Think About It. Color Line. Our color today is red. It’s the line said to be drawn around inner city neighborhoods, identifying areas historically selected as poor credit risks. Although racial segregation had long existed against a variety of minorities, the Federal Housing Administration formally began the practice in 1934, thereby putting the government stamp on what has proved to be a disastrous practice. In 1935, the Home Owners’ Loan Corporation was asked to look at 239 cities and without regard to ability to repay, create “residential security maps” defining minority neighborhoods as ineligible to receive financing, The color inside the red line was black.
Racial segregation and discrimination against minorities and minority communities pre-existed this policy. But now lenders had to consider FHA standards if they wanted to receive FHA insurance for their loans. FHA appraisal manuals instructed banks to avoid areas with “inharmonious racial groups“, and recommended that municipalities enact racially restrictive zoning ordinances, as well as covenants prohibiting black owners. From time to time the practice was also used against Jews, Latinos, Asians and the “others” du jour. Sadly there was more cooperation in Washington in those days.
Still in a conciliatory mood, Congress reached across the aisle to agree on the Community Reinvestment Act of 1977, designed to “encourage” lending in areas that then were being redlined primarily for the purpose of retaining the solvency of lenders. At the same time however, the legislation instructed that loans should be sound, without risks that might bring losses to the institution. Try meeting both of those standards. Banks were punished for failing to make loans to unqualified borrowers . Then, in 2011 Wells-Fargo bank paid a fine of some $85 million for making sub-prime loans and in 2012 paid another penalty for selling repackaged loans to investors who (wink wink) didn’t know they were less than highly secure.
Meanwhile, if you’ve stayed inside the lines you’ll note that banks then involuntarily acquired lots of real estate. While stories have appeared periodically around the country noting the decay of downtown big city neighborhoods, Indianapolis has garnered a nationwide reputation for an exciting urban revival. However Erika D. Smith writing for Indystar.com validly headlined her feature, “When empty homes are left to rot, everyone suffers“. Then she quoted a report by the National Fair Housing Alliance, “Homes in white neighborhoods were more likely to have neatly manicured lawns, securely locked doors and attractive, professional ‘for sale’ signs out front.” But homes “in communities of color were more likely to have overgrown yards trash, unsecured doors, and broken or boarded windows.”
According to Smith, the banks “deny the accusations. But in black and Latino neighborhoods like … Haughville, where the economic downturn hit homeowners hard and banks now own many foreclosed properties, the problem is painfully evident.”
To me, what is painfully evident is that our ever-overprotective government is too often responsible for the damage to our nation by continuing to create the Color Line. Think About it.