READ THE SHOCKING FACTS HERE

 

 

To define wealth, take a family's total assets (things like cash in bank accounts, retirement accounts, stock and bonds, and real estate investments) then subtract their liabilities (things like mortgages, credit card debt, car payments and student loans).  The end result is the family's net worth (i.e. wealth).

 

Net worth is the best measure of a family's overall financial health because it describes their financial security.  After all, even if someone has a great, high-paying job, they could lose that job tomorrow.  That is where wealth makes a huge difference.  Wealth provides a buffer if someone loses their job, or in the case of an economic downturn like the 2007-2009 Financial Crisis or the disruption of something like Covid-19.  Wealth also provides the opportunity for the creation of even more wealth, such as starting a new business venture, and it also allows families to finance their children's education, prepare a nest egg for their retirement years, and often allows parents to leave their kids an inheritance — which passes wealth on to the next generation.

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This is how wealth builds over time, and it is accumulated in different ways.  A well-paying job is obviously helpful because it allows people to save and/or invest, and healthy financial markets don't hurt either.  But more than anything else, housing is the most common way people build wealth.  According to the Economic Policy Institute, a non-partisan think tank, housing equity "makes up about two-thirds of all wealth for the typical household."  That's why "the racial wealth gap is primarily a housing wealth gap."

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Housing is an excellent example of how the staggering inequality that exists in this country did not just miraculously happen.  Rather, the disparities that infect almost every one of our systems is a direct result of decades of irresponsible (and sometimes downright racist) public policy decisions.  These decisions — made both intentionally and unintentionally — created entrenched systemic and structural division.  Many Americans remain captive to our misaligned social systems, ones that establish detrimental patterns that are impossible to unilaterally break.  The only way to close these persistent gaps is to enact policies that actively work to counteract the original ones. 

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For decades, the damaging consequences of our national social service policies — which have taken an already vulnerable population and forced them into a devastating cycle of long-term dependence — have mounted.  The plight of these Americans reminds us of that Whack-A-Mole game, where the little moles randomly pop up only to be whacked down by a big fat mallet.  Every time compromised families get their heads somewhat above ground to establish a semblance of control over their life and destiny, they get whacked down again by cycles heaped on them eight decades ago.  

 

It’s just wrong.  And excruciatingly unfair.  And exceedingly unjust.  Enough is enough.  

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Beginning in the 1930s, as part of President Franklin D. Roosevelt's New Deal, the Federal Housing Administration (FHA) created loan programs that lowered down payment requirements and extended the term of home loans from 5 to 30 years — all in an effort to make home ownership accessible to more Americans.  To help banks determine who should get home loans, the government-run Home Owners’ Loan Corporation established a system for appraising neighborhoods, now commonly referred to as "redlining."  Essentially, the United States government created color-coded maps, assigning green for "good" neighborhoods and red for "bad" neighborhoods (literally drawing red lines around what they considered "bad" neighborhoods, hence the name). 

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Unsurprisingly, Black neighborhoods (pretty much across the board) were given both the color red and the worst grade (D), which classified them as "hazardous" places to underwrite mortgages because “colored infiltration is a definite adverse influence on neighborhood desirability.”  Read more here.  Naturally, without the ability to obtain conventional financing, these neighborhoods significantly declined as businesses left, segregation and discrimination deepened, and predatory lending and slumlords thrived. 

 

In large cities, Black Americans were now confined almost exclusively to the "inner city" — where housing developments were often the only housing option — and soon freeways bypassed them altogether.  Although smaller in scale, those in rural areas fared no better as they were now relegated to the "wrong" side of town, or tracks as it were.  The very (very) few Black people who did obtain financing saw their property values plummet as White Americans refused to buy in what was now firmly considered "Black" neighborhoods.

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Redlining was devastating for Black Americans.  Between 1934 and 1962, the federal government backed $120 billion of home loans.  MORE THAN 98% OF THE LOANS WENT TO WHITE PEOPLE.  

 

This is a mind-blowing statistic, but old-school redlining cut far deeper than Black people not getting to own a house ninety years ago.  In truth, it was one of the very first bricks that built THE IMPERMEABLE WALL that has prevented Black Americans from having the chance to fully participate in American capitalism. 

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To be crystal clear: Institutionalized inequality is not something that those trapped in its relentless grip can work — or even educate — themselves out of by themselves...and it is highly insulting to act like they can, or even should.  

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Being robbed of the opportunity to generate wealth through opportunities like home ownership — which is essentially what happened to Black Americans with policies like redlining, and which still happens today with ongoing housing discrimination, an extremely unfair credit-scoring system, suffocating land use and building code requirements, inequitable property assessments and debt collection practices, and a blatant disregard for the Fair Housing Act — is the ultimate Butterfly Effect.    Plus, these Americans were also more than likely born out of the financial mainstream altogether, which made them credit invisible from the get-go — which makes it exceedingly difficult, if not impossible, for them to build credit and, as an extension, wealth in any form.

 

As a result, these Americans are forced to use the shadier side of America's dual credit market — the one that gives access to extremely expensive, unsafe money (i.e. predatory subprime loans, payday loans, land contracts, etc.).  Because these loans are so expensive, they then get stuck in a debt catch-22 that is virtually impossible to escape from.  Beyond the chronic ongoing indebtedness, this cycle leads to other long-term consequences like wage garnishment and restricted access to insurance, employment, housing and utilities.  

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Pile on all of the other bricks that come with being invisible — inadequate education, low or no employment, episodic poverty, and all of the other Fair Factors — and THE IMPERMEABLE WALL quickly becomes insurmountable.  #TheButterflyEffect

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