A bathtub. A floor. A bike. The items Kevin Hartley, Drew Wynne and Joshua Atkins had been working on at the time of their deaths less than 10 months apart varied, but what cut their lives short was the same: a chemical in paint strippers and other products sold in stores nationwide.

In their grief and horror, their families vowed to fight like heck to keep methylene chloride from killing again.

Get it off the shelves. Ban it. 

But in the U.S., with its checkered history of weak worker and consumer protections, astonishingly few chemicals have ever met that fate. That’s how methylene chloride became a serial killer despite warnings of its fumes’ dangers before Hartley, Wynne and Atkins had even been born. No agency intervened as it struck down dozens of people — if not more — in recent decades. 

After a Center for Public Integrity investigation and pleas from safety advocates, the U.S. Environmental Protection Agency finally proposed to largely ban it in paint strippers.

That was January 2017, the final days of the Obama administration. Hartley died that April, Wynne in October of that year and Atkins the following February amid the deregulatory fervor of the Trump administration, which wanted to dump rules rather than add them — especially at the EPA. The methylene chloride proposal was going nowhere.   

The three men’s mothers and other relatives had a seemingly impossible task ahead of them.

And yet, 13 months after Atkins’ death, the under-pressure Trump EPA acted to stop retail sales of paint strippers with methylene chloride. And in April, the Biden EPA proposed a rule to ban the chemical in all consumer products and most workplace uses.

“It’s rare that we do this in America,” said Dr. Robert Harrison, a clinical professor of occupational and environmental medicine at the University of California, San Francisco. “These families are my heroes.”

Here’s how they beat the odds to get those results — and the advice they give if you’re starting down a similarly hard road, whether the situation involves a dangerous product, an unsafe work environment, pollution or other harm.

Start with research

“Google everything,” said Brian Wynne, whose brother Drew, 31, had purchased a methylene chloride product to refinish the floor of a walk-in refrigerator in his South Carolina cold brew coffee business. “And reach out to people.”

That’s how he found the Public Integrity investigation published two years before his brother’s death, connected with experts and learned everything from the places you could purchase the products to the reasons these fatalities are hard to track. (Methylene chloride kills when its fumes build up in enclosed spaces, and its ability to trigger a heart attack can look like death from natural causes if no one orders a toxicology test.)

A tip from Wendy Hartley, Kevin’s mother: “scholarly” is a super keyword in searches. There could be a whole universe of studies out there, just waiting for you. “This will help weed out the opinion pieces from the facts,” she wrote in an email.

Lauren Atkins, mother of Joshua, 31, who died refinishing the front fork of his BMX bike, talked to UCSF’s Harrison on multiple occasions. His understanding of methylene chloride helped her translate her son’s toxicology and autopsy reports into a clear cause of death. That clarity was a solid foundation for action.

Often, chemical exposure hurts people on a delay, triggering health impacts that might not show up for years. Pollution can be a similar story. But if you’re trying to get government action on harms of that sort, academic studies are still a great place to begin.

Team up with everyone you can

A key source of their success is that the families connected with groups already working on chemical safety, and with each other. 

Lauren Atkins, for instance, found a Change.org petition about methylene chloride products from the advocacy group Safer Chemicals Healthy Families, now part of Toxic-Free Future, and signed it in honor of the son she’d so recently lost. Brian Wynne quickly reached out.

Teaming up leveraged their strengths. The families didn’t have to start from scratch to press retailers to pull the products from their shelves in the absence of EPA action: Safer Chemicals Healthy Families already had a Mind the Store campaign for exactly that type of appeal.

And they didn’t have to figure out the inner workings of agency rulemaking or Capitol Hill lobbying on their own. Staff with Safer Chemicals Healthy Families and the Environmental Defense Fund had that expertise. 

They opened up doors “that I would not have known how to open,” Lauren Atkins said.

“When you can put together a squad like that … you’ve got something really powerful,” said Brian Wynne, pointing to the Natural Resources Defense Council as another active group on the issue. 

Not everyone with a stake in the fight will be able to take a public role in it. Immigrants without permanent legal status face higher risks of workplace hazards, for instance, and that lack of status can make it hard or impossible to speak out.

But if you’re in that situation, you might still be able to connect and help in private.

Work the system(s)

Had the families focused all their attention on the EPA, the agency paradoxically might not have acted — especially during the rule-averse Trump administration.

Instead, they and the groups they’d joined forces with fought on multiple fronts.

With Mind the Store, they pressed retailers to save lives by not selling paint strippers that contained methylene chloride. Petitions and protests worked. One by one, companies ranging from The Home Depot to Walmart agreed to stop.

With Safer Chemicals Healthy Families and the Environmental Defense Fund, they pressed members of Congress to take action. They traveled to Washington, family photos in hand. They talked to reporters, getting news coverage that further turned up the heat. 

South Carolina’s senators and one of its congressmen wrote to Scott Pruitt, then administrator of the EPA. Another congressman called Pruitt out on the issue in an April 2018 hearing. Brian Wynne thinks all of that helped the families schedule a meeting with Pruitt in May 2018.

“The security guard was shocked because nobody got in to meet him,” Brian Wynne said. “It was a lot like meeting with the great and powerful Oz.”

Two days later, the EPA announced it would, in fact, do something about methylene chloride.

Along the way, the families turned to courts for action. They used social media to warn people not to put themselves at risk. And Lauren Atkins traveled to hardware stores to see for herself whether they’d actually pulled the methylene chloride items from shelves as they said they would. (Sometimes yes. Sometimes no.)

If all that seems exhausting, you’re not wrong. But the families think it’s clear what would have happened, had they not stepped in.

“Nothing would have been done,” Lauren Atkins said, “just like it hadn’t been done before.”

Remember it’s a marathon, not a race

“Don’t get frustrated with the small results,” Brian Wynne advised. “Be encouraged.”

Small wins multiplied. One thing led to another because the families didn’t give up.

Settling in for the long haul is often necessary: Federal rulemaking is slow by design.

An agency might need several years — or many more — to complete the research required to propose a rule. The proposal must jump hurdles to get finalized. And even then, any restrictions or new requirements might phase in over time.

What allowed the families to win a partial ban from the EPA so quickly, relatively speaking, is that the agency already had issued a proposal before effectively shelving it. But it still took two-and-a-half years after Kevin Hartley’s death before the EPA restrictions went into effect. And they didn’t cover workplace uses — such as the bathtub refinishing that Kevin, 21, had been doing on the job. 

Still, an agency can make different decisions with different people in charge. The EPA’s latest proposal, targeted for enactment in August 2024, would ban workplace use of methylene chloride in most cases. Bathtub refinishing included.

“You have to have patience, you have to have persistence,” Lauren Atkins said. “When it comes to somebody’s life, especially when it’s your child, you’ll find it. It’ll be right there.”

Mind your mental health

Pushing for change is hard. Pushing for change because you or a loved one was harmed can be even harder — even as it might offer a solace nothing else can bring.

“Buckle up, because it’s going to be an emotional train wreck,” Lauren Atkins warned. “I kept being asked, as emotional as this was and as hard as it was, why do I keep doing this? And my answer has always been and always will be, ‘So that you don’t have to sit in my seat. So that you don’t have to be where I am.’”

That mission gave her purpose amid the fog of grief. 

“How do you function when you’ve just lost half of yourself? At times, I felt the same day his heart stopped beating, so did mine,” she said. “But because I didn’t want anyone else to go through this and I didn’t want anyone else to lose what Joshua lost, that was my goal. I was willing to do whatever it took.”

Brian Wynne, similarly driven, suggests leaning into a stress-relieving activity that helps ground you through the marathon. The gym was his. “You’ve got to find your outlet to have an emotional release,” he said.

The Wynne family also started a foundation in Drew’s name to fund entrepreneurs like him.

Wendy Hartley found the activism itself healing — because of the support from the other families and the results they achieved together. 

As an organ donor, her son had an immediate effect on other people’s lives. Seeing his impact ripple further, through retailer shelves and the halls of government, was a comfort. 

“Kevin has now saved more lives,” she wrote, “and will continue to save lives for years to come.”

Never forget that your story is powerful

If you’re pushing for change, it can be easy to assume that lobbyists paid to maintain the status quo will always win out. But your life experience has heft that cannot be bought.

“If you know how to present your story, which is part of your life, so you can do it — when you can present that story, good luck, lobbyists,” Brian Wynne said. “We’re coming with passion and love, and it’s hard to beat that.”

Wendy Hartley’s advice: “Don’t be afraid to show emotion.” Talk about the effect on you and your family. “Show them the personal impact with pictures.”

“Six years ago, if somebody would have said, ‘If you scream loud enough, the government will listen,’ I would have laughed,” Lauren Atkins said. “Guess what? A voice can make a difference. I consider this part of my son’s legacy.”

So don’t count yourself out.

“Your impact,” Wendy Hartley wrote, “may be larger than you think.” 

The post Three families vowed to stop a killer chemical. Here’s how they did it. appeared first on Center for Public Integrity.

Many toxic substances harm people slowly, causing serious illnesses years after repeated exposure.

But methylene chloride’s fumes are so dangerous, the chemical can kill you in a matter of minutes.

The U.S. Environmental Protection Agency banned consumer sales of paint strippers with this ingredient in 2019 after an investigation by the Center for Public Integrity into a decades-long string of methylene chloride deaths — and a sustained campaign by relatives of its victims and safety advocates to press the EPA to act.

The coalition pushed for more: Workers weren’t protected by the narrow restrictions, they said. The vast majority of deaths Public Integrity traced to methylene chloride exposure happened on the job. And paint strippers were far from the only product you could find it in.

Now the EPA is proposing to ban most uses of methylene chloride — still with some on-the-job exceptions, but far fewer.

“I’m sort of stunned, you know?” said Brian Wynne, whose 31-year-old brother, Drew, died in 2017 while removing paint from his business’ walk-in freezer. Wynne had thought the EPA’s 2019 action on paint stripper “would be as far as we possibly could get — that we ran into a brick wall of funded lobbyists and councils that are paid to keep people like us away and ensure that their bottom line is prioritized ahead of safety.”

The proposed rule would prohibit methylene chloride in all consumer products and “most industrial and commercial uses,” the agency said in its announcement last week. 

The EPA said it hopes the rule will take effect in August 2024. Federal rules must go through a set process to give the public a chance to influence the final outcome. 

The chemical, also known as dichloromethane, can be found in products on retail shelves such as aerosol degreasers and brush cleaners for paints and coatings. Adhesives and sealants sold for commercial purposes use it. Manufacturers tap it to make other chemicals.

