Notes on redlining and related historical context

Excerpts of interest from a recent piece by Ta-Nehisi Coates.

http://www.theatlantic.com/features/archive/2014/05/the-case-for-reparations/361631/

From the 1930s through the 1960s, black people across the country were largely cut out of the legitimate home-mortgage market through means both legal and extralegal. Chicago whites employed every measure, from “restrictive covenants” to bombings, to keep their neighborhoods segregated.

Their efforts were buttressed by the federal government. In 1934, Congress created the Federal Housing Administration. The FHA insured private mortgages, causing a drop in interest rates and a decline in the size of the down payment required to buy a house. But an insured mortgage was not a possibility for Clyde Ross. The FHA had adopted a system of maps that rated neighborhoods according to their perceived stability. On the maps, green areas, rated “A,” indicated “in demand” neighborhoods that, as one appraiser put it, lacked “a single foreigner or Negro.” These neighborhoods were considered excellent prospects for insurance. Neighborhoods where black people lived were rated “D” and were usually considered ineligible for FHA backing. They were colored in red. Neither the percentage of black people living there nor their social class mattered. Black people were viewed as a contagion. Redlining went beyond FHA-backed loans and spread to the entire mortgage industry, which was already rife with racism, excluding black people from most legitimate means of obtaining a mortgage.

“A government offering such bounty to builders and lenders could have required compliance with a nondiscrimination policy,” Charles Abrams, the urban-studies expert who helped create the New York City Housing Authority, wrote in 1955. “Instead, the FHA adopted a racial policy that could well have been culled from the Nuremberg laws.”

The devastating effects are cogently outlined by Melvin L. Oliver and Thomas M. Shapiro in their 1995 book, Black Wealth/White Wealth:

Locked out of the greatest mass-based opportunity for wealth accumulation in American history, African Americans who desired and were able to afford home ownership found themselves consigned to central-city communities where their investments were affected by the “self-fulfilling prophecies” of the FHA appraisers: cut off from sources of new investment[,] their homes and communities deteriorated and lost value in comparison to those homes and communities that FHA appraisers deemed desirable.

In Chicago and across the country, whites looking to achieve the American dream could rely on a legitimate credit system backed by the government. Blacks were herded into the sights of unscrupulous lenders who took them for money and for sport. “It was like people who like to go out and shoot lions in Africa. It was the same thrill,” a housing attorney told the historian Beryl Satter in her 2009 book, Family Properties. “The thrill of the chase and the kill.”

The kill was profitable. At the time of his death, Lou Fushanis owned more than 600 properties, many of them in North Lawndale, and his estate was estimated to be worth $3 million. He’d made much of this money by exploiting the frustrated hopes of black migrants like Clyde Ross. During this period, according to one estimate, 85 percent of all black home buyers who bought in Chicago bought on contract. “If anybody who is well established in this business in Chicago doesn’t earn $100,000 a year,” a contract seller told The Saturday Evening Post in 1962, “he is loafing.”

Contract sellers became rich. North Lawndale became a ghetto.

But fight Clyde Ross did. In 1968 he joined the newly formed Contract Buyers League—a collection of black homeowners on Chicago’s South and West Sides, all of whom had been locked into the same system of predation. There was Howell Collins, whose contract called for him to pay $25,500 for a house that a speculator had bought for $14,500. There was Ruth Wells, who’d managed to pay out half her contract, expecting a mortgage, only to suddenly see an insurance bill materialize out of thin air—a requirement the seller had added without Wells’s knowledge. Contract sellers used every tool at their disposal to pilfer from their clients. They scared white residents into selling low. They lied about properties’ compliance with building codes, then left the buyer responsible when city inspectors arrived. They presented themselves as real-estate brokers, when in fact they were the owners. They guided their clients to lawyers who were in on the scheme.

The Contract Buyers League fought back. Members—who would eventually number more than 500—went out to the posh suburbs where the speculators lived and embarrassed them by knocking on their neighbors’ doors and informing them of the details of the contract-lending trade. They refused to pay their installments, instead holding monthly payments in an escrow account. Then they brought a suit against the contract sellers, accusing them of buying properties and reselling in such a manner “to reap from members of the Negro race large and unjust profits.”

North Lawndale is an extreme portrait of the trends that ail black Chicago. Such is the magnitude of these ailments that it can be said that blacks and whites do not inhabit the same city. The average per capita income of Chicago’s white neighborhoods is almost three times that of its black neighborhoods. When the Harvard sociologist Robert J. Sampson examined incarceration rates in Chicago in his 2012 book, Great American City, he found that a black neighborhood with one of the highest incarceration rates (West Garfield Park) had a rate more than 40 times as high as the white neighborhood with the highest rate (Clearing). “This is a staggering differential, even for community-level comparisons,” Sampson writes. “A difference of kind, not degree.”

