EH.net is owned and operated by the Economic History Association
with the support of other sponsoring organizations.

After Redlining: The Urban Reinvestment Movement in the Era of Financial Deregulation

Author(s):Marchiel, Rebecca K.
Reviewer(s):Storrs, Thomas

Published by EH.Net (June 2022).

Rebecca K. Marchiel. After Redlining: The Urban Reinvestment Movement in the Era of Financial Deregulation. Chicago: The University of Chicago Press, 2020. viii + 296 pp. $50 (cloth), ISBN 978-0226723648.

Reviewed for EH.Net by Thomas Storrs, Corcoran Department of History, University of Virginia.

 

The term “redlining” refers to a financial institution’s refusal to service an area with loans or insurance due to some combination of the race, ethnicity, and wealth of its residents. The term entered the lexicon around 1970. Rebecca Marchiel’s excellent and groundbreaking first book After Redlining: The Urban Reinvestment Movement in the Era of Financial Deregulation highlights reasons for its emergence and the activists who fought for its end. This fascinating volume will be of interest to historians of finance, cities, and social movements. In brief, most existing scholarship on racial discrimination in home mortgages in the twentieth century, beginning with Kenneth Jackson’s Crabgrass Frontier in 1985 and stretching across many academic disciplines today, focuses on denial of credit to Black communities before 1970, as contrasted with the suburban white communities that received federal mortgage insurance and guarantees in the middle third of the twentieth century. Marchiel, an Associate Professor of History at the University of Mississippi, flips this script by focusing on interracial urban communities “FHAed,” a term coined by local activists, and those activists’ evolution into a national campaign for redress.  The book provides essential background for scholars researching intraurban wealth inequality in the twentieth century United States and would be appropriate for an undergraduate course on the late twentieth century US history of social movements, financialization, or cities.

Activists uncovering and fighting redlining serve as Marchiel’s primary actors and narrators. Gale Cincotta, formerly a stay-at-home mother of six boys, and Shel Trapp, a professional organizer, founded National People’s Action (NPA). NPA learned and grew from their Chicago base to become a national movement that secured passage of both the Home Mortgage Disclosure Act (HMDA) of 1975, requiring financial institutions to disclose their home mortgage lending, and the Community Reinvestment Act (CRA) of 1977 that formed the centerpiece of efforts to funnel mortgage dollars to underserved communities. HMDA and CRA constituted the high-water mark of NPA’s legislative efforts. The group then turned to bank-based reinvestment in the late 1970s and early 1980s where financial institutions, among them commercial banks, savings and loans, and life insurance companies, agreed to lend specific sums in inner-city neighborhoods. Despite high hopes and heady headlines, Marchiel explains that this phase “did nothing to shrink the racial wealth gap, nor did it provide economic security for low-income people.” (15) These piecemeal efforts did serve the lenders’ interests by staving off additional legislation. The Clinton Administration revived the CRA as the toll for commercial bank consolidation in the 1990s. These two pieces of legislation, Marchiel argues, marked the end of New Deal Liberalism and the dawn of a neoliberal deregulation that snuffed out community-based lending.

But back to the beginning of the story. The Federal Housing Administration’s Section 235 program, part of the 1968 Housing and Urban Development Act, fully insured lenders against loss on loans to poor borrowers in inner-city neighborhoods. The program was a disaster for everyone involved except for the rapacious lenders who milked the program into disgrace by repeatedly lending money with little or no money down on shoddy homes that bribed FHA inspectors certified as sound. These inflated appraisals saddled borrowers with unaffordable debts while disequilibrating prices. The federal government and borrowers lost their shirts while conventional lenders refused to lend in areas eligible for FHA Section 235 loans, i.e., neighborhoods that had been “FHAed.” This practice, not the earlier efforts of the FHA since its inception in 1934 to augment affluent, white suburbia, marked the genesis of redlining activism.