At least 85 people have died from methylene chloride’s quick-acting harms since 1980, including workers who had safety training and protective equipment, the agency said. 

That figure comes from a 2021 study by the Occupational Safety and Health Administration and the University of California, San Francisco, that quantified the ongoing fatalities, building on Public Integrity’s earlier tally. The number is almost certainly an undercount because one of the ways methylene chloride kills is by triggering a heart attack, which can look to observers like death from natural causes unless someone thinks to do a toxicology test.

The chemical has also caused “severe and long-lasting health impacts” such as cancer in people whose exposure didn’t rise to immediately lethal levels, the EPA said.

“Methylene chloride’s hazards,” the agency wrote in its proposed rule, “are well established.”

So well established, in fact, that experts say the federal government should have acted long before.

Public Integrity’s 2015 investigation turned up multiple missed opportunities for intervention since the 1970s that could have saved lives. Yet more deaths occurred amid delays after the EPA first proposed a rule at the end of the Obama administration in January 2017 — the Trump administration shelved the proposal until pressured to act.

‘Protect as many people as possible’

Liz Hitchcock, director of Safer Chemicals Healthy Families, the federal policy program of Toxic-Free Future, is among the people working for years to stop methylene chloride’s killing spree. She hailed the proposed-ban announcement as “a big day.” 

“Again, people have died using these chemicals,” she said. “People have gotten sick being nearby when people are using these chemicals, people have gotten chronic illnesses from the use of these chemicals. We want to make sure we protect as many people as possible.”

But she wasn’t happy to hear that the EPA believes the rule won’t be finalized for 15 more months. 

And Lauren Atkins, whose 31-year-old son Joshua died in 2018 while using paint stripper to refinish his BMX bike, worries about the impact of the uses that won’t be banned. Seeing those loopholes in the announcement hit her hard.

“I about jumped out of my shoes until I actually read the whole thing, and then I was pretty sad,” said Atkins, whose driving goal since her son’s death has been to get methylene chloride off the market so it can’t kill anyone else. “I lost my son, but my son lost everything.”

The chemical’s use in pharmaceutical manufacturing isn’t covered by the Toxic Substances Control Act, so that isn’t prohibited in the proposed rule, the EPA said. Workers who continue to use methylene chloride in other activities the proposal would allow, the agency said, would be covered by a new “workplace chemical protection program with strict exposure limits.” Methylene chloride kills when its fumes build up in enclosed spaces.

Some higher-volume uses would remain in those exceptions, which include “mission-critical” or “safety-critical” work by the military, NASA, the Federal Aviation Administration and their contractors; use in laboratories; and companies using it as a reactant or manufacturing it for the allowed purposes, the EPA said. 

But some of those exceptions would end after 10 years.

And most uses would be prohibited. 

There would be no more methylene chloride in paint strippers beyond the federal-agency exceptions. The product was a common cause of reported deaths, frequently among workers refinishing old bathtubs in homes and apartments. 

And methylene chloride would no longer be allowed in commercial and industrial vapor degreasing, adhesive removal, finishing products for textiles, liquid lubricants, hobby glue and a long list of other applications. 

“Currently, an estimated 845,000 individuals are exposed to methylene chloride in the workplace,” the EPA said in a statement. “Under EPA’s proposal, less than 10,000 workers, protected from unreasonable risk via a required workplace chemical protection program, are expected to continue to use methylene chloride.”

Dr. Robert Harrison, a clinical professor of occupational and environmental medicine at the University of California, San Francisco, has focused on methylene chloride for roughly a decade. He said the EPA is walking a line with the proposal, trying to balance safety with economic and national-security considerations, and he finds the extent of the ban heartening.

“I think that this is a win. It’s a win for workers,” said Harrison, who worked on the 2021 study about fatalities caused by the chemical. “This sets a really great precedent for making decisions based on clear-cut science and establishing the principle … that we should move away from these toxic chemicals to safer substitutes where the harm clearly outweighs the benefits.”

62,000 chemicals

You might think a chemical can’t be sold on the market unless it’s deemed safe. But that’s not how the U.S. system works.

Concerns about chemical safety prompted Congress to pass the Toxic Substances Control Act in 1976, setting some requirements for chemicals. But those were widely seen as weak, giving the EPA no authority to broadly assess safety. A federal inventory published in 1982 counted roughly 62,000 chemicals, a number that’s continued to grow. 

In 2016, Congress amended TSCA and mandated chemical risk evaluations by the EPA. Methylene chloride was the very first that the agency tackled.

“This is what we worked so hard to reform TSCA to do,” said Hitchcock, who shared the Public Integrity investigation with congressional offices during that period as a potent example of deadly inaction.

The next step for the proposed methylene chloride ban is a 60-day public comment period. People will be able to weigh in on the EPA’s docket — and safety advocates are organizing around that.

“This is a big step forward for public health, but it’s not without its flaws,” Hitchcock said. She’s hoping to see comments that “urge EPA to enact the strongest rule possible.”

Harrison used to say that chemical regulation in the U.S. moved at a glacial speed — until glaciers started outpacing it. But he does see improvement since the 2016 TSCA amendments. The new regulatory action on methylene chloride makes him hopeful.

“There are many other chemicals that can follow the decision that the USA has made about methylene chloride,” he said.

The post The EPA wants to broaden a ban on a deadly chemical on store shelves appeared first on Center for Public Integrity.

It took an act of Congress, at least one lawsuit and a very long wait.

But today — decades after lenders were required to disclose mortgage-application information that brings hidden patterns of discrimination to light — the federal government enacted a rule to mandate that type of reporting about small-business lending, too.

“Many local businesses were shuttered during the COVID-19 pandemic after they struggled to obtain credit under the Paycheck Protection Program,” Rohit Chopra, director of the Consumer Financial Protection Bureau, said in a statement. “This small business loan census will give the public key data on this market to ensure that banks and nonbanks are serving small businesses fairly.”

The CFPB’s rule covers a wide range of lending and lenders: loans, credit lines, business credit cards, online credit products and merchant cash advances from banks and non-banks alike, as long as they make more than 100 such loans a year to businesses with gross revenue below $5 million.

Detailed data is likely still several years off from reaching the public eye. Large lenders will have to begin collecting first, starting October 2024, with other lenders phased in through January 2026. 

But the CFPB said it intends to get the data out as quickly as possible because it sees the long-delayed information as urgently needed. Officials there think such details would have made a difference in the disparity-plagued Paycheck Protection Program. 

The new small-business lending data will offer the first comprehensive picture of small-business credit applications nationwide. It’s designed to shed light on cost variations, availability by location and whether business owners are getting equal access regardless of their self-reported race, ethnicity, gender or sexual orientation.

That information could fuel lending competition, improve the design of government programs and trigger more enforcement of fair-lending laws. 

“We’re very excited that it’s now in effect,” said Paulina Gonzalez-Brito, chief executive of the California Reinvestment Coalition. “We really think it will help us detect and deter discrimination.”

When Congress ordered the creation of the CFPB in 2010, in the aftermath of a financial meltdown, it also directed the new agency to collect this lending data. Step one was enacting a rule, no quick matter. 

The agency hadn’t gotten very far when it put the work into deep freeze in 2018 under the Trump administration. 

Fair-lending advocates were determined to get the gears of government turning again. Data, they knew, could be powerful: The demographic information about borrowers approved and denied home loans — from the Home Mortgage Disclosure Act, created by Congress in 1975 and later amended to require more detail — shows sharp racial disparities and modern-day redlining. 

So in 2019, the California Reinvestment Coalition and several other plaintiffs sued. 

Among them: ReShonda Young, a small business owner in Iowa whose effort to open a Black-owned bank was the focus of the second season of the Center for Public Integrity’s Heist podcast. By not collecting the data, she and the other plaintiffs argued, the government was standing by as discrimination went unchecked.

“There are laws on the books, but people just don’t follow them,” Young said in an interview for the podcast. 

The CFPB settled in 2020. Its announcement of the now-final rule squeaked in one day before its court-ordered deadline.

“There’s no good answer for the delays, but given what we saw during the pandemic, the cost to small business owners and local communities of not acting has been high,” Chopra, the agency’s director, said in prepared comments he planned to deliver at the National Community Reinvestment Coalition’s Just Economy Conference today.

The fair-lending Community Reinvestment Act, he added, “cannot work without good data.” 

There’s the potential for further delays on data collection, if lenders or industry groups sue. But the CFPB made changes between its proposed and final rule that took some lender complaints into account, including raising the number of loans before reporting requirements kick in.

The CFPB pointed to the racial wealth gap, which The Heist podcast investigated, as a key reason equal lending is critical. Many small business owners of all races don’t have enough savings to self-finance their operations, the agency said, but it’s particularly difficult for owners of color. 

“In 2019, median Black and Hispanic net worth was 13% and 19%, respectively, of median white household net worth,” the agency noted.

The California Reinvestment Coalition’s Gonzalez-Brito sees in the new rule an opportunity to hold not only lenders but also regulators accountable for their responsibilities on fair lending.

“This kind of accountability, especially for people of color to be able to access the same as others, is always slow in coming — if it comes at all,” they said. “Today is really a day to celebrate. … We’re going to be able to see some real change.”

This article was updated March 30, 2023 with an interview from Paulina Gonzalez-Brito at the California Reinvestment Coalition.

The post A new tool to find and stop discrimination in small-business lending appeared first on Center for Public Integrity.

It’s a stark comparison.

Eleven years before the Civil Rights Act of 1964, the difference in median wealth between white and Black families — in today’s dollars to account for inflation — was about $47,000.

More than half a century has passed since 1960s laws banned racial discrimination in hiring and other key aspects of life but didn’t address the economic consequences of the country’s long history of such actions. The wealth gap, far from closing, has grown to $164,000.

White Americans are more likely to receive inheritances or other monetary gifts from family, according to Federal Reserve data, a key way the past feeds into a multi-trillion-dollar gulf. It’s baked into the future, too. Even among those anticipating an inheritance down the road, white families estimate they’ll receive nearly twice as much as Black families.

What can the country do to avoid an equally grim picture in another half-century?

In more than a year reporting a story and podcast about one woman’s effort to narrow wealth disparities in her hometown, we heard and saw recommendations ranging from small to sweeping.

Almost all would, at best, narrow the gulf or keep it from growing. Only one — reparations — seems to hold the potential for eliminating it in one fell swoop.

But many of the recommendations would have more impact together.

“These things absolutely complement each other in terms of working to close the racial wealth gap,” said Dania V. Francis, an assistant professor of economics at the University of Massachusetts Boston.

