Corporations Capitalize on Crises—and Black Wealth Suffers
Unchecked, corporate greed, enabled by government policies favoring the wealthy, severely diminishes working Americans' opportunities for upward mobility, most especially in communities of color. Ensuring justice for these communities will hinge on the government's commitment to reform economic regulations and advance racial equity.
How far would you go to ensure your family’s long-term financial security? And what if all the hard work you had done was wiped out merely to enrich someone else?
As I enter into the work of policymaking, these are the questions that drive me. And they are far from hypothetical or abstract. In this commentary, I use the experiences of Black women intimately familiar with corporate greed, including my own, to begin to answer the question of what we stand to gain from centering racial and socioeconomic justice in our approaches to corporate oversight.
First, let me introduce you to the Watts family. The first Watts generation to migrate to California in the 1940s was a curious bunch of six kids corralled by their single Black mother, Mary Lee Watts, seeking opportunity and a new start in West Oakland’s vibrant Seventh Street district. Swept up in Oakland’s emerging hub of Black culture, fueled by jazz, blues, community organizing, and Black-owned businesses, this family—my family—decided that Oakland would be their home for generations to come. In an effort to get settled, they capitalized on the city’s rapidly expanding wartime economy, bolstered by a federal integration mandate and the construction of the Oakland Army base and Naval Supply Center.
The first generation of Watts homeowners was established in the 1960s by Evelyn Vaughn, daughter of Mary Lee Watts, who purchased her first home with her husband and newborn daughter. At the time, this was a huge accomplishment for any Black family, let alone one living in Oakland, which, both in spite of and because of movements like the Black Panthers, was experiencing a convulsion of racist violence. Community efforts like the Panthers’ Free Breakfast program provided my family with beacons of resilience and determination, but a storm of police brutality, alongside economic policies determined to dismantle incipient Black wealth, threatened to snuff out those lights. And with each new decade after that, Seventh Street’s post-war dream of Black prosperity seemed to be coming to an end.
Predatory financing has had intergenerational repercussions.
For my own family, the savings and loan crisis in the 1980s was the tipping point. Years prior, thrift banking with savings and loan institutions became a popular option for lower-income Americans to achieve homeownership and build retirement savings, because they offered lower interest rates and long-term, fixed-rate financing compared to other banks. In the 1970s, when interest rates and inflation rose, these banking institutions hit a wall of losses, and many slid into financial deficits. To recoup losses, secure faster returns, and attract more depositors, the surviving thrift banks took a page out of the book of big business and became “zombie companies,” excessively pumping money into risky mergers and acquisitions via junk bonds while also paying higher interest rates. However, there was little return on this strategy, and in the process, these institutions cheated thousands of depositors out of their life savings and cost taxpayers billions for their bailouts when more than 40 percent of them went bankrupt.
My own family held on through the end of the crisis, but not without catastrophic cost. Like many Americans, Evelyn Vaughn had turned to a savings and loan institution as an opportunity to save for retirement and finance her mortgage. Evelyn was among the nearly one-third of Americans whose savings had gone up in smoke, and as a result, she decided to forgo part of her pension to salvage the remaining money in her retirement accounts. In 1996, my grandmother, Evelyn, made a significant sacrifice for our family’s sake after dedicating twenty-eight years to the Oakland Naval Supply Center and losing over half of the $30,000 she saved in a thrift bank. As a Black woman and the provider for a family of eight, early retirement seemed like the most viable option for her to attain immediate financial relief and mitigate the uncertainty surrounding her savings.
The loss of my grandmother’s retirement savings meant that her children and grandchildren would spend over two decades recovering from financial distress and still struggle to cover basic expenses. As a member of the third generation, I was always acutely aware of extreme wealth inequality. Growing up in a low-income, Black household of seven meant that my siblings and I had to learn about financial responsibility early on to support our mother, the family’s breadwinner. This meant choosing local public schools to save on transportation, coping with allergies while relying on free school lunch programs, and taking on caretaking roles for each other during our mother’s absences due to working multiple jobs. My family did the best we could, but when it was time for me to go off to college, I realized that my future as an independent adult hinged on my ability to navigate America’s student loan financing system.
Had things been different, I would have inherited a system of support rather than the series of debts I’ve acquired to access education, groceries, health care, and more. Looking back on what transpired after my grandmother’s retirement, I can see the failure of systems and the accumulation of debt as a pattern— history repeating itself when policymakers fail to learn from past mistakes.
Looking back on what transpired after my grandmother’s retirement, I can see the failure of systems and the accumulation of debt as a pattern— history repeating itself when policymakers fail to learn from past mistakes.
