The Color of Money: Black Banks and the Racial Wealth Gap

"to be a poor man is hard, but to be a poor race in a land of dollars is the very bottom of hardships."- W.E.B. DuBoisEvery few years there is a book that is so powerful it turns me into a book nerd, policy evangelical. I go out and buy several copies and press them into friends hands with the fervor of a recent convert and tell them they "NEED" to read it. I think the last nonfiction book to do this for me was 'Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right' or maybe 'The Big Short: Inside the Doomsday Machine.' Usually, the book has both a financial angle and a policy tint. It usually also explores unfairness. That makes sense. In my previous life I was a policy analyst and I now work in the finance industry as a financial planner. Most days, I'm a pretty mellow guy. I meditate, read, drink tea, Netflix and chill. But reading about inequality and unfairness, for me, catalyzes me for action.If the last few political cycles have taught us anything, it is America still struggles with its "original sin" of slavery and the ugly descendants of slavery: discrimination, segregation, inequality, despair. We have seen, just this week (actually for the last few years), protests about the way Black Americans are treated by police officers. That subject deserves its own space, so I wont dwell too much on that here, other than to say the interaction of Black Americans and police officers ISN'T simple. It isn't a subject that can easily be explained just by saying police are racists, or unarmed Black Americans should behave differently (different from whom?). There are structural, geographic, economic, historical, and political forces that all contribute to awful outcomes.Just like blue on black violence isn't easily explained in a tweet or a FB post, the interaction between Black Americans and banks has a long, ugly, and painful history. It is a history that is important to understand if one REALLY wants to explore topics like income inequality, segregation, credit, crony capitalism, corruption, exploitation, state power, wealth, etc... Mehrsa's book explores the policies, laws, programs, politics, economics, and history of black banks AND the history of Black Americans with banks. She points a fairly bleak picture of the fault/chasm that exists between the two financial markets that exist in America. One is the banking structure that exists for a majority of Americans and doesn't need to be explored. But for years that economic structure, that allows people to save (AND BORROW) didn't exist for a large segment of Americans. And when it eventually did, it was skewed heavily. Separate was never equal in banking. Blacks paid a heavy price to save, to borrow (if they could). Even laws that were designed to help pull Americans out of poverty, accumulate wealth and avoid taxes through home ownership, benefited one segment of America while ignoring or fleecing the other.It is a painful read. It is also necessary. Unlike Mehrsa Baradaran's* previous book, 'How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy', this one spends little/less time on prescriptions. She is laser focused on what is wrong, what went wrong, and why. It is a dense (without ANY of the negative connotations typically associated with that word) book. One that required me to open THREE different post-it flag packages. I was marking things that were new, quotes that amazed, items I didn't want to forget and I often found myself marking 3 or 4 times a page.A few caveats before I end. This isn't a perfect book. It isn't as exciting as a Michael Lewis book (this probably won't get made into a movie) and the prose isn't as pretty as Robert Caro's LBJ series. But it is important. It is a labor of both love and skill. Reading some chapters in it, I could tell Mehrsa spent months in presidential libraries. Well researched books give me a thrill. Especially when you recognize that a certain nugget of data or quote may never have seen the light of day if it wasn't for the doggedness of a skilled lawyer/historian. 'The Color of Money' deserves to be in the library of anyone who deals with or seriously thinks about income inequality, race, banking, inner cities, etc.As a white, upper-middle, male who has benefited from educated parents, stability, wealth, and every advantage American history and politicians have blessed me with, it is difficult and humbling to realize just how many of the economic realities I take for granted every day weren't available to the parents of my black friends. Hopefully, more of these same financial realities WILL be available to the children of ALL my friends. Hopefully we can begin to cover both the scars of the disadvantaged, and the economic and social chasms that separate (unfairly) us. This book is both a bridge and a battle cry.

