Exploitation Entrepreneurialism

NB: This post is part of a series in our Race for Profit symposium. Read all posts here.

Mehrsa Baradaran–

Keeanga-Yamahtta Taylor’s Race for Profit is an essential read not just for anyone interested in racism, housing segregation and post-Civil Rights era racial politics, but for anyone interested in understanding the American economy. It is impossible to understand contracts, property deeds, government guarantees, homeowner’s associations, or lending without knowing how each of these building blocks of the market can be used for race-based exploitation.   Taylor describes the relationship between exploitation and inclusion as real estate players shaping government policies “in ways beneficial to the industry and not the public.” Throughout the book, Taylor comes back to further refine her exploration of exploitation that differentiate and contrast her theory from other theorists who link exploitation to the higher prices, higher interest, or worse terms offered to Black homeowners.

As I highlight in my book, the definition of exploitation was pivotal in Alan Greenspan and President Nixon’s rejection of claims for reparations. Greenspan explained that because lending in segregated Black neighborhoods was “higher risk,” the lender had to charge more in interest and thus claims of exploitation were unjustified. Whether this was a cynical rhetorical move or not, this limited view of exploitation was adopted by Nixon and most administrations thereafter and was used to block remedial demands to rectify unequal housing. Taylor’s definition of exploitation is both more refined and more expansive. She finds exploitation in the government-guaranteed avoidance of risk in lending to and insuring low-income black buyers and exploitation in government programs that targeted Black homeowners with products that produced more debt rather than wealth.

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Addressing Race and Gender Inequities at the Root of Housing Injustice

NB: This post is part of a series in our Race for Profit symposium. Read all posts here.

Rasheedah Phillips–

As Keeanga-Yamahtta Taylor demonstrates in Race for Profit, housing exclusion, instability, and segregation are all racialized in nature, and sewn into the very fabric of American institutions, policies, and value systems. During the height of redlining in the mid-20th century, for example, a single black household in a middle-class area could make the whole neighborhood “risky” for mortgage loans in the eyes of the federal government. Black families – prohibited from buying homes in the suburbs in the 1940s, 50s, and into the 60s by the Federal Housing Administration – gained none of the equity appreciation that suburban whites gained over that crucial period.  Denied mortgages, Black people were often involuntarily driven into the rental housing market, where they faced ever more scarcity and less affordable rental housing.

Today, more than fifty years after the passage of the Fair Housing Act of 1968’s prohibition against housing discrimination, we find that exploitive real estate practices and the inequities that flow from them are not merely artifacts of history. Instead, these inequitable practices, particularly in the rental context, continue to show up in any number of permutations. They may appear as realtors showing Black renters fewer options (a 2013 study by the Urban Institute and HUD for example showed that Black renters saw about 11 percent fewer rental units than others). It may appear as “exclusionary zoning” practices that discourage density and multifamily buildings in wealthier, whiter areas. It may take the form of tenants with housing choice vouchers unable to rent in higher income neighborhoods, causing a concentration in so called “low opportunity” districts.

Through my work as a housing attorney, I’ve seen the continued impact of structural housing injustice on low-income tenants, particularly for Black women in Philadelphia, the site of much of Taylor’s powerful book. Although the focus in Race for Profit is on the role of systemic racism and predatory inclusion in the context of home ownership, the aftermath of those failures has led to exploitation in the rental context. Below, I focus on one issue – eviction records – and highlight some large-scale and individual approaches to ameliorating the problems Taylor encourages us to confront.

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Predatory Inclusion: A Long View of the Race for Profit

NB: This post is part of a series in our Race for Profit symposium. Read all posts here.

K-Sue Park–

The ascending slope of our current housing crisis is a good vantage point from which to think about Keeanga-Yamahtta Taylor’s new history of the federal response to an earlier point of crisis: she gives us reason to reconsider the role of the state in historic housing inequality, and new tools for demanding systemic change from the government going forward. At its core, Race for Profit is a rich and dense account of the government’s effort to finally include black people in its New Deal homeownership initiatives after decades of redlining erupted in riots over – among other grievances – housing starvation. In a literature that has focused principally on the history of racial segregation and formal exclusion through redlining, restrictive covenants, and racial zoning, Taylor instead highlights “predatory inclusion” as a principle mode of the American real estate market.

