How do we close a racial wealth gap that is so appalling and has been with us for so long? In 2016, the median family wealth by race for a White family in America was $171,000, while for a Black family it was only $17,600. So, according to the 2016 Survey of Consumer Finances, before the pandemic, the median White household had a net worth ten times that of a median Black household. “If current economic trends continue, the average Black household will need 228 years to accumulate as much wealth as their White counterparts hold today,” notes Joshua Holland in The Nation. “For the average Latino family,” he adds, laconically, “it will take 84 years.” These thought-provoking numbers should be food for thought.
COVID changed everything. Clearly the structural barriers to Black wealth in the United States over the last few centuries have been massive. But the COVID epidemic worsened our already profound racial inequalities, especially when it comes to home ownership. The national Black homeownership rate is at 42%, essentially as low as it was in 1970, which is an amazing number that does not get reported on nearly enough. “The gap in homeownership rates between Black and White Americans grew to over 30% last year — which is higher than what it was in 1960, when racial discrimination in housing was legal,” wrote Jason Stauffer, in Time.
What is to be done? Two practical solutions come to mind. The case for reparations – the most truly radical solution to the perennial racial wealth gap problem – cannot possibly pass the Legislative Branch of the United States government as it is presently constituted. With a 50-50 split Senate and an equally divided country, a game changer like reparations payments would never make it past even moderate Democrats, much less a united Republican opposition front. A lighter lift politically is student debt cancellation. It is estimated that canceling student debt could decrease the racial wealth gap as well as inject $108 Billion into the economy a year. It would also be, if administered, a race neutral policy. Politically, however, student debt cancelation would be a non-starter because it would involve non-college educated members of the American middle class absorbing the loss. Speaker Pelosi essentially said as much in July.
How about “baby bonds”? Some in municipal government opine that variations on an enhanced tax credit for children is the solution, or at least a part of the solution to the growing wealth gap. It is “reparations lite,” growing out of Reparations Committees in municipalities around the country, focusing on achievable “housing and economic development” programs for Black residents. Baby bonds – in essence — are a curious experimental solution making the rounds in policy circles. In October, the District of Columbia City Council unanimously approved these so-called “baby bonds.” Under the Child Wealth Building Act, a $1,000 a year trust fund was established for low-income kids in the district. They will be allowed access the investment only after they turn 18. The state of Connecticut already has such a program (operating since July 2021), investing $50 million towards any child born into poverty. And New York City has a much more modest and scaled down version, called the Juneteenth Economic Justice Program. Senator Cory Booker has been working for years to bring the baby bond program to every newborn – black or white.
The financial services industry is stepping up its game in addressing the racial wealth gap. The industry, which is private and answers to shareholders, not voters on Election Day, has been even bolder than municipal governments in targeting racial minorities. Citigroup announced this month that they are committed to a “Racial Equity Audit.” They are the first Wall Street bank to submit to such an audit. On the Citiblog, Executive Vice President of Citi, Edward Skyler, makes specific, and noteworthy, goals:
The focus of the audit is to assess Citi’s efforts to help address the racial wealth gap in the United States through the design and implementation of our Action for Racial Equity (ARE) initiative. The ARE initiative, announced by Citi and the Citi Foundation in September 2020, is a $1 billion+ commitment to help close the racial wealth gap and increase economic mobility in the United States. This effort is designed to (1) provide greater access to banking and credit in communities of color, (2) increase investment in Black-owned businesses, (3) expand affordable housing and homeownership among Black Americans, and (4) advance anti-racist practices in our company and the financial services industry.
And Citi is not alone in the financial services industry. In April, influenced by the murder of George Floyd, BlackRock proposed a resolution to assess its financial behavior through a racial equity lens. Further, Chase recently announced a $30 billion commitment to help close the racial wealth gap among Black, Hispanic and Latino communities. But American banks have not always had an amenable relationship with the Black community (which explains some of the new introspection). Discriminatory lending practices, known as “redlining” are a foul legacy of the American financial services industry and date back to the FDR administration. And the ripples of redlining are still being felt, largely through the court system. But the news in the financial industry is not entirely grim. In August, Liberty Bank and Trust Co., by acquiring Tri-State Bank of Memphis, became the nation’s largest black-owned bank with about a billion dollars in assets. Progress indeed!
Ron Mwangaguhunga is a Brooklyn based writer on media, culture and politics. His work has appeared within Huffington Post, IFC and Tribeca Film Festival, Kenneth Cole AWEARNESS, NY Magazine, Paper Magazine, CBS News.com and National Review online to name a few. He is currently the editor of the Corsair