Paul Krugman on 13 August in the New York Times provides a very helpful history lesson. Although his column focused on recent remarks from President Trump regarding a “war on the suburbs,” he incorporated very helpful historical context on the US housing and mortgage markets. Citing Richard Rothstein’s “The Color of Law,” Krugman notes: :”F.H.A. guidelines specifically cautioned against loans in communities in which children might share classrooms with other children who ‘represent a far lower level of society or an incompatible racial element.’ ”
The power of that policy was enormous as the F.H.A. and mortgage insurance from the V.A. were covering more than 50% of US mortgages by 1950. This insurance was in essence not available to people of colour or in communities that were not White. As a substantial source of wealth creation post World War II came from home ownership, it is clear that the financial institutions that were helping White people acquire homes were also preventing Black people from access to this same source of wealth accumulation.
As banks consider their role in addressing the issue of inequality of opportunity, they also need to consider how to make amends for their participation in the creation of that inequality. And they also need to review their current policies and practices to ensure that there are not other ways in which they continue to use their financial power and less than transparent processes to continue practices of discrimination.
