The racial wealth gap in America may just be the most astonishing statistic yet.  The latest Survey of Consumer Finances released by the Federal Reserve revealed that wealth of typical White households is eight times the wealth of typical Black households and five times that of typical Hispanic households.

The median wealth (the number squarely in the middle of all the numbers) of White households is $189,100, compared to $24,100 for Black households and $36,050 for Hispanic households. The mean wealth (the average) of White households is $980,550, compared to $142,330 for Black households and $165,540 for Hispanic households.

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To define wealth, take a family’s total assets (things like cash in bank accounts, retirement accounts, stock and bonds, and real estate investments) then subtract their liabilities (things like mortgages, credit card debt, car payments and student loans).  The result is the family’s net worth (i.e., wealth).

Wealth is the best measure of a family’s overall financial health because it determines their financial security.  After all, even if someone has a fabulous, high-paying job today, they could lose that job tomorrow.  Wealth, on the other hand, provides a financial buffer not only if someone loses their job, but also in the case of an economic downturn like the 2007-2009 Financial Crisis or the economic disruption of something like Covid.

Wealth also provides the opportunity for the creation of even more wealth, like the ability to start a new business venture, and it also allows families to finance their children’s education, prepare a nest egg for their retirement years, and often allows parents to leave their kids an inheritance — which passes wealth on to the next generation, where the cycle continues.

 

This is how wealth builds over time.  A well-paying job is obviously helpful in building wealth because it allows people to save and/or invest, and healthy financial markets don’t hurt either.  But more than anything else, housing is the most common way people build wealth.

 

A report from the National Association of Realtors showed that “over the last decade, the median-priced home has become worth about $190,000 more. As a result, the net worth of a typical homeowner is about 40 times the net worth of a renter.” However, “across racial/ethnic groups, the Black homeownership rate continues to be well behind the rate of any other group. At the end of 2022, the homeownership rate for Black Americans was 44.9 percent compared to 74.5 percent for White Americans.”

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Although housing is just one of many issues we must address to close the racial wealth gap, it’s an excellent example of how the staggering inequality that exists in this country did not just miraculously happen.
 

Beginning in the 1930s, as part of President Franklin D. Roosevelt’s New Deal, the Federal Housing Administration (FHA) created loan programs that lowered down payment requirements and extended the term of home loans from 5 to 30 years — all in an effort to make home ownership accessible to more Americans.

To help banks determine who should get home loans, the government-run Home Owners’ Loan Corporation established a system for appraising neighborhoods, a practice now commonly referred to as “redlining.”  Essentially, the United States government created color-coded maps, assigning green for “good” neighborhoods and red for “bad” neighborhoods (literally drawing red lines around what they considered “bad” neighborhoods, hence the name).

Black neighborhoods, pretty much across the board, were given the worst grade (D) and the classification of red, which deemed them as “hazardous” places to underwrite mortgages. The explanation given for this was that “colored infiltration" was "a definite adverse influence on neighborhood desirability.” Naturally, without the ability for homeowners to obtain conventional financing, these neighborhoods significantly declined as businesses left, segregation and discrimination deepened, and predatory lending and slumlords thrived.
 

In large cities, Black Americans were now confined almost exclusively to the “inner city” — where housing developments were often the only housing option — and soon freeways bypassed them altogether.  Although smaller in scale, Black Americans in rural areas fared no better as they were now relegated to the “wrong” side of town, or tracks as it were.  The very (very) few Black people who did obtain financing saw their property values plummet as White Americans refused to buy in what was now firmly considered “Black” neighborhoods.

Redlining was devastating for Black Americans.  Between 1934 and 1962, the federal government backed $120 billion of home loans.  Over 98 percent of the loans went to White people.
 

This is a mind-blowing number, but old-school redlining cut far deeper than Black people not getting to own a house ninety years ago.  In truth, it was one of the very first bricks that built the impermeable wall that has prevented many Black Americans from having the chance to fully participate in American capitalism.
 

Other bricks that helped build that impermeable wall were massacres like the one that happened in the Greenwood district of Tulsa, Oklahoma — often called the “Black Wall Street” — on May 31, 1921.  That fateful day, a White mob not only attacked Black people and their homes, but also their businesses, essentially burning to the ground all prosperity that the Black community had worked so hard to build.

 

A report by the Oklahoma Commission to Study the Tulsa Race Riot of 1921 describes it this way: “As the Whites moved north, they set fire to practically every building in the African American community, including a dozen churches, five hotels, 31 restaurants, four drug stores, eight doctor’s offices, more than two dozen grocery stores, and the Black public library.  By the time the violence ended, the city had been placed under martial law, thousands of Tulsans were being held under armed guard, and the state’s second-largest African American community had been burned to the ground.”
 

These atrocities started well before Tulsa.  On September 22-24, 1906, during the Atlanta Race Riot of 1906, White mobs murdered numerous Black men and women and destroyed many of their businesses. In the years before the riot, the Black population had become increasingly educated and successful, building strong communities and networks along with thriving, competitive businesses.  Naturally, this shift in dynamics threatened the White elite class in Atlanta, so they responded by expanding Jim Crow segregation laws, which only served to heighten tensions even more.
 

