Slate Money: "The Color of Money Edition"

Date: February 23, 2019
Host: Felix Salmon (Axios), co-hosts Anna Shymansky, Emily Peck
Guest: Mehrsa Baradaran (Author, "The Color of Money: Black Banks and the Racial Wealth Gap", Professor of Law at University of Georgia)

Episode Overview

This episode dives into the persistent racial wealth gap in America, with a special focus on the history and economics of black banking, the legacy of segregation in finance and housing, the legacy and rhetoric of "black capitalism," reparations, and public policy interventions like opportunity zones. Guest Mehrsa Baradaran brings expertise from her groundbreaking book The Color of Money and her research on the limitations of market-based solutions to structural inequality.

Key Discussion Points & Insights

1. The Historical Limits of Black Banking

• Black banks as a stopgap: The episode opens with a historical overview, noting black banks were often positioned as the solution to black economic exclusion. However, the structure of the banking system, segregation, and racist policy meant these institutions could not build real wealth in black communities.
  • Key Insight: “As soon as you make a loan, that asset... is owned by some white person, usually because of the history of capital and who had it. And so as soon as you make that loan, you're seeing this money leak out of the community.” – Mehrsa Baradaran [02:00]
  • Black banks had smaller, more volatile deposits, higher risk loans, and lacked profitable lending opportunities, setting them up for failure.

2. How U.S. Policy Entrenched the Racial Wealth Gap

• From Reconstruction to the New Deal: Baradaran describes how, post-Emancipation, the U.S. offered black Americans banks instead of land, replicating, not remedying, injustice.
  • Slaves as capital: A shocking historical note is made on how the slave economy was systemically financialized, with slaves used as collateral and assets (securitized and insured).
    • “Slaves were not just slaves but they were collateral... collateralized slave obligations ... a sophisticated financial system set up around a slave-based economy.” – Felix Salmon [06:00]
  • New Deal as ‘policy apartheid’: Policies like the FHA and Homestead Acts created generational white wealth via homeownership, deliberately excluding black Americans. Baradaran calls this “policy apartheid.”

3. Reparations and the Myth of Market Solutions

• Reparations as rectification, not charity: Baradaran rejects simplistic debates over “capitalism” or “socialism,” emphasizing reparations address the extraction of wealth over generations through racism. She notes 13th, 14th, and 15th Amendments' promises were never meaningfully enforced.
  • “You have been suffering... we need to make it right... Call it reparation, call it justice, call it whatever you want, I don't care. We just need to put capital or land or whatever the modern equivalent is of that wealth that was created for whites and not for blacks.” – Mehrsa Baradaran [10:00]
• Stark statistics: Baradaran repeats a core fact: Black Americans had only 0.5% of U.S. wealth at emancipation, and today just 1.5%. White families have 22 times the wealth of black families. [10:50, 36:35]

4. Housing as Both Cause and Partial Solution

• Housing policy as the root: Government-sanctioned redlining and exclusions created vast disparities in generational wealth.
  • “Housing is the root of the problem. I don’t know if it’s the solution, but it’s a start... for most people ... the house is still their primary asset.” – Mehrsa Baradaran [11:40]
• Caveats: Efforts to address the gap via housing must contend with places where property values are stagnant or declining.

5. Populism, Race, and Political Realities

• Populism’s racial compromise: Policy victories in the Progressive and New Deal eras relied on alliances with white supremacist Southern Democrats; left-wing economics often limited to whites, excluding blacks.
  • “The New Deal was built on white supremacy... They were able to convince white workers to use whiteness as opposed to their interracial solidarity.” – Mehrsa Baradaran [12:40]
• Race vs. class: Baradaran criticizes attempts to frame inequality as “either/or”—race and class are deeply intertwined.

6. Opportunity Zones & Market-Led “Revitalization”

• Cyclical, bipartisan market “fixes”: Opportunity zones are framed as the latest in a long line of bipartisan market-driven schemes (from Nixon’s “black capitalism” to Clinton’s “empowerment zones”) which promise investment but rarely transfer wealth to black residents.
  • Opportunity zones offer capital gains tax breaks for investing in designated areas; Baradaran points out the benefits primarily accrue to wealthy investors, with little real wealth-building for community residents.
    • “If we're measuring ... increased employment and investments and money, great. What I'm trying to measure is community wealth building. This is not the answer... the investors are always going to be the people with capital...” – Mehrsa Baradaran [20:24]
  • Revitalization may lead to gentrification, displacing residents who were meant to benefit.

