“...the currency of the South was the slave”

This month’s book is “The Color of Money - Black Banks and the Racial Wealth Gap” by Mehrsa Baradaran. Alternatively, you can grab it here from Bookshop or at your local bookstore. It covers the history of Black banking and the role of racism in the economic independence of the Black community.

Admittedly, my knowledge of Black history is limited. In the past few months however, I’ve learned a lot about Black history, racism, the racial wealth gap and more importantly that I, too, have a role to play in changing the economic future of the Black community. As a financial educator, it’s also been important for me to understand how past policies helped shaped today’s money system.

I came across this book when I was doing some research on the post Minority Banking.

Book Info

The book itself is 384 pages and it is dense. Dense and fast paced as the author takes you on a historical tour of the policies, regulations, and the people who enacted these policies.

The book certainly introduces us to the part of American history that’s rarely mentioned and often ignored which is the story of how African Americans were and continue to be systemically locked out of economic quality in America.

I learned a lot from this book especially how the laws and regulations established since the Emancipation Proclamation never favored economic equality and that there were many popular politicians of the past and present that willingly signed off on policies that suppressed and continued to support that status quo of economic inequality.

I listened to audio version of the book and while it’s a fast read, there’s a lot of information to digest.

Chapters

1. Forty Acres or a Savings Bank

2. Capitalism Without Capital

3. The Rise of Black Banking

4. The New Deal for White America

5. Civil Rights Dreams, Economic Nightmare

6. The Decoy of Black Capitalism

7. The Free Market Confronts Black Poverty

8. The Color of Money Matters

Slavery and American Commerce

I think one of the main aspects of slavery that we don’t hear enough is that slaves were a primary component of the economic growth of America.

“Slaves were also a valuable store of capital because they were liquid assets that could be exchanged on markets more easily than other property.” According to the book, 3.2 million slaves were worth around $1.2 billion in market value.

When the Emancipation Proclamation was issued, there lacked one universal law to help freed slaves acclimate to the new reality. Laws varied from state-to-state with many states limiting work for freed slaves only to agricultural work. A reality that continued a cycle of laws that barred them from owning property, pursuing other occupations, going to school and a general lack of right to economic prosperity.

She also discusses in the book how the rhetoric of free capitalism is used as a weapon to disengage any requests and calls to right the unfair policies of the past.

The Racial Wealth Gap

“When the Emancipation Proclamation was signed in 1863, the black community owned less than one percent of the United States’ total wealth. More than 150 years later, that number has barely budged. The Color of Money pursues the persistence of this racial wealth gap by focusing on the generators of wealth in the black community: black banks. Studying these institutions over time, Mehrsa Baradaran challenges the myth that black communities could ever accumulate wealth in a segregated economy. Instead, housing segregation, racism, and Jim Crow credit policies created an inescapable, but hard to detect, economic trap for black communities and their banks.”

Today, on every socioeconomic level, Blacks have significantly less wealth than whites. The book explains how the racial wealth gap was created that continues to affect millions of families in the United States. There were also many laws and policies like the GI Bill, the Homestead Act and the FHA that denied the Black community the opportunity to advance and economically prosper.

Catch-22 of Blank Banking

”The catch-22 of black banking is that the very institutions needed to help communities escape the deep poverty caused by discrimination and segregation inevitably became victims of that same poverty. Blacks were poor and, due to segregated housing, their homes were worth less. What this meant for Black banks was that their deposits were costlier and their loans were less stable, which created a combustible situation over time. Not only could black banks not “control the black dollar” due to the dynamics of bank depositing and lending but they drained black capital into white banks, leaving the black economy with the scraps.”

Banks were supposed to be the drivers of economic activity, and in the book the author describes how Blank banks were thought to be the answer/solution for the community to help itself, but the reality was that a segregated economy with policies that were not in their favor created lots of opportunities for failure.

The catch-22 of Black Banking wasn’t just a problem in the past. In the Great Recession of 2008, Black banks suffered greatly with many failing due to the sub-prime mortgage crisis. Many were deemed too small to be rescued by the government.

Why Read the Book

This brief summary and review cannot do this book justice.

I think this books provides a lot of insight into why the racial wealth gap exists. While the book doesn’t provide a lot of solutions on how to eliminate the gap, understanding how it came to be will be important for those that want to close the racial wealth gap. Financial education alone won’t close that gap. Saving and thrifty living alone won’t close that gap. As history has shown, it will take new policies and laws at the state and federal level to change the playing field to ensure a more equal economic future.

If you don’t have time to read the book, then I would recommend checking out Mehrsa Baradaran speaking about her book at the Economic Policy Institute - link below.