In other words, Chicago’s impoverished black neighborhoods—characterized by high unemployment and households headed by single parents—are not simply poor; they are “ecologically distinct.” This “is not simply the same thing as low economic status,” writes Sampson. “In this pattern Chicago is not alone.”

The lives of black Americans are better than they were half a century ago. The humiliation of Whites Only signs are gone. Rates of black poverty have decreased. Black teen-pregnancy rates are at record lows—and the gap between black and white teen-pregnancy rates has shrunk significantly. But such progress rests on a shaky foundation, and fault lines are everywhere. The income gap between black and white households is roughly the same today as it was in 1970. Patrick Sharkey, a sociologist at New York University, studied children born from 1955 through 1970 and found that 4 percent of whites and 62 percent of blacks across America had been raised in poor neighborhoods. A generation later, the same study showed, virtually nothing had changed. And whereas whites born into affluent neighborhoods tended to remain in affluent neighborhoods, blacks tended to fall out of them.

This is not surprising. Black families, regardless of income, are significantly less wealthy than white families. The Pew Research Center estimates that white households are worth roughly 20 times as much as black households, and that whereas only 15 percent of whites have zero or negative wealth, more than a third of blacks do. Effectively, the black family in America is working without a safety net. When financial calamity strikes—a medical emergency, divorce, job loss—the fall is precipitous.

And just as black families of all incomes remain handicapped by a lack of wealth, so too do they remain handicapped by their restricted choice of neighborhood. Black people with upper-middle-class incomes do not generally live in upper-middle-class neighborhoods. Sharkey’s research shows that black families making $100,000 typically live in the kinds of neighborhoods inhabited by white families making $30,000. “Blacks and whites inhabit such different neighborhoods,” Sharkey writes, “that it is not possible to compare the economic outcomes of black and white children.”

The implications are chilling. As a rule, poor black people do not work their way out of the ghetto—and those who do often face the horror of watching their children and grandchildren tumble back.

Even seeming evidence of progress withers under harsh light. In 2012, the Manhattan Institute cheerily noted that segregation had declined since the 1960s. And yet African Americans still remained—by far—the most segregated ethnic group in the country.

With segregation, with the isolation of the injured and the robbed, comes the concentration of disadvantage. An unsegregated America might see poverty, and all its effects, spread across the country with no particular bias toward skin color. Instead, the concentration of poverty has been paired with a concentration of melanin. The resulting conflagration has been devastating.

The Contract Buyers League’s suit brought by Clyde Ross and his allies took direct aim at this inheritance. The suit was rooted in Chicago’s long history of segregation, which had created two housing markets—one legitimate and backed by the government, the other lawless and patrolled by predators. The suit dragged on until 1976, when the league lost a jury trial. Securing the equal protection of the law proved hard; securing reparations proved impossible. If there were any doubts about the mood of the jury, the foreman removed them by saying, when asked about the verdict, that he hoped it would help end “the mess Earl Warren made with Brown v. Board of Education and all that nonsense.”

When enslaved Africans, plundered of their bodies, plundered of their families, and plundered of their labor, were brought to the colony of Virginia in 1619, they did not initially endure the naked racism that would engulf their progeny. Some of them were freed. Some of them intermarried. Still others escaped with the white indentured servants who had suffered as they had. Some even rebelled together, allying under Nathaniel Bacon to torch Jamestown in 1676.

One hundred years later, the idea of slaves and poor whites joining forces would shock the senses, but in the early days of the English colonies, the two groups had much in common. English visitors to Virginia found that its masters “abuse their servantes with intollerable oppression and hard usage.” White servants were flogged, tricked into serving beyond their contracts, and traded in much the same manner as slaves.

This “hard usage” originated in a simple fact of the New World—land was boundless but cheap labor was limited. As life spans increased in the colony, the Virginia planters found in the enslaved Africans an even more efficient source of cheap labor. Whereas indentured servants were still legal subjects of the English crown and thus entitled to certain protections, African slaves entered the colonies as aliens. Exempted from the protections of the crown, they became early America’s indispensable working class—fit for maximum exploitation, capable of only minimal resistance.

