Racism is profitable: an inconvenient and uncomfortable truth. Since the first settlers landed on these shores, corporations, and the people that control them, have used the existence of racism to enhance their wealth to the detriment of Black and Brown people and communities. Racism as a mechanism for profit is responsible for every single economic “gap” (such as the wage gap, wealth gap, the ownership gap) that plagues communities of color. The financial services industry has always known this; hence their role in capitalizing slave plantations, redlining Black and Brown communities, the aggressive marketing of subprime mortgages to people of color and more.
The Oppression Economy is a vicious cycle. Using tools of theft, exclusion, and exploitation in the pursuit of building wealth and accumulating power, these elites build, consolidate, and exert their political influence to maintain the status quo. This perpetuates a relentless cycle of oppression that suppresses the economic vitality of people of color, undermines our political power, and obstructs our ability to leverage democracy to change the economic rules that make racism profitable.
You may think, “Whoa, not in the community development sector. We’re here to create jobs, economic development, housing, and build thriving communities.” Yes, community development organizations deliver benefits because of cozy relationships with the financial services sector. However, the question remains – has this deal with the devil been worth it? Could more have been accomplished if our efforts had focused on aggressively curbing the influence, power, and control that banks and financial institutions have over people and communities of color?
This year marks 47 years since President Carter signed into law the Community Reinvestment Act (CRA) as a way to ensure that banks were making loans and providing credit to Black and Brown communities they were not previously serving. Despite its intentions to combat racial discrimination in lending, many activities, such as speculative real estate, predatory lending, or investments in gentrifying businesses, have both undermined the economic vitality of communities of color and generated positive CRA ratings when these activities are situated in low-income communities. We support the National Community Reinvestment Coalition’s (NCRC) call to create racial lending thresholds as a key criterion for CRA examinations and impose significant penalties to financial institutions whose actions harmed communities of color. As suggested by Randell Leach, the head of Beneficial State Bank, a community development bank, this can be accomplished, in part, by updating CRA guidelines to downgrade a bank’s CRA rating by two levels for certain violations.
The CRA is one tool of many needing major reforms. In Liberation in a Generation’s recent report, From Big Business to a Liberation Economy, we call on the federal regulators of financial institutions (such as the Federal Reserve, the Treasury, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation) to require financial institutions to explicitly center the needs of people of color. For example, financial institutions should begin to collect data and demonstrate the impact (good or bad) that their activities have on people and communities of color.
The vast majority of dollars circulating in our national economy runs through private banks and financial institutions. This means that financial institutions have tremendous control over both housing supply, business loans, public sector investments in infrastructure, and consumers’ retail banking needs. Put simply, the federal government has effectively outsourced the distribution of the money supply to private financial institutions.
In a Liberation Economy, we need public banks to both serve the retail needs of Black and Brown people, but also to fulfill the community development needs of insuring, bonding, and financing basic needs like affordable housing, clean energy, and infrastructure. You can join the many advocates looking to create a public banking system that calls for the Federal Reserve to become more of a “people’s bank” by providing every U.S. citizen (and undocumented citizen) with a Federal Reserve checking or savings account, while also providing a public, more democratically controlled institution that meets the needs of communities of color.
We can no longer stand for the existence of an Oppression Economy where racism is profitable. We must work to build a Liberation Economy where people of color have their basic needs met, are safe and secure, are valued, and feel we belong. The community development sector, through its intimate relationship with financial institutions, has a responsibility to hold banks accountable to creating that future. Our current deal with the devil will not suffice.
Jeremie Greer and Solana Rice are Co-Executive Directors and co-founders of Liberation in a Generation, a national movement support organization building the power of people of color to totally transform the economy – who controls it, how it works, and most importantly, for whom. Both Jeremie and Solana have midwestern roots and careers in community development in cities across the country.