Kyle K. Moore, an economist with the Economic Policy Institute’s Program on Race, Ethnicity, and the Economy, put it this way: “Our current system has so many points of failure that you really have to address them on multiple levels.” 

Side note: Many of the ideas on this list could improve conditions for Americans of modest means, regardless of race.

Here’s what we heard, starting with the big one:

Reparations

American slavery was a particularly horrifying form of mass wage theft that economists say still impacts family net worth today. But calls for federal reparations — restitution payments — for descendants of enslaved Americans often point to what happened after slavery, too.

William Darity Jr., a Duke University economist who has researched the wealth divide for decades, sees many examples of federal culpability in the period from Reconstruction onward. Promising land to formerly enslaved people and then grabbing it back while distributing millions of acres to white families. Standing by amid decades of mob violence and voter suppression, conditions that cut lives short, sapped Black wealth-building and permitted stark exploitation and thievery. Blocking Black communities from credit. Handing out government benefits unequally.

Compare similar groups today — married and unmarried, households with or without kids, college graduates — and net worth is markedly higher for whites than Blacks. Black households headed by a college graduate, in fact, have a lower net worth than white households headed by someone who didn’t finish high school. 

“The federal government is responsible for the policies that produced the racial wealth gap,” Darity said, “and the federal government has the responsibility to fix it.”

H.R. 40, legislation to create a commission to study reparations, has been proposed repeatedly since 1989. It has yet to make it to a full vote in the U.S. House of Representatives.

This year, there’s a push to get there after it was voted out of committee for the first time in April 2021. But the bill would then face a divided Senate.

In the absence of federal action, some cities have begun implementing or proposing programs.

“It’s great energy,” Francis said. “But I would caution: … Piecemeal local programs are not even going to make a dent in the racial wealth gap. … It’s a national issue, and it can only fully be addressed by the federal government.”

Better enforcement of non-discrimination laws

The Civil Rights Acts of 1964 and 1968 made racial discrimination in areas such as employment and housing illegal.

But there’s a difference between banning something and stopping it. 

The Markup, for instance, found in a 2021 analysis that Black applicants were 80 percent more likely to be turned down for a conventional home mortgage than similarly qualified white applicants.

And multiple studies, including ones that sent employers fictitious resumes with names selected to sound white or Black, have found that white job-seekers receive more callbacks. The share of Black job seekers not finding work averaged roughly double the white rate in the 2010s, not a whole lot better than in the 30 years before that.

Then there are wage disparities. As just one example: Census Bureau data tracking both white and Black earnings across 217 occupations — from bus driver to CEO — shows higher median pay for white workers in nearly 90% of those job classifications. 

A 2019 Center for Public Integrity analysis found that the system set up to protect workers from discrimination routinely fails to do so. Many complaints to the U.S. Equal Employment Opportunity Commission were being closed without investigation. Few ended with workers receiving some form of relief.

In a report for the Economic Policy Institute, a think tank focusing on low- and middle-income workers, Jenny R. Yang and Jane Liu argue that more funding for “vastly under-resourced” enforcement agencies and new requirements for employers are key to disrupting workplace discrimination.

“In other words, rather than primarily focusing on proving discrimination after the fact, our laws must create more powerful incentives for employers to adopt practices designed to prevent discrimination, audit systems for bias, and proactively correct problems,” they wrote.

A federal jobs guarantee, putting unemployed people to work on public projects in the vein of the Depression-era Works Progress Administration, would be another way to counter hiring bias. It’s a way “to stop the bleed of wealth from families when they’re exposed to unemployment,” said Moore, with the Economic Policy Institute. “Black families are disproportionately exposed.”

Rethinking systems that maintain the gap

Taxes. Higher education. Healthcare. Credit scores. Lending.

So many of the systems that run through our lives have an impact on economic inequality, and too often not for the better. In The Whiteness of Wealth, Dorothy A. Brown points to multiple ways the tax code rewards economic decisions that white families are more likely to be in a position to make.

The same dynamics play out in the credit-score system that affects our ability to get a loan or rent an apartment. “A credit score kind of bakes in the racial wealth divide to begin with,” said Jesse Van Tol, CEO of the National Community Reinvestment Coalition.

Lower levels of family net worth paired with rising college costs mean Black college graduates have an average of $25,000 more in student-loan debt than white graduates. In a country where health problems can trigger bankruptcy, a higher share of Black Americans are burdened with medical debt and don’t have health insurance, driven by disparities in job benefits and states that won’t expand Medicaid access. 

Advocates and experts say that changing the way these systems work — like proposals for tuition-free college or higher taxes for the wealthiest people — could improve outcomes for many Americans, not just Black families. Even so, there’s the potential to narrow racial wealth disparities because of the outsized impact unequal systems have on Black Americans. 

While Congress and federal agencies have the most power to fix bad systems, that doesn’t let states, cities, businesses and others with influence off the hook.

“This is a fight we all need to be engaged in collectively,” said Quentin Hart, mayor of Waterloo, Iowa, which recently began evaluating decisions for their impact on equity. “Businesses, banks, Realtors, elected officials, community officials, churches … We need to understand that we are all in this together, and it’s going to take all of us to be able to move the needle.”

Funding Black changemakers

Black community leaders with great ideas to address local consequences of the wealth gap often have trouble getting the capital they need to do it — because of the gap.

Disparities cut just as starkly through philanthropy as they do through the rest of the country. Nonprofits are disproportionately led by white executives and board chairs, and white-run groups receive much more funding on average than Black-led ones. 

A report by Echoing Green and The Bridgespan Group, two social-sector firms, concluded in a 2020 report that more equitable funding is critical to reducing inequality “because these leaders often bring strategies that intimately understand the racialized experiences of communities of color and the issues these communities face.” 

We dove deep into efforts in Waterloo because that’s where ReShonda Young is trying to open a Black-owned bank to address economic inequality, the focus of our podcast. What we found included an example of community action that people in other places — including funders — could look to replicate.

A group of Black community leaders there decided to tackle local economic inequality by founding an organization that would run programs such as an accelerator supporting Black businesses. They were able to launch it rapidly both because they’d assembled the right people and organizations with money in the majority-white city provided resources. 

A group in the process of shutting down turned its nonprofit status and remaining money over to the new 24/7 Black Leadership Advancement Consortium. Another local organization provided seed funding.

The success of 24/7 BLAC’s accelerator, launched in 2020, won the group grants from state and national organizations to keep it going.

“We have some extremely talented individuals in our community,” said Joy Briscoe, executive director of 24/7 BLAC. The economy as a whole misses out on innovation “by not making sure we have an equitable playing field. … We have to do better.”

Asset-building programs

“Baby Bonds” is an idea that would decrease inequality at birth. U.S. Sen. Cory Booker’s proposal would put $1,000 to $3,000 in an account for every infant — the amounts varying based on family income — that would be managed by the U.S. Treasury until the account holder turns 18. 

A 2019 Duke University analysis says that approach would help more than even debt-free college. 

But a program that links payment amounts to parental wealth would be better than one that is based on income, the Economic Policy Institute’s Moore said. Even with a good income, Black families often have a lower net worth than white families. That’s driven by racial differences in intergenerational wealth — parents’ ability to help with college costs, for instance. And it’s a precarious situation, he points out.

“Having a decent salary but no wealth behind it is a situation that policy should remedy but is often not addressed,” Moore said.

Guaranteed income is another potential asset builder that could reduce racial wealth inequality, depending on program design. Pilot initiatives are trying out no-strings-attached cash payments to small groups of people as a method for helping individuals and families escape poverty.

A program in Stockton, California, provided 125 residents $500 a month over two years, starting in early 2019. All recipients lived in neighborhoods with median income below roughly $46,000. A year in, program leaders said, those who received the money were more likely to have full-time jobs, to feel less anxious and to have a greater ability to pay for emergency expenses than study participants who didn’t get the funds.

A new program in Georgia will enroll Black women as participants for a two-year project. The In Her Hands program was designed after conversations with community members about their needs — which showed that people lacked money, not the financial literacy to know how to use it.

“It doesn’t matter how well you can budget when your income consistently lags behind the cost of providing for basic needs for yourself and your family,” organizers GiveDirectly and the Georgia Resilience and Opportunity Fund wrote. “Community members identified recurring cash relief as a key tool to get them ‘off the hamster wheel’ of persistent debt.”

Black banks

Black-owned banks are sometimes bandied about as the wealth-gap solution, so just to clarify: The gulf is way too big for that, even if the Black banking sector weren’t small.

But Black banks can and do help make their communities more equitable.

“People save more and just have better economic outcomes in areas where there is a bank, particularly a bank that accepts them,” said Kristen Broady, speaking about the matter while an expert at the Brookings Institution. She’s now director of the Economic Mobility Project at the Federal Reserve Bank of Chicago. 

What Broady means can look like “having more Black-owned banks in Black neighborhoods, Hispanic-owned banks in Hispanic areas, etc., or … having people from the community work in the bank so they understand the community’s needs and who’s who,” she said.

Stephone M. Coward II, a co-founder of BankBlackUSA, which helps people find Black financial institutions, said these banks tend to “stand in the gaps, especially when it comes to banking deserts.” But they’ve long been under-resourced, buffeted by the same forces that built and maintained wealth divides. 

He’s happy to see the recent shift of more big companies doing business with Black banks, a trend that could increase investment in the communities they serve.

“We know that banking Black is not a panacea for closing the racial wealth gap, but it’s a tool,” Coward said. “It’s a multi-pronged approach.”

William Michael Cunningham, economist at Creative Investment Research, has analyzed Black banks for three decades. His view: “Don’t count on the current form of white supremacy masquerading as capitalism to solve Black/white wealth disparities.” He’s pessimistic about the odds of it closing through any means because American society has so long been structured to extract wealth from Black people, not just historically but also in more recent decades through avenues like predatory lending.

He suggests a focus on “life maximization” instead, policies and programs that prioritize health and wellbeing.

But the systems that produce economic inequality were created by people. And people can remake them.

Andre M. Perry, a senior fellow at Brookings Metro and author of Know Your Price: Valuing Black Lives and Property in America’s Black Cities, sees reasons for optimism on that front, from the increasing share of people in favor of reparations to flourishing local equity efforts. It won’t be easy — as backlash shows — “but I think we’re in the upward trajectory toward progress,” he said.

“There’s a cultural shift that will open up a window for future policy changes,” Perry said.

Clarification: This story was updated to clarify that economist William Michael Cunningham was speaking of the U.S. economic system, rather than the potential of a theoretical capitalistic system.

