Wealth Disparity in America
Introduction
Over 150 years ago, enslaved people represented significant wealth in America, worth over by 1863.
Despite progress in breaking down racial barriers, a racial wealth gap persists, indicating that past injustices continue to affect the present. The median white household has in wealth, while the median black household has , and this gap is growing.
Although there are legal rights to equal opportunity, the ability to afford these opportunities is lacking.
In January 1865, a group of black leaders, led by Reverend Garrison Fraser, requested land to build lives and freedom. General William Sherman's Special Field Order Number 15 allocated land, with each family receiving up to 40 acres of tillable ground. Lincoln signed a bill to make it official, but following Lincoln's death, President Andrew Johnson reversed this decision, leading to the eviction of freed slaves who had received land.
Creating Wealth
President Johnson complained about discrimination against whites in favor of black people a year after slavery ended, despite slaves having created wealth for their owners for 246 years.
Wealth grows across generations through investments and compounding interest. For example, artwork bought for can increase in value to in two years and after four years.
Investing in 1863 with an average annual inflation-adjusted return of 7% in the US stock market would result in over today. Even if income and employment gaps were closed, the effects of centuries of inequality have already been compounded.
Home equity accounts for around two-thirds of wealth for the American middle class. The government played a significant role in housing through the New Deal, providing mortgage credit to the population during the Great Depression when almost half of city homeowners were in default.
Mean Housing Discrimination
Owning a home became synonymous with the American dream, but the Federal Housing Administration (FHA) wouldn't insure mortgages in areas deemed too risky, based on race. Redlining, the practice of marking neighborhoods with black families in red on maps, was used to deny loans.
Federally enforced segregation affected various aspects of life, including job access, education, safety, and home values. While housing discrimination was outlawed in 1968, it didn't end.
In 1969, Cory Booker's parents faced discrimination when trying to buy a home. Real estate agents showed them homes only in African American communities or falsely claimed houses in white neighborhoods were already sold. They conducted a sting operation with a civil rights group, where a white couple made an offer on their behalf that was accepted. On the day of closing, the white couple didn't show up, and when Booker's father arrived, the real estate agent became hostile and even sicced a dog on him. Despite the challenges, Booker's parents eventually secured the house.
Racial Wealth Gap
In the 1990s, there was a push to open up the mortgage market to families historically excluded from homeownership, leading to an increase in black homeownership. However, African Americans were twice as likely to receive subprime loans, which start cheap but become expensive, even for borrowers with good credit. Wells Fargo, for example, targeted black churches with wealth-building seminars, but only offered subprime loans, regardless of credit scores.
The 2008 financial crisis, fueled by irresponsible mortgage lending, resulted in black communities losing 53% of their wealth. Although financial institutions were made whole, communities that struggled were not assisted. Wells Fargo paid in a settlement for discrimination lawsuits, but the government's program to address the housing crisis didn't primarily aid homeowners.
Even if educational achievements were equalized, it would only minimally lower the racial wealth gap.
Conclusion
A Fed Reserve Bank of St. Louis study found that white college graduates' wealth increased over a couple of decades, while black college graduates' wealth decreased because black graduates are more likely to support their families financially.
For 246 years, African Americans were wealth, and for another 100 years, laws excluded them from building wealth. To close the wealth gap, reparations are suggested.
The Bible calls for repairers of the breach, acknowledging the generational cost of slavery and discrimination. Government policy perpetuates the circumstances for the wealth gap.
Whenever compensatory or preferential treatment for black people is suggested, it faces resistance, despite the fact that black people have been behind in the race for centuries.