Banks should offer their own form of reparations
George Floyd’s death has forced a worldwide reckoning on equality, inspiring — or forcing in some instances — politicians, athletes, celebrities and corporate leaders to make plain where they stand on a multitude of race-related topics.
Even bank executives deserve credit. They were among the first to speak up as protests began. Top executives from Citigroup, JPMorgan Chase, Wells Fargo, Bank of America and others assured stockholders, employees and the public that they were indeed, fully woke.
This is a great start, but now comes the follow-through. What do banks do next?
Maybe it’s time for bankers to take the lead in discussing, calculating and even paying out long-delayed reparations.
Certainly, they’ve noticed the topic of reparations is once again on the public’s mind. The California Assembly recently voted overwhelmingly in favor of establishing a reparations task force dedicated to putting together a plan to compensate African Americans.
But that task force centers on making things equitable with regards to the “economic benefits of slavery,” which is too often how the reparation discussion is framed. Just last year, Senate Majority Leader Mitch McConnell, R-Ky., reportedly dismissed an earlier bid for reparations as misguided compensation for “something that happened 150 years ago.”
But that viewpoint severely underestimates the point.
Reparations should make economic restitution for an entire history of institutionalized racism. Activist Marcus Garvey saw that as far back as the 1920s when he demanded reparations for a litany of injustices starting with being “robbed and exploited … for the last 500 years.” Firebrands who followed, including James Baldwin, Malcolm X and Toni Morrison, echoed this sentiment.
Understanding this full scope helps explain why the demand for financial remedy isn’t going away. Despite what McConnell says, one does not need to look far back to understand why reparations are in order, and why the banking industry should be leading the charge in compensating African Americans for past crimes.
After all, it was the 20th-century U.S. banks that introduced — and greatly profited from — the financial gerrymandering that created redlining, in part, with the help of the federal Home Owners Loan Corp.
Redlining came about in the 1930s when banks graded neighborhood maps to identify the profitability of home loans in those areas. In some neighborhoods, property values were the deciding factor.
But in areas heavily populated by blacks and Latinos, for example, race was the No. 1 determinant, so those areas were outlined in red, labeled “high-risk” precincts.
The high-risk areas became a self-fulfilling prophecy. Without an infusion of capital, these neighborhoods descended into districts of despair.
Most residents were barred from homeownership and, as a result, the middle class. The only lenders attracted to high-risk districts were often predatory lenders who created a legacy still visible today in low-income areas dotted with car-title lenders, pawnshops and payday loan offices.
But that is just one legacy. Although redlining was officially outlawed in 1968, a 2018 study determined its residue continues to linger. Nearly 70% of previously redlined neighborhoods remain populated by low-income minority residents in certain major cities. This in turn explains why the average black American earns about 60% of their white counterparts.
Redlining was just another form of systematic, separate-but-equal, government-sponsored racism.
Now the country’s top banks have an opportunity to take responsibility for the role played in economically cleaving hundreds of U.S. cities and towns. And they should.
More than 20 years ago, Swiss banks reimbursed descendants of Holocaust victims for assets stolen during World War II. South Africa established the Truth and Reconciliation Commission to recognize — and make right — harm inflicted on the victims of the apartheid and their descendants.
Rather than simply denouncing the brutality leading to George Floyd’s death and countless others, bank executives have a moral obligation to compensate the families who’ve long been denied a shot at the middle class because of redlining.
Taking ownership of that damage and remediating its victims would be a meaningful, long-overdue act of contrition.