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After a speech at Morehouse College, Chairman of the Federal Reserve, Ben Bernanke, was asked his opinion about the household wealth gap between whites and blacks in America. His response to the students: “minorities need to strengthen their financial literacy” and financial education. The full article can be found here. After reading the article, a Fabulous Financials reader wanted to know what I thought about Mr. Bernanke’s comments so here’s MY opinion. To put this in context, here’s a stat from a related article:
The gap between the wealth of white Americans and African Americans has grown. According to the Fed, for every dollar of wealth held by the typical white family, the African American family has only one dime. In 2004, it had 12 cents.
I was going to say Bush did it. LOL! But I decided to give an honest answer. I think his response was too simplistic. He chose the easiest, least controversial, way to answer a loaded question in 10 words or less. Although I do agree, everyone – not only minorities – need to strengthen their financial literacy. However, saving money, building a credit record, and integrating into the mainstream banking system (all mentioned in the article) are not the end-all-be-all solution that will magically put blacks on a level playing field with whites.
In my opinion, the household wealth gap is due to the following:
1. Whites Had a Head Start
Slavery, segregation, racism, discrimination, etc. My ancestors were slaves, my grandparents lived during segregation, my parents experienced blatant racism, and still today, I experience covert racism and discrimination. So let’s see – if I made someone hold you back with brute force for several hours while I ran full speed ahead, it would be absurd if I expected you to catch up with me in only a few minutes. Sure, there are people with stamina and sheer determination who may give me a little competition, but they are few and far between. It is difficult to overcome DECADES of physical, mental, emotional, and institutionalized oppression.
2. Closing the Gap Assumes a Level Playing Field in Other Pertinent Areas
Covert or what I refer to as “modern day” discrimination is wide spread in the school system, housing, workplace, and the “mainstream banking system.” For example:
School System – Most schools in predominantly black neighborhoods are sub-par. I had to move to an area with a very high cost of living just to get my daughter in a public school system that met MY standards. I chose the school, then I chose where I wanted to live. Now I pay more for rent than my mortgage, but this was a decision I made without hesitation because education is the #1 priority in my household. The school is excellent, the expectations are high, 70% of the faculty are PhD level, the student/teacher ratio is small, the equipment and resources are advanced, and the academic program is robust – this is non AP track. If your child meets the standards for the AP program, they are almost guaranteed acceptance into any college of their choice. Problem is, the school has less than 5% minorities. Unless parents have the resources to live in a comparable area or pay for private school, this disparity begins early and often continues throughout life.
Housing – I love my neighborhood, really I do. It’s beautiful, well kept, in a prime location, has an excellent school system, fabulous shops, very low crime rate, and easy access to the city. But why do so few black people live here? I’ll take a guess – because it costs too damn much! When BabyGirl graduates high school next year, I’m getting the hell out of dodge too. I believe minorities are intentionally priced out of certain areas. If it were more affordable, I’m sure more minorities would move here so their children would have access to better schools. But that may result in white flight, which would in turn, affect the quality of the school system. Then eventually, redlining would occur and change the dynamics of the surrounding area(s).
Workplace – The CSS has an old boys’ club with unspoken rules. Most management and executive positions are filled by whites. Those who hold positions of power often hire, groom, and recommend promotions for their own. This isn’t unusual. We’re attracted to people who look or act like us. Some blacks know how to play the game and some don’t – or refuse. Aside from the politics, our salaries and raises are smaller, promotions are less frequent, and we rarely hold top positions. We’re primarily found in blue collar or low/mid-level white collar positions. Getting to the top is recognized and celebrated as if it were a rare occasion…and it is.
Banking System – The “mainstream banking system” is a tool to build wealth, and by this, I mean savings accounts, credit accounts, business accounts, investment accounts, etc. However, minorities are more likely to be denied business loans, credit applications, mortgage loans, and more – unless it is a poorly structured loan package with a ridiculous interest rate. Other ways the mainstream system alienates black people are higher insurance rates based on zip code or credit score, fewer banks in close proximity, racial profiling based on appearance or name, etc. These are also referred to as the black tax, which we’ve discussed before.
Other stats from the related article linked above:
White families are five times as likely as families of color to have a bank account and access to responsible loan terms. Because of the lack of federally insured and regulated financial institutions on reservations and in inner cities, rural areas, barrios and Chinatowns, payday lenders and other shady financial dealers operating without government oversight have preyed on people of color, fueling the economic and foreclosure crises. African Americans and other people of color were more than three times as likely as white borrowers to be steered to high-interest loans, even when they qualified for a prime loan. A Harvard University study showed that in Massachusetts, a high-income African American was more likely than a low-income white borrower to get a subprime loan.
I will admit, minorities have less money in savings and investments. Which leads me to the next attributing factor…
3. Complacency
I’m going to keep it 100. Some people are just lazy MFs! For example: tired of struggling, choose to take the “easy” route and earn quick money. Tired of “the man,” use him/it as an excuse to stop trying. Accustomed to a life of nothing, there is little or no incentive to strive for more. Having a few dollars is “good enough,” no point in applying any extra effort. No one in the immediate environment “made it” – unless they “sold out” – so no trustworthy role models to emulate.
4. Misplaced Values and Priorities
This is more prevalent in recent generations. Our ancestors are probably turning somersaults in their graves over the choices we make today. For example: higher education is not a #1 priority, it is viewed as a financial burden or reserved for the privileged. Parenting out of wedlock is openly acceptable, single parents are the norm, and absent fathers are not shameful or accountable. Marriage is taboo. Men rely on women to lead the home. Debt is a way of life. Owning a nice car is priority over owning a home. Designer clothes and gadgets are preferred over saving.
SUMMARY
Yes, we all need more education in financial literacy. But I’d like to think that I’m financially literate, so that’s only a small part of the problem. This is proven by the fact that I own a home, have good credit, a good job by most standards, a little money in the bank, well read, well traveled, and educated – yet I am no exception to the wealth gap between whites and blacks. There are MANY other things that can be attributed to the problem.
Some factors, which have the greatest impact, are outside of our control. No matter how hard we try, these factors (#1 and #2) require black people to work 10x harder, be 10x smarter, and 10x more determined to succeed. Sometimes, even that isn’t enough to close the gap or level the playing field. But then, there are other factors (#3 and #4) that can be corrected by making better choices. These are the factors that the media and non-minorities focus on the most when “analyzing” the black community. I will not try to minimize the effects of these factors because they are substantial. Besides, I am a firm believer in personal responsibility and accountability. Made a poor decision? Live with it, learn from it, and move on! When you can do better, be better, exceed expectations! However, when the odds are stacked against you, I can not expect you to be my equal because it’s damn near impossible.