The post How can we close our racial wealth gap?  appeared first on Center for Public Integrity.

Do you know the history of discrimination in your community?

We delved into Waterloo, Iowa, for a podcast about the country’s racial wealth gap. What we saw included two types of real estate racism that played out coast to coast in the United States. Both erected barriers to wealth-building that still hurt people today, Black families especially, decades after the practices were declared illegal. 

It’s a lot easier than it once was to see the local impact of one of those practices, known as redlining. That means you can go digging, too. 

A federal agency called the Home Owners’ Loan Corp. graded neighborhoods in more than 200 cities nationwide during the 1930s, declaring some neighborhoods suitable for mortgage investment and some “hazardous.” The latter were colored red on HOLC maps — for reasons that included the race of the people living there.

“Redlining directed both public and private capital to native-born white families and away from African American and immigrant families,” concluded a team of researchers at four universities, including the University of Richmond, that put these maps online.

These maps redlined the country

To find out if your community was redlined by HOLC, go to the universities’ Mapping Inequality site. You’ll see not just the maps but also the justifications that federal employees gave for their grades.

Local bias in real estate and lending long predated HOLC. Researchers found that the agency’s maps reflected that reality more than they created it — and that the Federal Housing Administration was the real federal driver of discriminatory lending. 

Why aren’t we looking at FHA’s redlining maps? Because few survived.

“They had been destroyed after being noticed by a Washington official in use in the regional office in Detroit,” Columbia University’s Lynne Sagalyn wrote in her 1980 dissertation.

You can see the 1938 Chicago map, with different colors designating grades A through D, which Wenfei Xu, a postdoctoral fellow at the University of Chicago, delved into for a paper about decades-long ripple impacts. Thomas Storrs, a history Ph.D. student at the University of Virginia, found an FHA map of Greensboro, North Carolina, with a literal red line through it — drawn in pencil — that appeared to be the demarcation between areas where the agency would and would not lend.

Most FHA maps still around from the redlining period have no color-coded grades or red lines. Instead, demographic and other data embedded in those maps “provided the tools for redlining and the division of cities,” said Storrs, co-author of a 2021 paper on the agency’s discriminatory lending.

But the HOLC maps are far more readily available and clear-cut. And they do tell an important story about historical patterns of segregation, discrimination and blocked investment — as well as their present-day consequences. 

Researchers found that even today, people in Baltimore neighborhoods graded “declining” or “hazardous” in the 1930s live shorter lives, for instance, and that babies born in redlined California neighborhoods have worse health outcomes. The nation’s redlined areas have lower homeownership rates and home values. And most today are communities of color.

In Waterloo, we found that nearly half the city’s Black residents live in census tracts where the predominant grade was “declining” or “hazardous,” compared with 20% of white residents. Big disparities in income and homeownership plague the city.

“Fifty years after the Fair Housing Act, we’re still struggling with this,” said Jerry Anthony, an associate professor at the University of Iowa who has studied segregation in the state as well as lending discrimination. “We still haven’t made significant progress.”

Restrictions hidden in land records

Another practice used in Waterloo to enforce segregation: covenants filed in land records to restrict who could move in based on their race. 

That was common across the country, too — FHA recommended their use. But there’s no website where you can look them all up. 

So if you want to know whether a racially restrictive covenant was filed for your own home, you’ll likely need to check your property records for evidence of restrictions. Houses more likely to have them were built in the first half of the 20th century.

In some locations, though, someone’s already done the legwork to find many or all of the local covenants.  

In the Minneapolis area. In Washington, D.C. In the St. Louis area. In Seattle’s King County.

“Most shocking is the ‘Aryans only’ restriction imposed on a subdivision in Clyde Hill,” the University of Washington’s Seattle Civil Rights & Labor History Project wrote on its website. “That racial concept, favored by [Adolf] Hitler, was written into deeds as late as 1948.”

And the influence went both ways: Hitler used U.S. race laws as a model for Nazi Germany, Yale Law School’s James Q. Whitman says.

Colin Gordon, a professor of history at the University of Iowa, coordinated students cataloging covenants in two Iowa counties. Very fortunately for us, one of them was Black Hawk County, where Waterloo is located. 

Tracking down the documents is usually tricky, requiring a hunt through deed books, Gordon said. But the Black Hawk recorder’s office filed all the restrictive covenants as “miscellaneous” records, making it much simpler.  

The resulting Mapping Segregation in Iowa project shows the underlying documents, often with bland language that sounds like a current-day homeowners’ association rulebook until you get to wording like this: “No race or nationality other than the Caucasian race shall use or occupy any building or any lot, except that this covenant shall not prevent occupancy by domestic servants.” 

There’s also a map that lets you see these restrictions spreading across Waterloo from 1914 to 1950 like a contagion.

“It’s a response to the Great Migration,” Gordon said. The first covenants in Waterloo were placed by white homeowners living near an area where Black migrants from the South, seeking a better life, moved to work on the railroad. It was an effort, he said, “to seal the borders.”

After that, developers of new subdivisions and residents of other neighborhoods both followed suit. 

In 1948, the U.S. Supreme Court said judges could not enforce the documents but people could still adhere to them — which they did. The Fair Housing Act finally made that, and redlining, illegal in 1968.

Even if discrimination stopped after that, which it did not, these past practices would still matter today. They defined for decades which neighborhoods received public investment, mortgages and other resources. If you lived somewhere else, it was far harder — or impossible — to accumulate the modest wealth of the middle class. That meant less to pass on to children and grandchildren.

“You have intergenerational disadvantage,” Gordon said.

And that is why we dug into this history (and more) for a podcast about the present-day racial wealth gap and one woman’s effort to address it in Waterloo.

Moritz Kuhn, an economics professor at the University of Bonn in Germany, was part of a research team that showed how the wealth gap between Black and white Americans has changed over time. Measured in dollars, it didn’t shrink over the past 60 years. It grew.

Kuhn said the “dramatically different” wealth positions of Black and white Americans right after the Civil War, the result not just of slavery but of decisions by the country about whom to compensate for it, is enough to create a long-lasting disparity all by itself.

Then redlining, restrictive covenants and other discriminatory actions piled on.

“The situation that we see today is still very much inherited from 150 years ago,” Kuhn said.

The post The racist history that helps explain our present wealth gap appeared first on Center for Public Integrity.

WATERLOO, Iowa

Sheritta Stokes was worried, frustrated and determined to do something. 

As schools sent children home to protect families from the coronavirus in 2020, she knew the students at her elementary school would feel an outsized impact. For the majority Black student body in this resource-starved part of town, normal was already a problem. 

Stokes wasn’t the only Waterloo resident pondering how to change the status quo in a region that recently had been ranked the worst in the country for Black Americans. Some community leaders started an economic-empowerment organization, now running an accelerator providing support for Black business owners. One began working to launch a Black-owned bank. 

And Stokes? She and Waterloo native Nikole Hannah-Jones, the Pulitzer Prize-winning journalist, teamed up to create an after-school literacy program inspired by the 1960s Freedom Schools of the civil-rights movement.

“I’ve been with the district for over 20 years, and for 20 years, we’ve been fighting to close the achievement gap,” said Stokes, a third-grade teacher at Waterloo’s Dr. Walter Cunningham School for Excellence. An entrenched disparity, she said, requires “doing something different.”

But as Hannah-Jones, Stokes and others began planning the 1619 Freedom School, surging racial-justice efforts nationwide were met with conservative white backlash — focused in part on American history and what students learn about it.

Since 2021, Republicans have introduced bills in roughly 40 states to restrict what schools can teach in class or cover in training, mostly related to race and often using language from an earlier Trump administration executive order, according to a PEN America tally. 

Iowa passed a law that appears to ban curriculum and training about systemic racism, which educators say is having a chilling effect on frank discussions about both the past and present. A different bill proposed by a state legislator last year called for yanking funding from schools with lessons incorporating the 1619 Project, which was spearheaded by Hannah-Jones and places slavery and the Black experience at the center of the American story.

With all that as a backdrop, launching a free program for students that would embrace Black history and include “1619” in its name was no simple matter. Conversations with local grantmakers started strong, Stokes said, then largely fizzled amid the political furor.

Though the program has garnered some passionate support from local residents, “the majority of our funding came from out of state,” she said.

The 1619 Freedom School opened in January in a renovated Masonic Temple, an inviting space overflowing with books like The Youngest Marcher, walls decorated with colorful art and posters about the power of information. More than 30 fourth- and fifth-graders attend five days a week for two hours after school. The program provides literacy support and books to take home. 

“So often our underserved communities get programs that are not well resourced,” Hannah-Jones said. “I think sometimes we think because we’re serving poor children and poor families, we don’t have to have the same type of quality that we do for other students. Everything about this program is trying to stand in opposition to that in saying, if our kids got the same resources, they obviously could achieve the same things.”

Building the literacy program around Black history also felt critical to the leadership team, which is largely made up of educators. They knew the impact that can have on achievement. And Hannah-Jones saw the difference it made in her own life. 

“It changed my understanding of my place in the world,” she said. “It made me want to learn because I could see myself in the story.”

Lori Dale, a member of the program’s leadership team, said she’s heard some criticism about the 1619 Freedom School that seems to suggest “we’re trying to, I don’t know, start a revolution or something.” 

“But in reality, it’s just to make sure our students, Black students in particular, are getting what they need,” said Dale, an educational counselor for Educational Talent Search at the University of Northern Iowa. “They are not getting what they need in the school district.”

In 2018, the financial news site 24/7 Wall St. tracked economic and social disparities between Black and white Americans in metro areas across the country and ranked Waterloo the most unequal. In more recent rankings, the area remained among the worst 10. White households in the city have 81 percent higher median incomes than Black households and more than double the homeownership rate, census data shows.

The past helps explain that present, just one reason decisions about how to teach history matter.

Local efforts to create or maintain segregation in Waterloo were underway since at least 1914, according to a University of Iowa project that tracked race restrictions in land records. The city was also among those redlined by the federal government in the 1930s, one of many ways that Black neighborhoods were blocked from mortgage lending and other investments.

Decades-old patterns of segregation still hang on today. Now they’re enforced not by law but by the economics of where people can afford to live — dictated by a racial wealth gap built up over generations of discrimination.

That plays out in Waterloo public schools. All three of the city schools that sit on land the federal government once redlined were rated below “acceptable” by the Iowa Department of Education in 2021, the Center for Public Integrity found.

Among the rest of the city’s schools, just roughly one-quarter have a less-than-acceptable rating.

Nearly half the district’s Black students attend schools with such a rating, meanwhile, compared with a quarter of white students. 