In the aftermath of this financial crisis, Evelyn watched as the same public pension system she once trusted became one of the primary financing mechanisms used to take away her home during the housing financial crisis in 2007 and 2008. In the 1980s, Larry Fink, the founder of BlackRock, the world’s largest asset manager, was one of many profit-seeking individuals who helped popularize the high-risk mortgage loans that later stripped the wealth of Black communities in the housing financial crisis, while giving them millions in return. The federal government’s failure to prevent profit-seeking financial institutions from engaging in high-risk mortgage lending was the primary driver of this financial crisis. According to a report by the National Women’s Law Center, women of color, particularly Black women, were more likely to be labeled high-risk and thus receive high-cost mortgage loans, in which their mortgage interest rates were far higher than the average rate, before the market crash. At the turn of this century, by bailing out the financial institutions responsible for the financial crisis, the government’s response failed to address the needs of those directly affected, especially the needs of Black women.
Insufficient government oversight is as much responsible for the unacceptable levels of inequality and vast racial wealth gap we see in the United States today as enduring legacies of slavery and structural racism, both of which take a toll on our entire economy. As shown below, during times of crisis, progress in the racial wealth gap’s closure slowed as wealth grew increasingly concentrated among the richest families. Starting at a staggering 56:1 in 1865 following Emancipation, the White-Black per capita wealth ratio has been influenced by pivotal moments in history.
During the era of rapid industrialization from 1890 to 1929, Black Americans’ wealth progressed to roughly 10 cents for every white dollar, with the 1920 White-Black per capita wealth ratio reaching 10:1. However, when the New Deal era, spanning from 1933 to 1973, ushered in policies supporting unionization and the democratization of pension funds, wealth distribution was restructured more generally while also excluding Black Americans. The exclusion and long-standing racial wealth disparity laid the foundation for Civil Rights movements advocating for racial inclusion and economic justice, and by 1971, the White-Black per capita wealth ratio had reached 6-1. Since then, there’s been a disappointing stagnation in the closure of the racial wealth gap and an increase in wealth disparity, particularly after periods of financial distress.
For instance, from 1989—during the Savings and Loan Crisis—to 2001, a few years before the Housing Financial Crisis, the median wealth gap between white and Black families grew by roughly $18,250. (See Figure 1 ) The growth of this gap is an example of the impacts of the financial crisis on Black wealth. Another example can be observed in the period following the 2007 housing financial crisis, when Black families lost 44 percent of their wealth. This decimation of Black wealth pushed the median wealth gap between Black and white families to grow by $126,726 by 2010.
Figure 1
Throughout the evolution of the racial wealth gap, wealth has consistently increased for the richest households in the nation at the expense of lower-income households. For example, from 1982 to 2012, the top ten percent increased their wealth share by extracting 9 percent of wealth from the other 90 percent of households. (See Figure 2) This wealth transfer overlaps with two financial crises and one of the largest declines in Black wealth, as noted above. More recently, a similar trend occurred after the COVID-19 crisis swept the nation, causing the gap in white-Black median wealth to peak at $240,120 in 2022 as the wealthiest 10 percent maintained over 70 percent of the nation’s wealth.
Figure 2
These data points demonstrate how the richest earners have habitually capitalized on crises and deepened the racial wealth gap, but it would benefit the economy at large to regulate this wealth concentration and reverse the racial wealth gap. In 2019, McKinsey & Company optimistically reported that we could add $1 trillion to the 2028 economy if we closed the racial wealth gap. Unfortunately, at the current pace of improvement, it’s now estimated that it would take at least 300 years to achieve that level of equity. The evolution of the racial wealth gap and the projected rate of closure underscore the urgent need for racial and class-based measures to address predatory concentrations of wealth and promote economic justice for all Americans.
Unfortunately, at the current pace of improvement, it’s now estimated that it would take at least 300 years to achieve that level of equity.
Many of us entering the workforce—especially Black women striving to recover from generations of financial distress—are not inclined to work our entire adult lives. As seen during the pandemic, retirement savings aren’t always guaranteed for older workers, and working longer can actually decrease our life expectancy by exposing us to health risks or long-term physical strain on the body. The culmination of the two scenarios previously pushed 2.9 million older Americans out of the workforce during the COVID-19 pandemic, and at least 60 percent of older Black workers in physically demanding jobs were forced to retire between the ages of 55 and 60 due to health risks and disabilities. So working longer is not the solution, and can actually create an additional setback for Black wealth and retirement savings.