For the next 250 years, American law worked to reduce black people to a class of untouchables and raise all white men to the level of citizens. In 1650, Virginia mandated that “all persons except Negroes” were to carry arms. In 1664, Maryland mandated that any Englishwoman who married a slave must live as a slave of her husband’s master. In 1705, the Virginia assembly passed a law allowing for the dismemberment of unruly slaves—but forbidding masters from whipping “a Christian white servant naked, without an order from a justice of the peace.” In that same law, the colony mandated that “all horses, cattle, and hogs, now belonging, or that hereafter shall belong to any slave” be seized and sold off by the local church, the profits used to support “the poor of the said parish.” At that time, there would have still been people alive who could remember blacks and whites joining to burn down Jamestown only 29 years before. But at the beginning of the 18th century, two primary classes were enshrined in America.

In Cold War America, homeownership was seen as a means of instilling patriotism, and as a civilizing and anti-radical force. “No man who owns his own house and lot can be a Communist,” claimed William Levitt, who pioneered the modern suburb with the development of the various Levittowns, his famous planned communities. “He has too much to do.”

But the Levittowns were, with Levitt’s willing acquiescence, segregated throughout their early years. Daisy and Bill Myers, the first black family to move into Levittown, Pennsylvania, were greeted with protests and a burning cross. A neighbor who opposed the family said that Bill Myers was “probably a nice guy, but every time I look at him I see $2,000 drop off the value of my house.”

The neighbor had good reason to be afraid. Bill and Daisy Myers were from the other side of John C. Calhoun’s dual society. If they moved next door, housing policy almost guaranteed that their neighbors’ property values would decline.

Whereas shortly before the New Deal, a typical mortgage required a large down payment and full repayment within about 10 years, the creation of the Home Owners’ Loan Corporation in 1933 and then the Federal Housing Administration the following year allowed banks to offer loans requiring no more than 10 percent down, amortized over 20 to 30 years. “Without federal intervention in the housing market, massive suburbanization would have been impossible,” writes Thomas J. Sugrue, a historian at the University of Pennsylvania. “In 1930, only 30 percent of Americans owned their own homes; by 1960, more than 60 percent were home owners. Home ownership became an emblem of American citizenship.”

That emblem was not to be awarded to blacks. The American real-estate industry believed segregation to be a moral principle. As late as 1950, the National Association of Real Estate Boards’ code of ethics warned that “a Realtor should never be instrumental in introducing into a neighborhood … any race or nationality, or any individuals whose presence will clearly be detrimental to property values.” A 1943 brochure specified that such potential undesirables might include madams, bootleggers, gangsters—and “a colored man of means who was giving his children a college education and thought they were entitled to live among whites.”

The federal government concurred. It was the Home Owners’ Loan Corporation, not a private trade association, that pioneered the practice of redlining, selectively granting loans and insisting that any property it insured be covered by a restrictive covenant—a clause in the deed forbidding the sale of the property to anyone other than whites. Millions of dollars flowed from tax coffers into segregated white neighborhoods.

“For perhaps the first time, the federal government embraced the discriminatory attitudes of the marketplace,” the historian Kenneth T. Jackson wrote in his 1985 book, Crabgrass Frontier, a history of suburbanization. “Previously, prejudices were personalized and individualized; FHA exhorted segregation and enshrined it as public policy. Whole areas of cities were declared ineligible for loan guarantees.” Redlining was not officially outlawed until 1968, by the Fair Housing Act. By then the damage was done—and reports of redlining by banks have continued.

….

Today Chicago is one of the most segregated cities in the country, a fact that reflects assiduous planning. In the effort to uphold white supremacy at every level down to the neighborhood, Chicago—a city founded by the black fur trader Jean Baptiste Point du Sable—has long been a pioneer. The efforts began in earnest in 1917, when the Chicago Real Estate Board, horrified by the influx of southern blacks, lobbied to zone the entire city by race. But after the Supreme Court ruled against explicit racial zoning that year, the city was forced to pursue its agenda by more-discreet means.

Like the Home Owners’ Loan Corporation, the Federal Housing Administration initially insisted on restrictive covenants, which helped bar blacks and other ethnic undesirables from receiving federally backed home loans. By the 1940s, Chicago led the nation in the use of these restrictive covenants, and about half of all residential neighborhoods in the city were effectively off-limits to blacks.

In 1948, when the Supreme Court ruled that restrictive covenants, while permissible, were not enforceable by judicial action, Chicago had other weapons at the ready. The Illinois state legislature had already given Chicago’s city council the right to approve—and thus to veto—any public housing in the city’s wards. This came in handy in 1949, when a new federal housing act sent millions of tax dollars into Chicago and other cities around the country. Beginning in 1950, site selection for public housing proceeded entirely on the grounds of segregation. By the 1960s, the city had created with its vast housing projects what the historian Arnold R. Hirsch calls a “second ghetto,” one larger than the old Black Belt but just as impermeable. More than 98 percent of all the family public-housing units built in Chicago between 1950 and the mid‑1960s were built in all-black neighborhoods.