7. Amazon HQ2, Corporate Subsidies, and Regional Inequality

• Amazon’s botched New York bid: The hosts analyze Amazon’s failed HQ2 project in Long Island City, pointing out that cities compete for subsidizing corporations, ultimately racing to the bottom and forfeiting vital public funds.
  • “You can’t have cities and states competing... to see who can offer the greatest tax breaks to corporations, because that just results in corporations paying no taxes.” – Felix Salmon [30:14]
• What actually revitalizes cities? Baradaran suggests the public sector—via infrastructure, housing, and creative programs like a 21st-century Homestead Act—is better equipped, and cites postal banking as an example of overlooked public innovation. [33:22]
• Public works vs. tax breaks: New York would give $3B to Amazon but balks at reparations—revealing a double standard in public spending on corporate welfare vs. reparative justice.
  • “We only ask, how are you going to pay for it? When it's like a social benefit, we don't ask... when it's this massive tax cut.” – Mehrsa Baradaran [35:40]

Notable Quotes & Memorable Moments

• On black banking’s built-in limits:

  “Black banks have these other services; as a wealth building mechanism, they’re not useful, they're not harmful, but they're... not the answer. The problem is that white policymakers have kept pushing this segregated banking system as an answer to the racial wealth gap.” – Baradaran [04:31]

• On the legacy of the New Deal:

  “The New Deal was built on white supremacy... They were able to convince white workers to use whiteness as opposed to their interracial solidarity.” – Baradaran [12:40]

• On opportunity zones:

  “This is not new. It is so Nixonian... it is basically the market’s response to the ghetto.” – Baradaran [17:42]

• On subsidies and reparations:

  “We're willing—New York's willing to give Amazon $3 billion in tax breaks. But if we say, what about reparations? People are like, we don't give away money.” – Emily Peck [35:31]

• On persistent wealth inequality:

  “White families have 22 times the wealth of black families.” – Baradaran [36:35]

• On structural disadvantage:

  “A third of black families have zero to negative wealth.” – Baradaran [38:19]

Key Segment Timestamps

• 00:29 – 02:54: Introduction to black banks and why they couldn’t build black wealth
• 05:34 – 06:30: The Freedmen’s Bank and financialization of slavery
• 08:44 – 09:13: The discriminatory New Deal and its legacy
• 09:33 – 10:50: Reparations: what’s owed and why
• 11:15 – 12:40: The role of housing policy in the racial wealth gap
• 14:30 – 15:19: Intersection of race and class; the political calculus of populism
• 16:11 – 22:17: Opportunity zones & policy critique—why investment doesn’t build local wealth
• 24:57 – 30:41: Amazon HQ2, subsidies, and the flawed race for economic growth
• 33:22 – 35:29: Homestead Act proposal, alternative public policy routes
• 35:31 – 35:59: Contradictions in prioritizing corporate tax breaks over reparations

Numbers Round: Noteworthy Stats

• “White families have 22 times the wealth of black families.” (Baradaran, [36:35])
• “Black Americans had only 0.5% of U.S. wealth at emancipation, and today just 1.5%.” (Baradaran, [10:50])
• A third of black families have zero to negative wealth. (Baradaran, [38:19])
• Amazon’s $3 billion in targeted tax breaks from New York.
• Minotaurs: There are 55 private startups that have raised over $1 billion in equity capital. (Salmon, [37:19])

Episode Tone

Dense, thought-provoking, analytical, with moments of wit and pointed critique. Baradaran’s factual clarity and the hosts’ persistent questioning keep the discussion grounded and urgent, highlighting not only the historical context but also present-day policy stakes.

For Further Exploration

• Mehrsa Baradaran, The Color of Money: Black Banks and the Racial Wealth Gap
• Slate Money, previous episodes on public policy and corporate incentives
• Current debates on reparations and policy-based wealth redistribution

This summary is designed for listeners and non-listeners alike seeking to understand the breadth and depth of the conversation on black wealth, historic injustice, and modern policy failures in the U.S. economy.