By focusing on this dynamic and the public-private partnerships that enabled it, her critique of the real estate system runs to its very foundations. As I elaborate below, this analysis resonates profoundly with other patterns of the real estate market’s development over a long historical arc—in particular, the government’s reliance on energies unleashed by incentives for private actors to accomplish public goals, its elevation of businessgrowth over social provision, and the way that real estate value continues to hinge on the race of the people present in a place, and to rise based on white presence and white desire.

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Symposium: Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership

NB: This post is part of a series in our Race for Profit symposium. Read all posts here.

Keeanga-Yamahtta Taylor

In Houston’s upscale Galleria-Uptown neighborhood, the mall known simply as “TheGalleria” is, according to its website, “Texas’ largest and most luxurious shopping destination.” A local real estate website confirmed the value of the location, pointing out that housing values in the neighborhood sustained a “55 percent appreciation rate from 2005 to 2014.” The prize of rising property values was the promise to keep the neighborhood as white and middle class as possible.

In 2015, the Houston Housing Authority proposed building two hundred and thirty-three units of affordable housing in Galleria-Uptown, a neighborhood that is eighty-seven percent white. Swarming to the public meeting the way Texans flock to Friday night football, hundreds of mostly white residents packed public meetings to register, not just their disagreement, but their vehement opposition to building “affordable” housing units in their neighborhood. When a 281-unit apartment complex had been built two years earlier, there had been no outcry, but also no affordable units in that development.

White residents, two decades into the twenty-first century, have long perfected the art of talking about race by way of cues and codes to avoid talking specifically about Black or Latinx people. In this meeting organized to discuss the future of affordable housing in the Galleria district, residents complained about traffic, overcrowded schools, the construction costs of the project, and, of course, the potential effect on property values. But in a fit of frustration, one resident set aside time to write to the Department of Housing and Urban Development, and she wasted little time getting to the unvarnished point. Her opposition to the new, affordable development because it threatened to introduce “an unwelcome resident who, due to poverty and a lack of education, will bring the threat of crime, drugs, and prostitution to the neighborhood.” The woman writing the letter went on to extol her personal virtues as a hard worker, while disparaging those who she believed to were not, “I will fight very hard…before I give up that privilege and dignity to those who, either from lack of initiative or misfortune, don’t deserve to be [here].” These views may seem extreme in our era of coded and duplicitous double talk, but the sanctity of property value extracts a deeper truth that might otherwise remain hidden. Consider the comments of Galleria’s City Councilman, Greg Travis. His opposition to the affordable housing development that would bring Black residents to this white neighborhood was that, “People of different socioeconomic status sometimes have different values based on their socioeconomic status. Some people can afford things that other people cannot.”

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Predatory Lending and the Predator State

NB: This post is part of the “Piercing the Monetary Veil” symposium. Other contributions can be found here.

Raul Carrillo–

Like most advocates of Modern Monetary Theory (MMT), I didn’t embrace the paradigm because I dig late-night chats about accounting identities. Rather, I found it while pursuing economic justice (following the lead of Angela Harris, Emma Coleman Jordan, and other allies). Today, I fight financial predators — banks, landlords, debt collectors, and agencies engaged in racialized wealth extraction — on the daily. And so, my MMT enthusiasm remains…practical.

Although the commentariat caricatures MMT as a rationalization for U.S. deficit spending, it’s something more powerful — a new interdisciplinary lens, shaped for eyes on the prize of justice. Most importantly, MMT is rooted in legal analysis; its neochartalist foundations help illuminate financial hierarchies — so we can better dismantle them around the world.

As elites literally claim human survival is “too expensive”, it’s crucial for movements to absorb this symposium’s chief insight: money itself, although not always starkly a creature of the “state”, is a creature of law, just like the institutions through which it flows.