Dear Friends and voters – I am recommending that you read the following book before you go cast your vote in the 2020 election.“THE COLOR OF MONEY BLACK BANKS AND THE RACIAL WEALTH GAP” by MEHRSA BARADARAN has triggered my sense of civic duty like no other event has done. The first few chapters were hard for me to read and the fact that I only read this book on my way to work, while riding the train, had made it a daily morning reminder that I must use my actuarial expertize to share the essence of this book with everyone who wishes to listen.The laws of arithmetic are universal and non-partisan. If you invest $100 at an APR of 3%, at the end of the year the bank will pay you $103 regardless of your race, religious beliefs, political affiliation or sexual orientation. The payout of this investment is identical in every country on planet earth.Imagine my reaction when I read the following statistic: “The perpetuation of poverty is stunning – 75 percent of black children who grow up in families in the bottom wealth category remain in that same category as adults. A 2013 study found that for white families, every additional dollar they earn in income leads to $5.19 in wealth. For black families, each dollar creates only sixty-nine cents ($0.69) in total wealth.” The Color of Money, page 249-250.Using simple arithmetic: $5.19 divides by $0.69 = 7.52. Translation: because black families and white families have access to the same investments universe, white families will always accumulate 7.52 times more wealth than black families on AVERAGE. Using my actuarial training, the wealth Gap multiplier is even bigger if you were to use MEDIAN as metric, the multiplier would be 13 instead of 7.52 to the Atlantic.This may sound too much for some voters, but trust me this is the most simplistic way to make the argument for REPARATIONS on behalf of African Americans. And I am not an African American.The judicial system is full of case laws that make reparations for African Americans a thing of the past. But to show respect to the author (MEHRSA BARADARAN), I must share her legal argument with you:“Proposal to address the wealth gap directly by providing some form of reparations will be met with powerful political resistance. A 2016 Marist / PBS poll found 81 percent of white Americans opposed reparations (58 percent of blacks supported the idea). Yet equality must proceed down a path that acknowledges past wrongs and provides compensatory damages. An essential first step in dealing with the wealth gap is to acknowledge that it was created through racist public policy. Full justice demands a recognition of the historic breach of the social contract between America’s constitutional democracy and black Americans. And contract breach requires a remedy. Without that recognition, the Constitution itself stands as a roadblock to redress because it demands that all individuals be neither harmed nor benefited based on group characteristics. But it is unfair to be held to a contract that has already been violated. Blacks have been harmed in direct contradiction to the Constitution’s promise of equal treatment in seeking a remedy. It is indeed time for a new social contract with Black Americans that deals honestly with the past breach.” The Color of Money, page 281.Would you please post this message on your social media (e.g. Facebook), send a copy to your elected officials, your friends and families. When an old car breaks down on the highway during rush hour, every driver behind it are forced to deal with the problem. Did you know Wall Street bankers received more than $700 billion in bailout money from the federal government after they took advantage of black families with subprime mortgages (a.k.a. ghetto loans) that caused the 2008 financial crisis?How does the US Supreme Court justify compensatory damages in Product liability laws, but object to compensatory damages for African Americans subjected to forced labor and racist public policy?

I absolutely cannot say enough good about this book. I deal with these issues for a living, and this is, hands down, one of the best books I have ever read on putting together, dot, by dot, why we are where we are in 2017. How the author made it so compelling, readable, interesting and accessible is beyond me. The only negative thing I have to say is that the title does so little to belie the real significance of this book. It has a title that will turn off some because a book about banking sounds boring, and a book about a racial wealth gap would scare away those who would think it is too "radical." It is so neither!!! In a tremendously interesting way, the author does an incredible job of telling the story, step by step, of where we all find ourselves in 2017 and why. The factual, but not dry, story, is one that EVERYONE can learn from. It is truly, truly, an awesome book. I'm on my second read and I have recommended to everyone from my Uber driver to the head of the Finance department of a major university. Do yourself a favor and read it. You will NOT regret it!

This book was shocking and powerful. As someone who does not generally read books about banking, I found it enthralling and heartbreaking. The author writes with an exceptional clarity that makes the material accessible and poignant. Before reading this book, I had never considered the connection between banking and racial injustice in America. Now, it’s hard to imagine any discussion of race that does not involve banking policy. Anyone interested in creating a more just society needs to read this book.