walmart or a payday lender or a check casher to get their financial transactions and so the idea what the postal bank is to actually have the post office which buy by its original mission is in every community just allow for simple banking so this is you know debit cards you can participate in Nationwide commerce and a checking account so you can pay your bills online and not have to operate in cash as this is a simple idea I think that would benefit a ton of communities not just black and brown communities but certainly also today I don't think that's a solution to to the vast racial wealth gap I need I think we need bigger guns for that but this is a solution to a problem of you know poor family spending 10% of their income on financial transactions that the rest of us don't pay for because we have making out professor Marisa Bharata Ron thank you so much for talking with us today thank you so much for having me I really appreciate it it's an honor [Music] [Music] you