When we analyze money as public software, rather than private hardware, we see political economy differently. For example, as Harris argues, any movement for economic justice must overcome the toxic trope of the “undeserving benefit recipient” (and the corollary trope of the put-upon khaki-clad patriarch). In my view, MMT helps us challenge this divide-and-conquer strategy, by undermining the technical premises of “taxpayer citizenship” — the racialized and gendered notion that rights should correspond to one’s nominal contributions to government coffers. When Stephanie Kelton reminds us that “money doesn’t grow on rich people”, she is making an inference LPE readers should appreciate: the wealthy do not get their money by generating it, but by mastering a system that routes tradeable legal claims on real resources that we collectively produce (i.e. “money”) to themselves. As I’ve emphasized, the coercion Robert Lee Hale described leads the rest of us not merely to work, but to work for legal tender, which can settle debts between individuals, but must satisfy debts to the state (most notably, taxes).

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Financial Regulation and Social Reproduction

Financial Regulation and Social Reproduction

NB: This post is part of the “Piercing the Monetary Veil” symposium. Other contributions can be found here.

Donatella Alessandrini —

Even amongst critical scholars, there is a tendency to treat international regulation of money and finance as “strictly economic”, distinct from the “social” domains of labor, the environment, and socio-economic rights. This conceptual separation cedes the realm of finance to the “neutral” neoliberal technocracy while occluding interrelationships between finance, production, and social reproduction. Placing social reproduction at the center of our analysis forces us to overcome these false dichotomies and confront finance’s role in the shaping of the “social”.

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The Impact and Malleability of Money Design

Christine Desan –

9780674970953Mehrsa Baradaran’s book teaches us that money has a color, an arresting proposition to fans and foes of capitalism alike.   As she points out, economic orthodoxy posits that the transactional medium is itself a formal instrument:  money expresses but does not affect the value of the substances it measures.  Critics of that orthodoxy agree even as they bemoan the results:  money denies through its very impersonality the social substrate of exchange.  Against that commonsense, Baradaran directs us to consider how the institutions of money creation in the United States – commercial banks – have systemically originated money in white hands over decades.  That is, considering money as a process – asking how value is packaged into the everyday units we call dollars and injected into circulation – reveals that we have designed a market that is racially discriminatory in its very medium.

Baradaran challenges us to recognize how much determinations about money’s design matter.  That proposition is particularly striking because they are also remarkably malleable:  altering the institutions that deliver credit in money can change the way people and groups relate to one another.  I want to underscore Baradaran’s argument about the practice of black banking by exploring an alternative vision.  Only when the monetary project of the agrarian populists failed did Americans settle on the exclusionary system that Baradaran describes.  The contrast suggests that designing money is shaping community; it can bring people together or set them at each other’s throats.

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Racial Myths, Market Myths, and the Policy Roots of Predatory Lending in 1970s Chicago

Beryl Satter – 

9780674970953In The Color of Money and in the opening post of this Symposium, Mehrsa Baradaran challenges the notion that markets exist outside of political power. What she shows for credit policy, I have shown for housing policy, particularly in my book, Family Properties: How the Struggle over Race and Real Estate Transformed Chicago and Urban America.  Here I’d like to discuss a shocking example of governmental policies shaping “markets,” or, rather, supporting investors to extract wealth from segregated black communities: the Housing and Urban Development (HUD) Act of 1968.

In 1968, after rebellions following Martin Luther King, Jr.’s assassination finally focused Congressional attention, two laws were passed to address the problem of “the ghetto.”  First, the Fair Housing Act prohibited racial discrimination in the advertising, rental or sale of housing.  It included no significant enforcement mechanism.  Its solution to “ghetto” problems was to give those wealthy enough to move out the chance to do so.  “Fair housing does not promise to end the ghetto,” one senator admitted, but simply enables “those who have the resources to escape the… suffocating…inner cities of America.”