The death and destruction in Atlanta led W.E.B. Du Bois — a sociologist, historian, civil rights activist, and one of the founders of the National Association for the Advancement of Colored People (NAACP) — to write his unforgettable and haunting A Litany of Atlanta: 

 

“A city lay in travail, God our Lord, and from her loins sprang twin Murder and Black Hate.  Red was the midnight; clang, crack and cry of death and fury filled the air and trembled underneath the stars when church spires pointed silently to Thee.  And all this was to sate the greed of greedy men who hide behind the veil of vengeance! Bewildered we are, and passion-tost, mad with the madness of a mobbed and mocked and murdered people.”

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In the East St. Louis Race War of 1917, a White mob brutally murdered Black men and women over what began as a labor dispute.  When White workers at the Aluminum Ore Company went on strike, Black workers were hired to replace them.

Dhati Kennedy, the founder of the Committee for Historical Truth, told Smithsonian Magazine the story of his father, who lived through the massacre: 

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“We spent a lifetime as children hearing these stories.  It was clear to me my father was suffering from some form of what they call PTSD. He witnessed horrible things: people’s houses being set ablaze, people being shot when they tried to flee, some trying to swim to the other side of the Mississippi while being shot at by White mobs with rifles, others being dragged out of street cars and beaten and hanged from streetlamps.  Thousands of Blacks were streaming across that bridge when what they called the ‘race war’ got into full swing.  When that happened, the police shut down the bridge, and no one could escape.  Some, in desperation, tried to swim and drowned.”

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Carlos F. Hurd, a reporter, wrote a first-hand account of the mayhem in the St. Louis Post-Dispatch: “The East St. Louis affair, as I saw it, was a man hunt, conducted on a sporting basis, though with anything but the fair play which is the principle of sport.  There was a horribly cool deliberateness and a spirit of fun about it.  ‘Get a n*****’ was the slogan, and it was varied by the recurrent cry, ‘Get another!’”

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Another journalist, Hugh L. Wood, wrote in the St. Louis Republic:

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“A Negro weighing 300 pounds came out of the burning line of dwellings just north and east of the Southern fright home. ‘Get him!’ they cried.  So, a man in the crowd clubbed his revolver and struck the Negro in the face with it.  Another dashed an iron bolt between the Negro’s eyes.  Still another stood near and battered him with a rock.  Then the giant Negro tumbled to the ground.  A girl stepped up and struck the bleeding man with her foot.  The blood spurted onto her stockings and men laughed and grunted.”

These stories are nauseating.  But it's really important to remember that the consequences of these unthinkable tragedies extend far beyond death, destruction, and property damage.  These events literally smashed and burned the prosperity that Black men and women had — against all odds and with zero advantages — worked so hard to build.

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Unsurprisingly, in almost all of these instances, most of the victims were unable to rebuild and recover, which, along with policies like redlining, contributed heavily to the astonishing racial wealth gap that exists in this country today.  

Redlining and things like mob destruction at the hands of White people are perfect examples of how the staggering inequity that exists in this country — in everything from wealth to incomes to education to criminal justice — did not just miraculously happen.

The uncomfortable, harsh truth is that the disparities that infect practically every one of our systems and institutions is a direct result of decades of irresponsible and, at times, downright racist public policy decisions.

< Note: We're pretty sure this is the spirit of what people mean when they use the term “systemic racism.”  We're not huge fans of this term because it fails to convey the multidimensional challenges of racism in this country.  Inanimate entities — like systems — reveal racist cycles and uncover the consequences of racism, they don’t cause it.  Systems in and of themselves aren’t the problem; the human-driven decisions made within those systems are. >

From the beginning, these decisions — made both intentionally and unintentionally — initiated and perpetuated pervasive, deep-rooted division and inequality.  They just did.  This is not our opinion.  It’s a well-documented fact.

Debating whether or not this is true is an unnecessary waste of time because numbers don’t lie.  All we have to do is read the astonishingly unequal statistics throughout this website to know that these inequalities not only exist, but they are not healing on their own.  For example, McKinsey’s report says that “almost 70 percent of middle-class Black children are likely to fall out of the middle class as adults.”

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As we search for solutions, we all need to understand that chronic inequality is not something that those trapped in its relentless grip can work — or even at times educate — themselves out without a hand...and it is highly insulting to act like they can, or even should.  In truth, the only way to close these persistent gaps is to enact policies that actively work to counteract the original ones.

Being robbed of the opportunity to generate wealth through opportunities like home ownership — which is essentially what happened to Black Americans with policies like redlining, and which still happens today with ongoing housing discrimination, an extremely unfair credit-scoring system, suffocating land use and building code requirements, inequitable property assessments and debt collection practices, and a blatant disregard for the Fair Housing Act — is the ultimate Butterfly Effect (see a great example here).

Plus, many of these Americans were more than likely born out of the financial mainstream in the first place, which made them credit invisible from the get-go.  Obviously, this makes it exceedingly difficult, if not impossible, for them to build credit and, as an extension, wealth in any form.   

As a result, these Americans are forced to use the shadier side of America’s dual credit market — the one that gives access to extremely expensive, unsafe money (i.e., predatory subprime loans, payday loans, land contracts, etc.).  Because these loans are so expensive, they then get stuck in a debt catch-22 that is virtually impossible to escape from.  

Beyond the chronic ongoing indebtedness, this cycle leads to other long-term consequences like wage garnishment and restricted access to insurance, employment, housing and utilities.

Then, pile on all of the other bricks that come with being invisible — inadequate education, low or no employment, episodic poverty, and all of the other Fair Factors — and the impermeable wall quickly becomes insurmountable.  #TheButterflyEffect