Many of the Waterloo schools in or near once-redlined places are helping children progress faster than the national average, according to a Stanford University analysis, but not enough to catch up.

“Waterloo is not an anomaly,” said Gabriel Rodriguez, an assistant professor of education at Iowa State University. Patterns like this are visible around the country, he said.

Part of what Rodriguez appreciates about the 1619 Freedom School approach is that its leaders see their students walking in with assets to build on, rather than deficits to fix. 

“I think it’s exciting,” he said. “I think it’s awesome.”

Doing the work

In Waterloo, equity efforts are powered in large part by Black women.

Joy Briscoe, one of the 1619 Freedom School’s leaders, is also executive director of the 24/7 Black Leadership Advancement Consortium, which formed in 2020 and recently started the fourth round of businesses going through its accelerator program. Waterloo native Sharina Sallis is involved with both the school and consortium, too. And ReShonda Young, who runs the accelerator, is also working to launch the Bank of Jabez. 

Briscoe said all 30 graduates of the accelerator are continuing to operate their businesses, despite the challenging pandemic environment, and some are growing. Her advice to anyone trying to improve their own communities: Focus on those most affected by the problem you’re trying to address. Center their voices. And, she said, team up with people “who are biased toward action. Don’t do a lot of meetings.”

Hannah-Jones, who said the 1619 Freedom School’s curriculum will be made freely available to anyone who wants to work on student literacy in their own area, would like more attention on the many regions like Waterloo: smaller Rust Belt places with Black communities locked out of the middle class. 

She had the contacts to land out-of-town funding for the program, but most people trying to improve equity in their community don’t, she said.

“It just speaks to how challenging it can be,” Hannah-Jones said.

A key early funder of the 24/7 consortium was Red Cedar, a public-private partnership that helps startups in the region. Executive director Danny Laudick, who is white, said he’s noticed a hopeful shift in the last few years in how residents of the majority white city think about equity. More people are acknowledging that there’s work to be done, he said, and more are starting to do it. 

“We have a responsibility to the people who are members of our community,” he said.

Quentin Hart is Waterloo’s first Black mayor. He was recently elected to his fourth two-year term after a challenge that tapped the anger of some white residents over his police chief’s decision to change a department logo reminiscent of a Ku Klux Klan symbol.

In a sign of pushback to the pushback, Waterloo residents elected a majority Black city council in November, refusing every candidate endorsed by a group that wanted the police logo back.

The city now evaluates decisions for their impact on equity, Hart said, and has been making investments in a redlined part of town. He’s delighted by the private efforts. What he wants is even more like that, from every part of the community.

“People need to acknowledge that there is a racial wealth gap, and whether directly or indirectly, you could be hurting or you could be helping,” Hart said. “We need to understand that we are all in this together, and it’s going to take all of us to be able to move the needle.”

It’s exactly that feeling of being in it together with others that makes Dale love Waterloo. The challenges are formidable. And yet she is not alone.

“I’m not saying it’s easy,” she said, “but I’m surrounded by people, positive people who are willing to do the work.”

You can hear a podcast about ReShonda Young’s quest to fight the wealth gap by opening a bank in the newest season of The Heist.

The post Inside the effort to make this city a better place for its Black residents appeared first on Center for Public Integrity.

You can’t fix a problem you don’t track.

That’s especially true if you’re counting on the federal government to intervene. It’s why, several years after 1968 civil-rights legislation intended to stop housing discrimination, Congress passed a law requiring many financial institutions to report some information about every home mortgage application they receive. 

The race, ethnicity and gender of the would-be borrower. Basic financial and geographic details. Whether the request was approved. It’s publicly reported — without individuals’ names or other identifying information — and helps reveal discriminatory practices.

But for small-business lending, there’s no equivalent. No national public information. It simply doesn’t exist.

Now, though, it’s finally on track to be created.

Getting even that far was a battle.

In 2010, amid the fallout from a financial crisis, Congress mandated the creation of the Consumer Financial Protection Bureau and directed the agency to collect this data. That came decades after the Home Mortgage Disclosure Act. But enacting a rule to get the reporting started wasn’t at the top of the CFPB’s to-do list. 

In 2018, after the agency took some early steps on a rule, it reversed course.

The next year, the California Reinvestment Coalition and several other plaintiffs sued the Trump administration to get the effort restarted. 

“It’s a real problem, and they’re not collecting the data needed to make sure this problem gets at least somewhat resolved,” said plaintiff ReShonda Young, an Iowa entrepreneur who told the court about her troubling lending experiences.

The CFPB quickly settled, agreeing to court-ordered deadlines. In September 2021, the journey to data hit a crucial milestone: an actual proposed rule.

“Having better information about how both applications and originations are functioning for small businesses is incredibly important,” said Kris Andreassen, senior counsel in the agency’s Office of Regulations.

Data like this “is what allows effective regulation to be put in place,” said Didier Trinh with the Main Street Alliance, a group that advocates for small businesses.

But public access to the data is still a ways off — the process could take several more years. And now there’s a new stage in the battle, with banks and other lenders trying to convince the agency to exempt more of them from its requirements, lengthen the time before reporting is necessary or drop the idea entirely.

More than 2,000 comments from opponents and supporters flowed in by the Jan. 6 deadline. 

The Independent Community Bankers of America argued that small business loans are far more complicated than mortgages and “should not be subject to simplified, rigid analysis.” Identical letters submitted by credit union workers and advocates said the requirements “will likely add substantial strain” on the nonprofit, member-owned financial institutions and could cause them to reduce or stop small-business lending. A number of small lenders said larger lenders would be better positioned to comply. 

“We strongly support the need to ensure all small businesses are fairly and well served,” the Community Development Bankers Association wrote in its comment. “Yet, we are also concerned about the costs of data collection.”

Supporters of the rule argue that broadening exemptions would reduce the reach of the data and its effectiveness.

An expansive 2020 paper for the National Bureau of Economic Research, relying on a survey of new-business owners conducted over several years to fill in parts of the information vacuum, found sharp disparities in lending to Black- and white-owned startups. Areas with strong local banks, the authors wrote, were no better for Black owners than communities dominated by national players.

“Black founders are not less afraid of loan denial in these markets; if anything, they are somewhat more likely to report that they did not apply for fear of denial in regions with stronger local banks,” concluded the study, by Robert W. Fairlie, Alicia Robb and David T. Robinson. “In these areas, white-owned startups receive larger amounts of bank debt on average but black-owned startups do not.”

Secret-shopper tests of lenders by the National Community Reinvestment Coalition have found unequal treatment of Black and Hispanic testers compared with less qualified white testers. The tests also found disparities in treatment of women compared with men, particularly Black women. 

But the lack of lender-by-lender, application-by-application data for small business loans is a harmful gap that allows discrimination to continue unchecked, community advocacy groups say.

“This has made it hard, often impossible to enforce fair lending laws, and increase small business loans to women and people of color,” Bethany Sanchez, senior administrator of fair lending for the Metropolitan Milwaukee Fair Housing Council, wrote the CFPB in support of the proposed rule. “We realize that this lack of transparency has been intentional.”

The Paycheck Protection Program, a temporary effort to get forgivable loans to small businesses during the pandemic, shed some light on disparities. Even so, the federal government shared details only about the finalized loans, not all applications, obscuring the experience of business owners who tried to get the help and couldn’t. And early missteps resulted in many lenders failing to consistently report demographic information. 

Ashley Harrington, former federal advocacy director at the Center for Responsible Lending, thinks it would have gone differently if the small-business lending rule had already been in place. 

Unequal lending treatment shows up in ways often difficult or impossible for a customer to detect, she said. A lender turning you down for a loan it gave to a similarly qualified borrower, for instance. Or giving you worse terms.

“Some of this, you don’t even realize it’s happening,” Harrington said. “Because that’s just what it is. That’s just what’s given to you. How would you know?”

You can hear a podcast about lawsuit plaintiff ReShonda Young’s effort to fight the wealth gap in the newest season of The Heist. 

The post Small business lending looks unequal. Getting the data has been a battle. appeared first on Center for Public Integrity.

WATERLOO, IOWA

ReShonda Young strode into a church too big for its congregation, in a still-segregated city where economic barriers often strangle Black ambition, on a mission to tackle a tenacious consequence of American discrimination.

If she could buy this sprawling property, she would be one step closer to opening the only Black-owned bank in Iowa — potentially the first in more than 20 years to launch anywhere in the country. If she could open the bank, she hoped it would provide more tools to shrink the yawning gap between the wealth held in the U.S. by typical white families and most everyone else, Black families especially.

Trying to narrow a wealth gap that’s taken a personal toll is as difficult as it sounds, particularly when the strategy is founding a bank. That requires convincing investors to hand over a lot of money. Young’s target: about $10 million.

On the September day she stepped into the brown-brick Ambassadors for Christ Church, eight months after her first conversation with federal regulators and 17 months after starting down this road, she had commitments for about 5% of the money she needed. 

The wealth gap she’s been contending with her whole life did not occur by accident. That white families have eight times the median net worth of Black families, at last count by the Federal Reserve, is hundreds of years of American history contained in a single statistic. It is slavery and Jim Crow and modern-day discrimination. It’s how all of that translates into the unequal way wealth passes from one generation to the next, with whites nearly three times more likely than Blacks to receive an inheritance.

Young’s grandparents sharecropped in Mississippi under a system designed to keep poor farmers poor — especially Black farmers — and enrich large landowners. As children, her parents worked long hours in the fields, picking cotton, sometimes missing school to do it.

Her parents and grandparents bucked stiff odds to become homeowners. Even so, there was no money left for funeral costs when her mother’s mother died, and relatives had to chip in. Young contributed the housing portion of her college scholarships and moved back home for the last semester of her senior year.

Two decades later while working at a local investment firm, she learned just how much some of her white peers’ grandparents were able to leave their own children.

“My classmates will inherit that, and I think it’s awesome,” said Young, 46. “Unfortunately, that’s not the story for myself and many others.”

The gap, trillions of dollars wide, is so massive that academics who study it say it can’t be closed with anything but a major government intervention. 

Federal actions to narrow it are scattered and collectively small. The grim truth: The wealth gap between Black and white families today is no better than it was in the early 1960s. 

In fact, it’s larger.

What do you do in the face of that?

Young’s own answer came bit by bit as she bought homes to rent out, started a business she franchised, survived financial turmoil and helped other entrepreneurs in Waterloo. Over and over, she saw lending decisions that looked discriminatory or unreasonable and placed roadblocks to building Black wealth. A devout Christian, she felt a persistent sense that God was telling her to act.