In contrast, the HUD Act attempted to address conditions within “suffocating… inner cities.” It created mortgage subsidy programs to help “lower income families in acquiring homeownership.”  It also reversed the workings of an earlier federal program that many felt had created ghettoes in the first place – the Federal Housing Administration (FHA)’s insured mortgage program.  Starting in the mid-1930s, FHA-insured mortgages had been denied to black or racially changing urban neighborhoods, thereby encouraging conventional lenders to similarly “redline,” or refuse to issue mortgages, in such areas.  In a major reversal, HUD specified that FHA-insured mortgage loans would be made in “older, declining urban areas.” Such areas need only be “reasonably viable” to qualify for FHA-insured loans.

The newly redirected FHA-insured mortgages were meant to spur the “resources…of private enterprise” to address the housing needs of “low income families.”  The HUD programs never acknowledged that racial segregation was unjust or even problematic.  Instead, they were built on the assumption that lending to blacks and Latinos was inherently risky. Those who needed protection were lenders, not borrowers.  HUD programs cosseted lenders active in what were euphemistically referred to as “certain neighborhoods”— that is, black, Latino, and racially changing ones — in ways so extreme that they damaged the very communities they were ostensibly created to help.

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Black Proprietorship and Crises of Value

Shirley E. Thompson –

9780674970953By shedding historical light on the development and practices of black banking, Mehrsa Baradaran’s excellent and thought-provoking The Color of Money demystifies some fundamental free market myths and strongly cautions against the widespread faith, among policymakers and activists alike, in banking as a means of overcoming long-entrenched and worsening racial disparities in wealth. In this response, I suggest that the history of black banking, even for its many failures, holds a unique perspective on property and its contradictions of value. It also contains a deep lesson about how economic strategies generate and are reinforced by affective practices—and how racist economic laws rested on public feelings of their own. The personal and the structural are closely interlinked.

From the debacle of the Freedmen’s Bank, to the rise of black-owned banks under Jim Crow, to the promotion of “empowerment zones” in more recent times, economically isolated black communities have consistently been urged to engage in “capitalism without capital.” Because black banks were cordoned off from their mainstream peer institutions, Baradaran shows, they could not effectively tap into the money multiplier effect, the means by which a bank stood on the good credit, financial security, and proprietor status of its patrons and generated value by lending its deposits through the system more broadly. Because black people did not own large stores of property, any wealth accumulated by black banks swiftly left black control as it sought greater prospects elsewhere: “once in the banking system,” Baradaran writes, “money flows towards more money.”

It is difficult to overstate the policy implications of Baradaran’s work. The story she tells of the institutional segregation and siphoning off of black wealth disarms the widely held premise that black poverty derives from some sort of cultural deficiency or a lack of personal financial literacy. By exposing the lure of “for-us, by-us” banking and “community empowerment” as “a decoy,” “an empty promise,” and a faulty basis for banking legislation and activism, she paves the way for a bolder vision and more creative experimentation in attempting to remedy a seemingly intractable racial inequality. Indeed, proposals such Darrick Hamilton’s and William A. Darity Jr.’s endorsement of “baby bonds” and Baradaran’s own call for the return of postal banking flow from such an understanding of the structural impact of racism on US political economy.

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Symposium: The Color of Money & Racial Capitalism

Mehrsa Baradaran –

9780674970953When I started research on the project that became The Color of Money, I wanted to write a book about racial disparities in access to credit. When I started digging into the history, I started to realize that there was a much bigger story here, one that undermined one of the most basic neoliberal myths about the free market. This history of black banks and the economy of segregation reveals how inextricably financial markets are tied to racial exploitation, and how the dominant economy can continue to extract from racially subordinated groups through “color-blind” market mechanisms.

I hope that the upcoming symposium on The Color of Money will help connect the historical work to contemporary law, building on LPE’s commitment to understanding and reversing the many structures of racial capitalism.

In particular, I try to debunk three market myths in the book:

  1. That money, markets, and trade exist outside the realm of political power
  2. That inequality is a natural byproduct of market forces rather than being created by the state
  3. And that people left outside of the structures of power can overcome their exclusion through local institutions or self-help

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