In recent months the groundswell of activism regarding black America’s lack of criminal justice has become nearly daily headline news. Demonstrations spanning the nation and many parts of the globe have called for justice for those lives taken by questionable and fatal police behavior.
Yet black America also suffers from another kind of injustice that is economic in nature and as pervasive as it is cruel. According to a new analysis of the Federal Reserve’s Survey of Consumer Finances, white household wealth stands at 13 times that of black households. Similarly, when white wealth was compared to that of Latino households, the wealth gap was more than 10 times.
After accounting for total household financial assets such as savings, investments, and business equity, the Pew Research Center then subtracted all indebtedness including mortgages, installment loans, credit cards, student loans and more. The results in dollar values determined that the median net worth of white households in 2013 was $141,900. For blacks and Latinos, however, median net worth was respectively only $11,000 and $13,700.
Commenting on these findings, analysis authors Richard Fry and Rakesh Kochhar wrote, “(F)inancial assets such as stocks, have recovered in value more quickly than housing since the recession ended. White households are much more likely than minority households to own stocks directly or indirectly through retirement accounts. Thus, (whites) were in better position to benefit from the recovery in financial markets.”
This reasoning may apply post-recession, but America’s racial wealth divide has existed throughout most of the nation’s history.
For example, for more than 200 years enslaved Africans and their descendants worked with no wages. Emancipation freed former slaves, but few opportunities for immediate gainful employment existed. Although Reconstruction led to some short-lived economic gains, the “Black Codes” that soon followed with Jim Crow laws and practices reversed most financial gains. America’s “colored wages” continued for several decades until 1960s federal civil rights legislation called for equal employment and banned racial discrimination in employment, public accommodations, housing and voting.
It is also noteworthy to remember that early federal homeownership programs were structured in ways that discriminated against black borrowers. For example, the FHA and GI Bill’s housing programs had severe biases against urban homes and neighborhoods with large numbers of minorities. These policies and practices led to the virtual exclusion of black families in accessing affordable and sustainable mortgages.
In other locales, restrictive covenants banned people of color from neighborhoods – without regard for their ability to afford homes. Some restrictive covenants existed even in communities that did not officially mandate racial segregation.
The Community Reinvestment Act (CRA), enacted in 1977, requires depository institutions such as banks and credit unions to use safe and sound practices to meet the credit needs of communities where they operate – including low and moderate-income neighborhoods. In May 1995 and again in August 2005, CRA’s regulation was substantially revised and updated.
Even with CRA, however, predatory lenders consistently targeted consumers of color in their own neighborhoods. Often in the absence of full-service, mainstream financial services, these fringe lenders arrived to exploit financial needs in urban areas. In the process, valuable dollars have been drained from wallets and livelihoods.
For example, 2012 research by the Center for Responsible Lending (CRL) found that:
Black and Latino families bore $1 trillion of the nation’s $2 trillion in lost wealth due to the concentration of subprime mortgages in communities of color;
Auto loan interest-rate markups cost consumers nearly $26 billion each year; and
Borrowers in lower credit tiers pay up to 68 percent higher monthly payments on private student loans than on safer federal loans.
If economic injustice is allowed to continue, America’s disturbing wealth gap trends will underscore what the 1960s Kerner Commission report predicted: two Americas divided by race.
As a new year begins, a different kind of resolution is in order: Economic justice for all.
Charlene Crowell is a communications manager for the Center for Responsible Lending. She can be reached at Charlene.firstname.lastname@example.org.