Her first move was to sue the federal government with three other plaintiffs in 2019, demanding it make financial institutions disclose race and other demographics in their small business loan decisions as a 2010 law required — information critical to finding and stopping discrimination. 

She won. Public release of the data is still likely at least several years away, but the Consumer Financial Protection Bureau is working on enacting that long-delayed rule.

And still, she felt God prodding her. Open a bank.

It would be the most difficult business launch she’d ever attempted. Even if she jumped all the hurdles, her bank couldn’t by itself defeat the wealth gap in Waterloo, let alone the nation. 

And the gap fights back. Among roughly 5,000 banks in the U.S., the number the federal government says are Black-owned or -led dropped to 19 from 49 in the past two decades because they’ve been starved of capital like the communities they serve, making blows like the Great Recession more lethal. The survivors collectively increased their cash and other assets just over 30%, accounting for inflation, from 2001 through 2020. Meanwhile, the country’s 10 biggest banks — beneficiaries of white wealth — saw assets more than triple.

Despite the daunting prospects, Young, a planner and quiet risk-taker, still felt the prodding: Open a bank. She began drawing up a to-do list.

‘Keep me from harm’

The book of “miscellaneous” records was a deep red. Inside, white type on black paper detailed in dry language the restrictions the homeowners of Waterloo’s well-to-do Highland neighborhood banded together to place on their properties in 1945. No low-cost homes, no small lots, no businesses — and no owners or tenants “of any race other than the Caucasian race.”

Young leaned over the book in the county recorder’s office, looking at the 18 pages of signatures of people who once lived in what is now her neighborhood, each of them intent on keeping it all white.

The restrictive covenants that spread in Waterloo and across the country were just one skirmish in a long campaign by the government, banks, real estate agents and myriad other combatants to keep America separate and unequal. For decades, Black residents in Waterloo could live only in a small part of the city hemmed in by railroad tracks and factories. 

By the 1930s, federal employees were making maps of U.S. cities that deemed certain areas “hazardous” for investment, a practice that came to be known as redlining. They offered just one reason they shaded that part of Waterloo red: “This is the colored section.”

As a child, Young would walk through the Highland neighborhood, passing by the pocket park, the mature trees, the inviting early 20th-century homes in contrasting styles, and dream of living there. And when she grew up, she made it happen, finding a deal on a cozy blue house. 

In a sense, her moving there meant the white-collar white supremacists who erected those earlier barriers had lost. 

But in another sense, they had already won. 

Congress passed anti-discrimination laws in the 1960s and ‘70s to try to stop racially biased decisions in hiring, real estate and lending. But the country never fixed the wealth gap that generations of that discrimination created, locking those disparities into place. Half a century later, Black households headed by a college graduate have a lower median net worth than white households headed by a high school dropout, according to research by Duke University’s William Darity Jr. and other scholars. 

Less family wealth means more student-loan debt. More trouble when emergencies hit. More difficulties buying homes or starting businesses. Running hard might do nothing more than keep you from falling further behind, even if no further discrimination piles on.

Young, who wrote an opinion piece for the Des Moines Register in 2020 calling the situation “an impossible race,” looked at the once-legal document under her fingertips and thought of the insidious equivalents today. Lower property appraisals, real estate steering, biased loan denials. It all feels harder to fight because none of it comes with a blunt written statement like the one staring back at her.

“This is in-your-face,” she murmured. “You know where you stand.”

Young grew up a few blocks south of the redlined community that was once the only place Black residents could live in Waterloo. And she was born just two years after the local school system approved a desegregation plan over strenuous objections from a well-organized group of largely white parents who said they objected to mandatory busing. Up until that point, the U.S. Commission on Civil Rights noted, many of the district’s white teachers “had never met a black person.”

For years, Young said, she was passed over for gifted and talented classes in school despite having excellent grades. It made her more determined. She graduated in the top five of her high school class and won scholarships for college, part of the first generation in her family to go. 

That same determination runs through her working life, starting with her first summer job. Young said that after she put in a day of exhausting fieldwork at age 14, struggling to quickly remove the pollen-producing tassels from corn, a supervisor told her not to bother coming back. She was certain she could do much better her second day — and just as sure that no one would notice if she returned. Young said she was right on both counts: She quickly worked her way onto the fastest crew.  

She’s tapped that resolve many times since. She bought rental property at 25 while repairing her credit after her identity was stolen. She repaired her credit again after her first business partnership went sour and she filed for bankruptcy protection. She started a gourmet popcorn business with a loan smaller than she’d needed, franchised it and sold it. She sued the federal government and won. And she negotiated a settlement from a bank whose error she says triggered a domino effect leading to her second bankruptcy.

Young has also worked for investment and financial services companies — unusual in the Waterloo region, where whites are employed in finance jobs at three times the rate of Black residents, U.S. Equal Employment Opportunity Commission records show. But she’s never worked at a bank.

Still not entirely sure she should try to open one, she texted a cousin with two decades of banking experience and expected to hear it was too big an idea to take on. 

Instead, her cousin wanted in.

It was April 2020, a month after health officials declared the coronavirus a pandemic and a month before George Floyd’s murder. “OK,” she thought in a silent prayer, “if this is really something I’m supposed to do, I need You to give it a name.”

Soon after, in the middle of doing laundry, she had the strong sense that she needed to read the verses of 1 Chronicles about Jabez, who was “more honorable than his brothers.” 

“Jabez cried out to the God of Israel, ‘Oh, that you would bless me and enlarge my territory! Let your hand be with me, and keep me from harm so that I will be free from pain.’ And God granted his request.”

She stopped thinking about the bank as something she might do. It would be the Bank of Jabez. And she was going to open it.

The wrong sort of No. 1

The words were blunt: “No U.S. metro area has larger social and economic disparities along racial lines.” That was how the financial news site 24/7 Wall St. described the Waterloo region in a 2018 article ranking it the worst place in the country for Black Americans. 

It hit like a thunderclap in the Black community. Residents already knew there were problems — a report the year before called the region “still severely segregated,” and there were huge gaps in income and homeownership between whites and Blacks. But now they had a ranking that showed Waterloo’s troubles didn’t merely mirror the country’s.

Joy Briscoe, talent acquisition specialist for the Waterloo school system and a leader in the Black community, thought back to her 1980s childhood in town and couldn’t say that things had improved.

One key economic measure, in fact, was getting worse. In 1950, despite the barriers erected by powerful people, the city’s Black homeownership rate was an impressive 68%, double the national figure for Black Americans and about the same as for white Waterloo residents. Good industrial jobs and union leaders committed to racial equality made a difference, said Colin Gordon, a University of Iowa history professor whose students tracked the restrictive covenants in Waterloo.

Then many of those jobs disappeared. And the Black community, with less intergenerational wealth to draw on, with homes devalued by redlining and other discriminatory practices, was hardest hit.

The Black homeownership numbers tell the story: 46% in 1990, 40% in 2010 and, by the end of the last decade, 32% — the reverse of the economic situation at the start of the civil rights era.

“For working class African-Americans in the urban north, economic losses (falling wages, unemployment, deindustrialization) overshadow most of the legal gains of the civil rights movement,” Gordon wrote in an email.

That experience was threaded through Briscoe’s own family history. And now, the same month Young was contemplating a bank, Briscoe and other local leaders fired up about the 24/7 ranking met to discuss another way to fight the wealth gap: starting a business accelerator that would support Black entrepreneurs with mentorship, training and other aid. They needed someone to run it, someone with an entrepreneurial record, a habit of helping other business owners and the ability to build something new at high speed.

The answer seemed obvious to them. But would Young say yes?

She already had plenty on her plate. But the mission fit well with hers. She agreed.

“I was so happy,” said Briscoe, executive director and co-founder of the group, the 24/7 Black Leadership Advancement Consortium. “It was really fate: The planets aligned, God was smiling on us. … We couldn’t have found a better person.”

By September 2020, the accelerator was running with a dozen business owners. Other cities in Iowa soon came calling, hoping to replicate it. 24/7 BLAC raised hundreds of thousands of dollars in grant funding to keep the accelerator and other efforts going as Young helped recruit more participants, led discussions and worked with the entrepreneurs on their challenges. 

Frequently, their biggest challenge was getting a loan.

Accelerator participant Rosie Daniel, owner of LuLit's Hair Essence, needed to replace the failing car she relied on to make deliveries of her hair restoration products. She went to a local credit union where she banks to apply for a business auto loan in 2020. She said the lender, after assuring her he would verify her credit score without a “hard inquiry” that would ding it, told her it wasn’t high enough. Then, in the parking lot afterward, she saw an alert on her phone that made her even more upset: It had been a hard inquiry. The credit score she’d been working to improve would go down for nothing.

Daniel, who can’t wait to move her accounts to the Bank of Jabez, dialed Young on the spot. “Guess what just happened to me,” she said.

Young listened, feeling more certain with every story like this that banking had to change. Too often a credit score simply reflects the wealth gap — and helps maintain it. After delving into accelerator participants’ financials and understanding their risks and opportunities in a way no single number could convey, Young thought local banks could widen their lens for customers, “looking at them and their business holistically.”

She and other 24/7 BLAC representatives suggested this type of broader thinking — which some financial institutions already employ — in conversations with local bank CEOs, all white. Some agreed it was a good idea. Others weren’t receptive, Young said — their loan-approval process worked for them, and they didn’t seem interested in changing.

But she could see that Stacey Bentley, president and CEO of Community Bank & Trust, took the request to heart. The two women knew each other from serving on local boards together, and Young tucked a thought away: Perhaps Bentley, who helped open Community in 1997, would be willing to offer advice to the Bank of Jabez.

Climbing the mountain

A new bank is not a typical startup. The Federal Deposit Insurance Corp. and another banking agency, federal or state, must both sign off. After the Great Recession hit — contributing to more than 500 bank failures — regulators demanded more capital and more evidence of community need. And investors weren’t so eager to jump on board.

“It’s a very different world today than it was then,” said Nathan Stovall, lead banking analyst for S&P Global Market Intelligence. “There just were too many banks.”

Organizers started more than 100 on average nationwide each year from 1990 to 2008, according to the Federal Reserve Board. From 2009 through 2020, that annual number sank to six. 

Waterloo has a lot of banks already. But Young was confident about the case for community need. Raising money, she thought, would be the far harder task: $10 million minimum, and more if possible. She thought regulators would OK a smaller amount, $3 million, but she feared that would be too little for the bank to succeed.

And beyond the money, she had a lot of regulatory boxes to check.

