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.”

Furthermore, the CRC study recommends stronger fair lending enforcement, requiring banks to fund the revitalization of damaged neighborhoods, halting foreclosures, expanding the Community Reinvestment Act to promote responsible lending and investment, and expanding the Mortgage Disclosure Act to reveal discriminatory practices.

“These suggestions make a great deal of sense,” Morning agrees. “But since public policy alone is not enough, I would take it a step further. Over the years, the overall population of Blacks in America (has) been in a recession or depression, regardless of the general state of the U.S. economy. Needless to say, when America catches a cold, Black America catches pneumonia . . .”

Researchers and financial experts evaluating solutions to this disparity in financial prospects and realities between Blacks and Whites, concentrated on two areas: Blacks building their own businesses which would ultimately yield their own economies as well as confronting and battling institutional racism.

“Do for self and cooperative economics make more sense now than ever before,” emphasized Fletcher. “What better time than the Great Recession to embark on a plan for African Americans to achieve economic empowerment?

“You look at the other cultures in this country: The Japanese, the Koreans, the Jews. They pour their monies back into their own communities, creating their own economies. Therefore, they have economic clout. Blacks in this country are more consumers than business builders. But it is not too late to copy those other communities.”

In American history, African American businesses were most plentiful in the pre-integration era. “Blacks have had our backs against the wall from day one in this country,” Ingram commented. “During Jim Crow segregation, the African American community banded together out of necessity and supported one another. They created businesses and services that the community relied upon, causing money to circulate throughout the community.”
Morning stressed that, although building Black businesses is a practical means to close the wealth gap between African Americans and Caucasians, there is still the need to acknowledge and combat institutional racism. “Racism in this country is not only some crazy Ku Klux Klan member with the white sheet and burning crosses. Rather, we are dealing with institutions and structures in society that discriminate against Black people, and in a material, dollars-and-cents sort of way. We should fight this racism by holding our elected officials accountable regarding public policy reforms. We also have to hold businesses accountable for their practices in how they deal with the Black community and boycott those businesses that discriminate, disrespect, and exploit us.”