Governmental embrace of segregation was driven by the virulent racism of Chicago’s white citizens. White neighborhoods vulnerable to black encroachment formed block associations for the sole purpose of enforcing segregation. They lobbied fellow whites not to sell. They lobbied those blacks who did manage to buy to sell back. In 1949, a group of Englewood Catholics formed block associations intended to “keep up the neighborhood.” Translation: keep black people out. And when civic engagement was not enough, when government failed, when private banks could no longer hold the line, Chicago turned to an old tool in the American repertoire—racial violence. “The pattern of terrorism is easily discernible,” concluded a Chicago civic group in the 1940s. “It is at the seams of the black ghetto in all directions.” On July 1 and 2 of 1946, a mob of thousands assembled in Chicago’s Park Manor neighborhood, hoping to eject a black doctor who’d recently moved in. The mob pelted the house with rocks and set the garage on fire. The doctor moved away.

In 1947, after a few black veterans moved into the Fernwood section of Chicago, three nights of rioting broke out; gangs of whites yanked blacks off streetcars and beat them. Two years later, when a union meeting attended by blacks in Englewood triggered rumors that a home was being “sold to niggers,” blacks (and whites thought to be sympathetic to them) were beaten in the streets. In 1951, thousands of whites in Cicero, 20 minutes or so west of downtown Chicago, attacked an apartment building that housed a single black family, throwing bricks and firebombs through the windows and setting the apartment on fire. A Cook County grand jury declined to charge the rioters—and instead indicted the family’s NAACP attorney, the apartment’s white owner, and the owner’s attorney and rental agent, charging them with conspiring to lower property values. Two years after that, whites picketed and planted explosives in South Deering, about 30 minutes from downtown Chicago, to force blacks out.

When terrorism ultimately failed, white homeowners simply fled the neighborhood. The traditional terminology, white flight, implies a kind of natural expression of preference. In fact, white flight was a triumph of social engineering, orchestrated by the shared racist presumptions of America’s public and private sectors. For should any nonracist white families decide that integration might not be so bad as a matter of principle or practicality, they still had to contend with the hard facts of American housing policy: When the mid-20th-century white homeowner claimed that the presence of a Bill and Daisy Myers decreased his property value, he was not merely engaging in racist dogma—he was accurately observing the impact of federal policy on market prices. Redlining destroyed the possibility of investment wherever black people lived.

Speculators in North Lawndale, and at the edge of the black ghettos, knew there was money to be made off white panic. They resorted to “block-busting”—spooking whites into selling cheap before the neighborhood became black. They would hire a black woman to walk up and down the street with a stroller. Or they’d hire someone to call a number in the neighborhood looking for “Johnny Mae.” Then they’d cajole whites into selling at low prices, informing them that the more blacks who moved in, the more the value of their homes would decline, so better to sell now. With these white-fled homes in hand, speculators then turned to the masses of black people who had streamed northward as part of the Great Migration, or who were desperate to escape the ghettos: the speculators would take the houses they’d just bought cheap through block-busting and sell them to blacks on contract.

The Capitol and the White House were built by slaves. President James K. Polk traded slaves from the Oval Office.

In 1952, when West Germany began the process of making amends for the Holocaust, it did so under conditions that should be instructive to us. Resistance was violent. Very few Germans believed that Jews were entitled to anything. Only 5 percent of West Germans surveyed reported feeling guilty about the Holocaust, and only 29 percent believed that Jews were owed restitution from the German people.

In 2005, Wells Fargo promoted a series of Wealth Building Strategies seminars. Dubbing itself “the nation’s leading originator of home loans to ethnic minority customers,” the bank enrolled black public figures in an ostensible effort to educate blacks on building “generational wealth.” But the “wealth building” seminars were a front for wealth theft. In 2010, the Justice Department filed a discrimination suit against Wells Fargo alleging that the bank had shunted blacks into predatory loans regardless of their creditworthiness. This was not magic or coincidence or misfortune. It was racism reifying itself. According to TheNew York Times, affidavits found loan officers referring to their black customers as “mud people” and to their subprime products as “ghetto loans.”

“We just went right after them,” Beth Jacobson, a former Wells Fargo loan officer, told The Times. “Wells Fargo mortgage had an emerging-markets unit that specifically targeted black churches because it figured church leaders had a lot of influence and could convince congregants to take out subprime loans.”

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