When she hired banking consultants in the middle of 2020, they handed her a list of every major step she’d have to complete — 74 in total. Recruiting a board of directors, undergoing background checks, lining up three different kinds of insurance, writing policies and charters and plans.

“It is a process that generally takes a good year and a half,” she said in December 2020, trying to balance optimism and realism as the mountain loomed before her. “So we’re hoping to be open by the end of 2021.”

As 2021 unspooled, she tried different methods of fundraising. Asking the community. Reaching out to large banks where she had some connection, hoping to tap into the new appetite for racial equity work before it might fade. Attempting to launch a partnership with nonprofits to seek grant money.

Organizing Zoom meetings and working late into the night, she tried not to think about how far off the top of the mountain remained. 

By summer, it felt to her like one or even two steps back followed every step forward. There would be no grand opening for the Bank of Jabez that year.

Ken LaRoe has launched three new banks, all in Florida, and said the fundraising was never easy. But LaRoe, CEO and chairman at Climate First Bank, whose board members include the CEO of a Black-owned bank, thought Young’s task would be particularly difficult. It’s “the wealth disparity,” said LaRoe, who is not involved in Young’s effort. “It’s a smaller community to try to raise capital out of than a bunch of old white guys.” 

LaRoe, himself white, couldn’t think of a single founding shareholder across the three banks he started who was Black. He said it wasn’t for lack of trying. “Yeah,” he said, contemplating that stark fact, “that’s pretty stunning, isn’t it?” He thought about the implications and added: “really, pretty scary.”

Then there’s the way regulators, anxious to ensure banks won’t fail, judge the fitness of prospective executives and directors. 

First off, they want people with high-level banking experience — roles that EEOC records suggest Black workers have been systemically locked out of. Nationwide, Black and white workers hold jobs in finance, which includes banking, at rates roughly the same as their share of the population. But white employees become senior managers at seven times the rate of Black employees.

Secondly: If anyone on a prospective management team has “a history of bankruptcy filings,” the FDIC says in its guide for startups, approval could be “problematic.”

Young came across that warning in late July. She’d figured her financial past might be one of the hurdles in the bank’s future. It was a development that could fill a less-determined person with anxiety, but Young reacted with characteristic calmness, saying she trusted that God had not put her on a path with a dead end.

“It’ll be something to work through as we move forward,” she decided. Either it would be OK, or she would get the bank as close to the finish line as she could and others would cross without her.

Around that time, she said, her credit union told her she couldn’t open an account for the Bank of Jabez because it would be “too risky.” Thinking of Stacey Bentley, Young then turned to Community Bank & Trust.

The bank said yes. Bentley, who’d seen the 24/7 Wall St. ranking and knew her institution was not reaching all of the community, invited Young to tell her more. At the end of a meeting full of ideas and positivity, Bentley said, “There’s a lot of people who will really want to see this succeed. So if you want me to introduce you to some people I think would be great investors, let me know.”

Soon afterward, Bentley emailed her parent company in Illinois. She thought QCR Holdings could be one of those investors.

What would fix the wealth gap?

Duke University’s Darity sums up the wealth gap with one big number: $840,000. That’s how much less net worth the average Black family had in 2019 compared with the average white family.

The average is skewed upward by massive wealth at the very top, part of a larger story of American inequality that cuts across race. But the very top is overwhelmingly white, which comes right back to Darity’s point.

Darity has spent decades studying the gap, seeing it however the numbers are sliced. Marriage doesn’t solve it, advanced degrees don’t close it, homeownership isn’t a magic bullet, his and others’ research shows.

And Black banks, he said, as helpful as they can be to the communities they serve, aren’t the solution.

Their assets combined were just shy of $5.6 billion at the end of 2020. 

At that point the nation’s largest bank, JPMorgan Chase, was 541 times that size.

And even those assets fall far short of the extent of the gap.

“If we were to identify the amount of resources that it would take to bring the Black share of wealth into consistency with Black America's share of the nation's population, it would require approximately a minimum of $11 trillion,” Darity said. “It's clearly not something that can be done by the existing apparatus of Black banks, nor can it be something that would be accomplished by incremental increases in the number or scale of Black-owned banks.”

His answer to the problem? Reparations. The federal government set this injustice in motion, he said. It fed the gap by giving land to white Americans after the Civil War, largely through the Homestead Act, but to only a handful of the formerly enslaved people whose stolen labor made others wealthy. And President Andrew Johnson quickly snatched back land that had been provided to freed slaves on the orders of Maj. Gen. William T. Sherman. 

After it abandoned Reconstruction, the government stood by for decades amid lynchings and mob violence and voter suppression, starved Black communities of credit and extended government benefits unequally. And it never made up for the damage.

Session after session since 1989, a bill to study reparations has been introduced in the U.S. House of Representatives. In April 2021, H.R. 40 made it out of committee for the first time but went no further. In the closely divided Senate, Minority Leader Mitch McConnell — whose ancestors owned enslaved people, NBC News found — said he dislikes the idea of reparations “for something that happened 150 years ago, when none of us currently living are responsible.”

And therein lies the tension for Young and everyone else trying to make their community a more equal place: Do you throw your energies into pushing for federal action that may never come? Do you work locally and hope that will be enough? Do you attempt to achieve both somehow?

As a teenager, Young helped register people to vote. Later, she would testify before Congress in support of equal pay and be named a 2015 White House “champion of change” for economic equality efforts. She understands the power of policy. She’s also familiar with the long pushback to reparations. A bank can accomplish only so much, but she believes it can make a difference in Waterloo. And maybe, she hopes, beyond the city.

Her work taps into a rich history: Black Americans have always pushed back against the wealth gap. Mutual-aid societies. Business cooperatives. Tireless entrepreneurs like Maggie Lena Walker of Virginia, who launched a newspaper, a department store and, in 1903, a bank. 

All around Young today are community leaders, many Black, some white, working on their own answers to the wealth gap. What the country needs, she said, is more people doing the same. And fewer standing in the way.

“It's really all of our responsibility,” she said. “It's just, what role are we going to play?”

Past, present, future

When Matthew Gilbert heard about the Bank of Jabez, it pinged an old memory: his great-aunt telling him that his great-grandfather had started a bank.

Gilbert, an attorney who works on economic inclusion and talks regularly with Young about how to move the needle in Waterloo, started digging. 

He found that his ancestor, Dr. Lee Furgerson, joined forces in 1947 with other Black community leaders to launch the Black Hawk Savings & Loan Association, named after their county. It opened in the building where Furgerson practiced.

Perhaps this institution helps explain Waterloo’s huge jump in Black homeownership between 1940 and 1950. It’s hard to know because so few records are left.

Furgerson, the first Black physician in the city, died the year after the savings and loan’s founding, the victim of an intestinal obstruction. He was just 49. Another of the four founding officers died two years after that. 

Gilbert, thinking of the health toll of discrimination and the wealth toll of lost working years, looked for more details about the financial institution’s existence and couldn’t find anything beyond the late 1950s. 

Young’s efforts looked to him like a new chance. “Here in Waterloo, it could be a really powerful example,” said Gilbert, tapped to be on the Bank of Jabez’s board.

As summer turned to fall, Young continued talking with Bentley, the Community Bank executive. She also pitched to individuals with money to invest, some from out of state. She and her family went door-to-door in Waterloo neighborhoods, some comfortably well-off, some not, asking people to commit to opening accounts at a future Bank of Jabez.

In October came a turning point — for another prospective Black bank. Organizers in Columbus, Ohio, filed an application with the FDIC seeking approval to open. They’re hoping to begin operating in the fall of 2022.

Their Adelphi Bank might be the one to break the 22-year drought in Black bank startups.

But not, most likely, as a Black-owned bank. Instead, it would be a Black-led one.

Organizers are aiming to meet an alternative federal definition of a minority bank that’s based on board composition and communities served, said Kevin L. Boyce, an Adelphi co-founder. Even in Columbus, 13 times the size of Waterloo and home to nearly a quarter-million more Black residents, the money test looked formidable.

“That’s part of the challenge with wealth distribution in America,” said Boyce, a former Ohio state treasurer. “We’ve been fortunate to have other partners with us, both institutional and individuals that are not minority, that have joined in our efforts.”

Though Waterloo has Iowa’s highest share of Black residents, it’s modest enough — 18% — that a new bank would need to serve a broader demographic. Young was pretty sure the harder road was her only alternative: Just over half the money would have to come from Black individuals.

Thinking about the momentum she’d have if she could get the other 49% covered, she drafted a pitch to give to Community’s parent company. In between meetings with Bentley to prepare, she’s worked to recruit board members and executives. 

For now, the bank's future remains a question mark. Will the money come? Can she launch it?

Young said she's determined to get there. To see it open someday.

Which is why she's already made an offer on a property for it. 

In the summer of 2021, Young visited a church property for sale in an east-side neighborhood of small homes, some in disrepair, to see if its kitchen could work for home-cooking entrepreneurs needing commercial-grade resources. The 97-year-old brown brick building and an addition that once housed a parish school stretched nearly the length of a block, with a parking lot and empty land on the other side of the street. 

There was room not just for the home cooks, but also for small businesses ready to rent their first space. She could imagine the Bank of Jabez across the street — 13 blocks from the former site of the Black Hawk Savings & Loan.

What she didn’t yet know: Fifteen years before she’d texted her cousin about a bank she felt God calling her to open, the pastor of this church sat up in bed in the middle of the night with a vision from God to incubate five businesses on the property.

Pastor Faye Scott said she tried to make it happen, but it never came to pass. Eventually her Ambassadors for Christ Church needed to sell this too-big home. An offer fell through. An auction drew no one. The boiler broke, the pipes burst.

And now here was Young, explaining about the bank and the small businesses. Five of them already were interested. For Scott, it was like a promise from God that the first vision was no mistake.

“I couldn’t help but get on board,” Scott said.

She offered the entire property to Young for $22,500.

Young, amazed, started digging into the old building’s challenges. She talked to her cousin and lawyer. On a warm September afternoon, she returned in a Bank of Jabez T-shirt — “Experience Excellence,” it said — to meet with Scott. In the sanctuary, light filtering in through the stained-glass windows, she handed the pastor a purchase agreement.

“Knowing that it’s yours,” Scott asked, “how do you feel?”

“I’m still very carefully suppressing emotions,” Young admitted.

There were so many steps left that she needed to stay focused on, not all of which the original list of 74 included. The real estate deal wasn’t official yet and a legal battle over a mechanic’s lien on the property could upend things. Contractors weren’t getting back to her. The building needed a new heating system ASAP. Small businesses couldn’t move in until rooms were readied for them.