As retirement hangs in the balance, underfunded and largely inaccessible to most Americans, BlackRock’s founder, Larry Fink has the gall to call for delaying the retirement age to preserve the retirement system and cultivate financial security. The asset manager’s CEO, who has a net worth of about $1.2 billion and controls $10 trillion of Blackrock fund assets, is either a comedian, or enshrouded in an experience that makes him truly believe such an out-of-touch approach could benefit those of us who are not rich.
If we want brighter Black futures, we need stronger economic regulation
To blindly trust the retirement advice of a rich billionaire who had a hand in exacerbating the racial wealth gap is to ignore our economic struggles and the systemic disparities that perpetuate them. We know very well that private institutional investors like BlackRock can turn a profit at the expense of everyone else in the economy, most especially workers and communities of color. But, what could the government do instead of sitting idly by and watching the flames—a position it’s taken many times before and may take again if nothing changes?
I want to turn our attention back to the same structures that my grandmother had tried to rely on, but which collapsed from under her: retirement and pensions. The pension system has unfortunately become yet another arena for wealth to be siphoned by private, profit-driven entities. However, it’s not too late for policymakers and enforcers to take a proactive approach to preventing the next financial crisis and protecting communities of color from predatory corporate practices.
The pension system has unfortunately become yet another arena for wealth to be siphoned by private, profit-driven entities.
There’s a profound racial wealth gap rooted in the legacies of slavery and systemic racism. Wealth-maximizing practices, like Larry Fink popularizing predatory loan investments, often exploit and worsen these disparities. The laws governing economic power have evolved to prioritize wealth maximization and private interests, neglecting racial and class inequalities in the process. Policymakers and antitrust enforcers revitalizing corporate regulation should capitalize on this chance to center race and class equity in their approach to regulating private equity and corporations more broadly.
Policymakers and antitrust enforcers revitalizing corporate regulation should capitalize on this chance to center race and class equity in their approach to regulating private equity and corporations more broadly.
According to the Institute for Local Self-Reliance’s new report, decades of financial exclusion and disempowerment in Black communities set the stage for Wall Street’s exploitation of Black wealth. While stronger financial safeguards with a racial equity consideration could have been instrumental early on in constraining risky business practices that led up to the savings and loan crisis, antitrust policy could have also been leveraged to support this country’s economic recovery by blocking the mergers and transactions that created the “too big to fail” perpetrators of the 2007 financial crisis. Imagine if we had regulated the “too big to fail” financial entities, provided more transparency around pension investments, or even supported the 900,000 families who lost their homes in the housing crisis with the same urgency we had when we bailed out the responsible financial institutions. If the government had prioritized financial regulation and mandated that public pensions be divested from risky assets at the first signs of distress, Evelyn’s home and retirement savings could have been protected. From her time working in the Oakland Naval Supply to her time spent as a retiree, Evelyn could’ve been better equipped with the information needed to assess the risk to her pension investments and her long-term financial security prior to the savings and loan crisis; but more importantly, BlackRock’s Larry Fink and other profit-seeking actors in the 1980s could have been held accountable for the wealth they amassed after exploiting pension funds and mortgage payments.
Black Oakland grieves for what might have been had racial economic justice prevailed: a city where African Americans could flourish and build vibrant communities. Politicians, artists, musicians, writers, business leaders, and athletes could have emerged from the neighborhoods shaped by the first migrants who journeyed West seeking a better future. The narratives of Black Oaklanders were integral to the city’s identity, shaping its character profoundly. The enduring loss of homes and wealth carries profound implications for Oakland’s soul. The diminishing Black population due to displacement, eviction, homelessness, incarceration, and more diminishes the city’s diversity and threatens the disappearance of a cherished cultural legacy.
Our stories should be used to draw the solution, not just frame the problem.
Protecting the communities directly impacted by private and corporate power is crucial for more nuanced and impactful corporate regulation. Evelyn has pushed for her children and her grandchildren to get an education regardless of the cost because she wanted us to learn, grow, and find the financial freedom that was taken from her. She told me, “I shared my story with you because I don’t want to be forgotten…[when] you go off into the world trying to build a better tomorrow, you [might] forget that you aren’t the first one to have this dream. Because we share our stories, we’ve been able to organize internally to protect each other. Never forget that.”
She told me, “I shared my story with you because I don’t want to be forgotten…[when] you go off into the world trying to build a better tomorrow, you [might] forget that you aren’t the first one to have this dream. Because we share our stories, we’ve been able to organize internally to protect each other. Never forget that.”
Evelyn is a reminder that many workers and communities of color, especially Black women, are equipped with the first-hand knowledge essential to holding corporations and private equity firms accountable. Addressing the deep-rooted economic disparities that have been reinforced throughout history may not be a quick or simple task, but policymakers shouldn’t miss out on this prime opportunity to move in the right direction.