In response to the Great Depression, then President Franklin D. Roosevelt enacted a series of domestic programs that were meant to provide relief for the unemployed and poor, and improve a financial system that would prevent future economic depressions. These programs included development of agencies like the Civilian Conservative Corps. (“CCC”) that employed over three million people and the Federal Housing Administration (“FHA”) that regulated the banking industry that provided mortgages for homes and guaranteed those mortgages. These programs and many like them were collectively known as the New Deal. The New Deal was supposed to provide relief for everyone equally, but although the programs were new, the prejudices were old. Many of the reforms meant to provide economic and housing relief excluded African Americans and widened the wealth gap between Whites and African Americans. The ripple effects of this discrimination are felt even today.
The relief programs were not supposed to discriminate on the basis of race nor were they supposed to further the racial and gender inequality of the time. However, old habits die-hard and many of the people who ran the programs were discriminating against African Americans and women. One example is The CCC, one of the first new deal programs. It was a public works project intended to promote environmental conservation through intense outdoor labor. This program was meant to relieve unemployment and keep youth off the street. More importantly, it was meant to provide jobs at a time when jobs were scare. Although the CCC was supposed to utilize non-discriminatory practices, the men that ran it had deep roots in the South where discrimination was rampant. African American membership in the CCC was limited to ten percent. African American CCC members were eventually segregated from their white counter-parts. Although there was a clause in the law establishing the CCC that outlawed discrimination based on race, the CCC held that segregation was not discrimination. The overriding principles of the New Deal legislation were meant to provide economic relief to people on a non-discriminatory basis. However, the drafters of the legislation fell short on two fronts. First, they did not explicitly add these non-discriminatory practices into their legislation and second, these federal programs were run by local community leaders or local authorities who used their own racial biases in administering these programs. According to an article published by the Roosevelt Institute titled [African Americans and the New Deal: A Look Back in History], although the CCC employed almost 3 million men in 1933, less than 300,000 of those jobs went to African Americans. In an era where jobs were scarce, the CCC was critical in keeping the White male employed and financially afloat during the Depression. African Americans who were denied these federally funded jobs fell deeper into a cycle of poverty while their white counter-parts began their path to financial recovery.
The FHA was another New Deal relief program initiated under the National Housing Act of 1934. After the Great Depression, many banks failed causing a drastic decrease in home loans and ownership. The FHA was supposed to regulate the rate of interest and the terms of mortgages for loans the government insured. Before the FHA, most mortgages were short term, three to five years, with no amortization and balloon payments. These terms made mortgages unattainable for most people and became a key component in the housing collapse of the Great Depression. Although many people would be able to make the monthly mortgage payments on their homes they could not afford to pay off the entire balance when the loans came due in five years. At the time, banks were unregulated and would not extend mortgages past the three or five year terms and would simply foreclose on these homes. The FHA began regulating these practices by insisting on longer terms and lower interest rates. The FHA was meant to strengthen the housing market and end these predatory lending practices, making the American dream a reality for everyone. In 1934, the practice of redlining came into existence under the housing act. The National Housing Act created residential security maps which outlined the level of security for real estate investments in 239 cities around the United States. High-risk areas were outlined in red. Most minority neighborhoods were redlined which meant that they were automatically denied mortgages.
The mortgage discrimination that flourished under the National Housing Act led to decaying neighborhoods and the disenfranchised state of most inner city neighborhoods that we see today. Similarly, the Civilian Conservation Corps. that provided white males with the financial security they needed to survive and eventually thrive during an economically unstable time had the opposite effect on African Americans who were not offered this same safeguard.
Home ownership and equity is a source of wealth. The National Housing Association’s redlining practices created a middle class of mostly white males that extends into the present day. Without the ability to obtain mortgages African Americans were denied this source of wealth and advancement that came through rising real estate prices. Without the stability and financial advancement that comes with home ownership African-American neighborhoods, which were mostly inner city, neighborhoods fell into decay. This self-perpetuating cycle even permeates our present day society. Most white homebuyers are able to get help with a down payment on their first home from their parents. They can do this because their parents are able to take out loans on their own homes and use that equity to provide their children financial help. Most African-American homebuyers today are not afforded this same luxury because their parents were excluded from the mortgage assistance during the Roosevelt era. Homeownership became almost non-existent in minority neighborhoods because of these discriminatory practices and this lack of growth and advancement led to decaying and disenfranchised areas that became the inner city neighborhoods of today.
The CCC further extended the wealth gap between white males and African Americans. While white males were suffering the economic hardship of the Great Depression, African Americans were being crushed by the worse than normal economic hardships they faced. According to the New Deal reference library, the overall unemployment rate during the Great Depression was 25% and African Americans and minorities accounted for 50% of that unemployed population. As a result of the Great Depression white males were now competing with African Americans for jobs and the CCC was a great source for employment. With administrators promulgating rules that limited the number of jobs available to African Americans with the CCC, a program that was supposed to provide economic relief to all people equally, African Americans were at a severe financial disadvantage. African Americans were economically suppressed while Whites were given a leg up. Without the stability provided by these federally funded jobs the wealth gap between white males and African Americans continued to grow.
The roots of the widening wealth gap between Whites and African Americans can be traced back to the Roosevelt era New Deal reforms. These reforms were meant to equally help people of all racial backgrounds to not only survive an economic depression but to build anew and strive for a better and economically stable future. Beginning with the housing discrimination and leading up to employment discrimination, African Americans faced an economic disadvantage that they have yet to overcome. To build a solid economic foundation that lasts through generations you must first have a foundation on which to build. African Americans were excluded from building their foundations at the same time as their White counterparts and the effects of that delayed beginning is felt, even today. Today, when people do not like to discuss racial issues because most people want to believe we live in a so-called “fair” society, African Americans are still struggling to overcome the effects of earlier reforms that were meant to be “fair”.