For urban history historiography, this intervention, alongside Keeanga Yahmatta Taylor’s complementary 2019 book Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership, shifts focus from earlier harms done by FHA exclusion to more recent harms done by FHA inclusion. Kenneth Jackson’s Crabgrass Frontier exemplifies the former and sought to explain 1970s urban disinvestment by reaching back to the 1930s Home Owners’ Loan Corporation maps rather than the more proximate, and plausible, explanation of Section 235’s driving conventional lenders out of low-income urban neighborhoods. After Redlining also provides a new chapter to Beryl Satter’s Family Properties: How the Struggle Over Race and Real Estate Transformed Chicago and Urban America (2010), which focuses on earlier private contract lending that deployed similar schemes to evaporate Black wealth. This book also contrasts with Amanda Seligman’s Block by Block: Neighborhoods and Public Policy on Chicago’s West Side (2005), which focuses on the antiblack reactions of white Chicagoans as compared to Marchiel’s highlighting of interracial activism.

For urban economists, sociologists, and geographers, the book suggests a similar reappraisal is in order. The long legacy of New Deal mortgage programs and the fruitful research on them might move on to these questions: What relative role did higher interest rates and the FHA Section 235 program play in conventional home mortgage lenders’ abandonment of transitional urban neighborhoods? Why was the FHA successful in insuring mortgages in white suburbs and subsequently unsuccessful in insuring mortgages in racially mixed urban areas? What was the political economy of lenders’ purportedly voluntary loan commitments in response to activists’ demands and were these efforts a success on either side?

Overall, After Redlining makes a significant contribution to urban history scholarship that will be useful across many fields. Marchiel’s use of NPA’s archives to cogently put together a history of activism alongside sophisticated yet intelligible financial history is remarkable and innovative. As it is de rigeur in book reviews to add a few criticisms, I will follow suit even though none of mine are major. First, the title After Redlining is slightly misleading in that the book in fact covers a major period of redlining spurred by Section 235. This can be chalked up as a reference to preexisting narratives but underplays the book’s contribution. Second, in my reading, the clear “bad guy” here is the FHA in that they caused the destruction of an, up to that point, viable home mortgage market in inner city neighborhoods via Section 235. I think it bears emphasis that there was a viable conventional mortgage market during the FHA’s prior period of neglecting these areas and that the FHA’s Section 235 program killed it with an assist from erratic and rising mortgage rates. The Censuses of Housing across this period agree that savings and loans lent throughout the early postwar period to Black borrowers. Marchiel presents all the dots for these two conclusions but does not quite connect them. Lastly, I do not see evidence of “a two-way relationship with thrifts that activists came to expect under the New Deal financial regime.” (83) Thrifts, namely savings and loans, lent in urban areas and/or to nonwhite borrowers because the FHA did not. They sought to maximize the risk-adjusted returns of their savers rather than practice New Deal mutuality. Concomitantly, they stopped making conventional loans for the same areas and borrowers because they deemed the profit not worth the risk.

These required and slight criticisms aside, After Redlining should be on your reading list. I enjoyed it. Marchiel’s arguments and evidence answered many questions I had while fostering new ones. The 1970s are a treacherous canyon for any historian to cross. This book bridges them elegantly and innovatively with fresh evidence and novel arguments.

 

Thomas Storrs is a PhD student in the Corcoran Department of History at the University of Virginia, where he studies urban and financial history. His article with Price Fishback, Jonathan Rose, and Kenneth Snowden, “New Evidence on Redlining by Federal Housing Programs in the 1930s,” is forthcoming in the Journal of Urban Economics.

Copyright (c) 2022 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (June 2022). All EH.Net reviews are archived at https://www.eh.net/book-reviews.

 

Subject(s):Economic Planning and Policy
Financial Markets, Financial Institutions, and Monetary History
Government, Law and Regulation, Public Finance
Social and Cultural History, including Race, Ethnicity and Gender
Urban and Regional History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII