A recent study examined the question, "Why are White families $95,000 richer than Black families in the United States?"
According to a report by the Institute on Assets and Social Policy at Brandeis University, in which the question was examined, the wealth gap between African American and Caucasian families has expanded dramatically in the last 23 years.
In fact, the difference in financial assets between the two groups has increased over four times in the period of 1984-2007, from $20,000 in 1984 to $95,000 in 2007.
"As of the beginning of this year, that number ($95K disparity) has held steady," said Morgan Stanley Dean Witter investment analyst Devon Fletcher. "Factors for the difference are debatable: Racism, the recession, bad investments, (and) key (or lack thereof) family connections/inheritences."
The Brandeis report also discovered that middle-income Whites experienced a greater increase in net worth than high-income Blacks. Average White families earning $30,000 had accumulated $74,000, while Blacks earning more than $50,000 netted only $18,000, for a wealth gap of $56,000.
Compounding the difference, 10 percent of Blacks owed at least $3,600 in debt, which is nearly double the Black debt burden since 1984. Making matters even worse, 25 percent of Black families had no assets to rely upon in times of adversity.
Even in cases where Black and White households gross the same salary, the net returns are dramatically different.
"The problem is that income equality is not translating into wealth equality and economic security for Black households," said Darrell Morning, a business accountant from Miami. "Some of this is due to bad public policy, nationwide. This would include tax breaks for the wealthiest Americans and other measures that have redistributed wealth upward--to those who are already rich and arguably don't need more."
Others point to institutional racism in housing, labor, and lending. "The deregulation of the lending market has resulted in systematic discrimination against people of color and the poor," says Theresa Smith, Wells Fargo Los Angeles Branch supervisor. "These people pay more for credit.
"Those who live from paycheck to paycheck, borrow just to make ends meet, depending increasingly on payday lending (which results in more debt), and check-cashing stores that prey on these poorer communities."
Additionally, according to the California Reinvestment Coalition (CRC), because of these factors, African Americans and Latinos have been coaxed into risky and costly subprime mortgages that typically cost more than twice that of Whites with the same income. In many cases, these individuals got caught in the foreclosure crisis, which has eliminated what little wealth these families had, and derailed the ability of the Black community to build wealth.
Similarly, according to CRC, non-White communities were cut out of conventional mortgage loans, after the housing bubble burst, the organization found in their own study of the financial gap.
"The Decline in Prime Mortgage Lending in Communities of Color" noted that from 2006 to 2008, prime lending in non-White areas decreased 60.3 percent, in contrast to 28.4 percent in predominantly White areas.
Researchers at Brandeis recommend the use of public policy to close the racial wealth gap. "For example," suggested Ruth Ingram, a financial specialist who contributed to the study, "wealth-building policies must specifically target families of color. Additionally, an effective consumer financial protection agency would guarantee fairness for consumers, who borrow money to pay basic expenses and needs."