She didn’t want to tear her gaze from the path ahead by looking back at how far she’d come.

“It’s a time to rejoice,” Scott insisted. With a mischievous smile, she added, “Just take a couple of minutes. Go ahead, girl.”

Young didn’t have a couple of minutes. But for one unguarded second, she let out a joyful laugh.

You can hear a podcast about Young’s quest in the newest season of The Heist. 

The post Fighting the wealth vortex appeared first on Center for Public Integrity.

Mortgage lenders aren’t making headway on longstanding racial disparities in home lending, according to a new analysis.

The National Community Reinvestment Coalition, tapping federal data, found that Black and Latino borrowers were still receiving loans to purchase homes in 2020 at lower rates than white borrowers. 

And the boom in refinancing touched off by falling mortgage rates in 2020 disproportionately benefited homeowners identifying as white, Asian Indian or Chinese, distributing unequally the benefits of lower payments.

NCRC, a nonprofit group that advocates for equity in housing, banking and business, released its report Tuesday. It noted that the national gap between Black and white homeownership rates in 2020 was worse than at any point in the 20th century, including the decades preceding anti-discrimination laws of the 1960s.

In 2020, 74% of white families were homeowners, compared with just under 45% of Black families.

“This appears to be a market failure, where it excludes certain groups perennially,” said Jason Richardson, the group’s senior director of research. “That drives a persistent racial wealth gap as well.”

The wealth gap — sharply higher net worth for typical white families than for typical Black and Latino families — is both a cause and effect of unequal homeownership by race. 

From land redistributed largely to white Americans in the 1800s to redlining, displacement of communities of color for highway construction and bias in current-day lending, discrimination has had compounding effects on the assets of generations of families. That makes it harder to buy a home, a key way many families increase their net worth.

But increasing homeownership won’t by itself close the wealth gap.

NCRC, digging into mortgage data for 2018 through 2020, found that Black home buyers had less home equity when they received their loans than all other groups: just under $27,000 on average, compared with $79,000 for white borrowers. 

Meanwhile, both Black and Latino borrowers paid more upfront in mortgage costs, driven by higher reliance on government-backed loans.

“They are building wealth, but they’re not building wealth at the same rate as wealthier households and more affluent neighborhoods,” said Joshua Devine, NCRC’s director of racial economic equity.

The impact of past discriminatory policies is still baked into home values today, Richardson noted.

“This is another example of a symptom of long-term segregation,” he said.

But modern-day discrimination plays a role, too. An investigation by The Markup using the same federal data found that lenders were more likely to turn down Black, Latino, Asian-Pacific Islander and Native American applicants than similarly qualified white applicants. Black applicants were 80% more likely to be denied, the newsroom reported.

The Mortgage Bankers Association, asked to comment on the continuing homeownership gap, pointed to announcements in 2021 about efforts such as a pledge by members to “promote minority homeownership.”

"MBA believes there is a significant need and opportunity for member companies to come together to eliminate the racial inequalities that have plagued our communities for generations," Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in a statement in October.

In 2019, a separate analysis from the Urban Institute found, white households held three-quarters of the housing wealth locked up in primary homes even though they accounted for just two-thirds of the country’s homeowners.

“The decline in black homeownership threatens to exacerbate racial inequality for decades to come,” the Urban Institute’s Housing Finance Policy Center wrote, calling for “changes across the entire housing ecosystem to address entrenched structural barriers.”

NCRC used data reported under the federal Home Mortgage Disclosure Act, which requires many lenders to share details about home loan applications, including the race and ethnicity of borrowers. 

More detailed information included in the 2018-2020 data allowed NCRC to show differences within demographic groups — particularly striking for Asian applicants. For instance, 23% of borrowers identifying as Vietnamese bought homes in low- or moderate-income neighborhoods in 2020, compared with 8% of borrowers identifying as Asian Indian.

The newest data also included property values, allowing the calculations showing sharply different equity positions by race.

“Now we can put numbers behind the wealth gap in a way we never could before,” Richardson said.

The post Home lending remains unequal appeared first on Center for Public Integrity.

As a key pandemic-aid program pushed money out faster to bigger companies and majority white areas than to small firms and communities of color, the U.S. Small Business Administration made repeated changes to try to make it more equitable.

Some worked. Some didn’t. Now that the Paycheck Protection Program is almost entirely in the rearview mirror, here are some lessons learned from a year of reporting on it that speak to more than just this forgivable-loan effort.

If you don’t account for inequality, you’ll get more of it. 

The way the PPP loans gushed out in the early part of the program followed the usual pathways carved by decades of lending disparities, reinforcing them even as pandemic effects hit business owners of color hardest.

The legislation that created the program dictated that it should prioritize “underserved” markets, including low-income areas, rural places and businesses owned by people of color. But the Trump-era Small Business Administration launched the PPP in April 2020 with rules that weren’t crafted to do that — and waited two-and-a-half months to even mention it to lenders.

The statement to that effect came out two weeks before what was at the time expected to be the end of the program. 

In a survey conducted between late April and mid-May 2020 for the advocacy groups Color Of Change and UnidosUS, more than 60% of Black and Hispanic business owners said they’d either received no assistance from the PPP and other aid programs despite applying, or they were still waiting to hear back about approval. 

And on top of all that, a study by New York University and Michigan State University academics suggests that Black-owned businesses receiving PPP loans got substantially smaller amounts than similar white-owned businesses.

➤ Read more: PPP lending in Kansas City mirrored some decades-old redlining patterns

Later changes, many made by the Biden administration shortly after inauguration in the early part of 2021, expanded eligibility, set aside money specifically for the smallest firms in lower-income areas and made other changes aimed at shrinking disparities. That helped, small business advocates say. 

Among the tweaks was a two-week period from late February to early March that limited applications to businesses, including nonprofits, with fewer than 20 employees. At the end of that window, the SBA said the daily average rate of new loans for businesses owned by people of color, women and rural residents all increased.

“By the time PPP closed in June 2021, lending in traditionally underserved counties was proportional to their representation in the overall small business community,” the U.S. Government Accountability Office said in a report. “While lending to businesses with fewer than 10 employees remained disproportionately low, it increased significantly over the course of the program.”

But all these fixes happened in a crisis, when the timing of aid could make the difference between survival and closure.

“Our conclusions on how the program has helped businesses most in need is that the adjustments were absolutely correct in the carve-outs to ensure that those with a smaller-scale operation with fewer employees were equally qualified,” said Amanda N. Jackson, Color Of Change’s Economic Justice Campaign director. “Unfortunately, it was a little late.”

Given the long history of lending disparities, Jackson thinks the federal government should have anticipated that an aid program with lenders as the go-between would require careful handling.

“Federal relief must, must, must respond to those kinds of hurdles if it’s serious about the existence of Black businesses,” she said.

Asked what it learned from the PPP, the SBA said in a statement that “we’re looking at doing more through policy and process to remove those historic impediments, and partnerships and outreach to more equitably reach and distribute our services to business owners of color and women-owned businesses.”

If you don’t keep good data, you complicate efforts to track (and improve) results.

The SBA asks borrowers to voluntarily share their race and other demographics when applying for its main small business loan program. It launched the PPP without those questions.

Some lenders asked anyway, but it meant that the lion’s share of applications were coming in without that information.

What should have been a simple question — is the program reaching different groups of people equally, and if not, who’s in need of more help? — required a lot more effort to answer.

Journalists and academics had to find workarounds like determining how well the PPP was reaching communities of color compared with largely white areas or low-income neighborhoods vs. wealthier places. 

Some of that data, meanwhile, came only after newsrooms — including the Center for Public Integrity — sued the SBA to release it. (Public Integrity is also among the news organizations to receive PPP loans.)

And the SBA didn’t release data about the applicants turned down, the National Community Reinvestment Coalition notes. Home mortgage denials, by contrast, are tracked just like approvals, and that’s allowed analyses showing evidence of discrimination.

If you don’t design the help with very small businesses in mind, they’ll fall through the cracks.

Many businesses are run by sole proprietors and might have no employees beyond the owner. Black-owned businesses, constrained by lending disparities and the racial wealth gap, are particularly likely to have this structure. But the PPP was challenging for these entrepreneurs to access.

Sole proprietors, independent contractors and gig workers couldn’t even apply in the first week of the program, a point when the money was going fast. (It ran out that next week. Congress stepped in to add more funds.)

One of the 2021 rule changes helped a lot, said Michael Rapaport, president and chief operating officer for Accion Opportunity Fund, a PPP lender and organization that focuses on businesses underserved by the financial industry. Calculating the loan amount off gross income rather than profit increased the number of entrepreneurs who qualified.

“That was a big win for sole props,” Rapaport said. “If only that had been done at the beginning, that would have been really nice.”

If you want to give mission-driven lenders a boost, make sure the benefit will actually be beneficial.

The final round of PPP lending started in mid-January, in the final days of the Trump administration, and ended May 31. At both ends, the SBA had a short window of exclusivity for community lenders whose mission is to focus on businesses and communities poorly served by the finance sector.

The first window was a mess, participants say.

Community lenders “raced to understand SBA’s new systems and program rules, many of which were published only hours before the scheduled opening of the application period,” Lisa Mensah, president and CEO of Opportunity Finance Network, said in testimony to a U.S. Senate committee.

That made it “the guinea pig period,” dragging down its effectiveness, Rapaport said.

“The intention was to give us a leg up, but in the end, it didn’t really help,” he said. “We worked out the kinks in the system, and then everyone else joined in.”

If you received aid as a borrower, get ahead of any later deadlines (e.g. forgiveness).

The PPP is a forgivable loan, which means borrowers won’t have to pay it back — but only if they apply for that forgiveness and get approved. 

Three-quarters had applied by mid-November. PPP guidelines don’t set hard deadlines for those applications, but earlier is better. Wait too long, and you’ll have to at least start repaying the loan.

“Don’t be shy about the application,” Rapaport said. “Get it forgiven. There’s no reason not to try.”

If you need help, keep pressing.

Some borrowers got across the finish line with PPP only because they switched lenders. Persistence can make a difference, though when you’re trying to keep a business together in a crisis, finding the time for it is no easy feat.

The PPP ran out of money months ago. But the SBA has other pandemic help, and some lenders have specialty programs for businesses digging out of COVID-19 holes.

The Southern Opportunity and Resilience Fund, for instance, is available in 15 states and Washington, D.C. On the West Coast, there’s the California Rebuilding Fund. The loans they offer aren’t forgivable, but the interest rates are lower than average.

The post Six lessons from the Paycheck Protection Program appeared first on Center for Public Integrity.