First Black President Can’t Help Blacks Stem Wealth Drop
The nation’s first African-American president hasn’t done much for African-Americans.
Between 2005 and 2009, the median black family lost more than half of its wealth compared with a 16 percent decline for whites, according to the Pew Research Center. Photographer: Tim Boyle/Bloomberg
Richard Brown, 40, a U.S. Army veteran and college graduate, lost his job as a community organizer in Durham, North Carolina, amid the 2008 credit crunch. Unemployed for seven months, he worked temporarily at a grocery store for one-third his previous salary before landing a position in 2010 at another nonprofit, helping establish minority-owned businesses.
The employment roller coaster punched a hole in his bank balance and left his net worth “sitting at zero,” says the married father of two. “We’re easily three years behind where we would have been,” Brown says.
So are millions of other African-Americans whose tenuous hold on prosperity has slipped since President Barack Obamareached the White House. The recession and anemic recovery, while painful for most Americans, have been especially punishing for blacks, stripping jobs, homes and wealth from people who have historically lagged.
“These groups have been very, very hard hit, not only in the recession, but in the recovery that followed,” says economist Gary Burtless of the Brookings Institution. “Things have been very grim.”
Today’s 14.1 percent black unemployment rate is almost twice the 7.4 percent white rate, and the racial gap — after narrowing from 2005 to 2009 — has widened since the recession’s June 2009 end. At Obama’s inauguration, 7.1 percent of whites were jobless compared with 12.7 percent of blacks.
Amid a fitful economic recovery over the past three years, black households’ median annual income fell 11.1 percent, more than twice the 5.2 percent inflation-adjusted decline suffered by white households, according to an analysis of Census Bureau data by Sentier Research.
“When the economy catches a cold, the most vulnerable families get pneumonia. And this economy caught pneumonia,” says Jared Bernstein, who was an economic adviser to Vice President Joe Biden from 2009 to 2011.
The implosion of the nation’s housing market is central to understanding blacks’ financial plight. Home ownership among blacks fell about twice as much in percentage terms as among whites during the housing crash, according to Harvard University’s Joint Center for Housing Studies. And minorities, including blacks, have lost their homes to foreclosure at higher rates than whites.
African-American voters like Brown — stirred by Obama’s 2008 election and savaged by the economic storm that followed — are critical to the 2012 campaign. If dispiriting economic conditions, or tough new voter-identification laws, shrink African-American turnout from its 2008 peak of 65 percent, Obama’s chances for a second term could be diminished.
“It’s definitely going to be a concern for the re-election effort,” says Ruy Teixeira, a political demographer with the Center for American Progress in Washington. “If there’s a widening of the gap between black and white turnout, pretty much by definition, that’s bad for the president.”
Four years ago, African-Americans accounted for more than one of every eight votes cast. Obama captured 95 percent of the black vote in 2008, bettering the mark of the 2004 Democratic candidate, Senator John Kerry, by 7 percentage points. Even Republicans acknowledge that the president this year is certain to receive more than 90 percent black support. Yet questions remain about African-American voters’ enthusiasm given their struggles during his presidency.
‘Done the Best’
The presence of a black man in the White House remains a source of intense pride for millions of African-Americans. Though they have suffered disproportionately from the subpar economy, blacks also have benefited from administration policies on health care, voting rights and mortgage discrimination.
“It’s easy to play Monday morning quarterback,” says Damian Mills, an African-American auto dealer in Smithfield, North Carolina. “President Obama has obviously done the best that could be done.”
Not according to his Republican challenger. Former Massachusetts Governor Mitt Romney told the annual convention of the National Association for the Advancement of Colored People in July that blacks were suffering more than other groups. “If you want a president who will make things better in the African- American community, you are looking at him,” Romney said.
During Brown’s bout with unemployment, he and his wife, Rachael, struggled to stay current with bills for daycare, their mortgage and a car. A lapse in their health insurance left them with about $10,000 in unpaid medical expenses.
“It was terrifying,” he says. “The financial strain was great; even more was the emotional strain.”
Black America began losing ground before the 2008 financial crisis. From 2004 to 2010, black families’ median net worth fell by more than a third compared with a drop of 20 percent for white families, according to the Federal Reserve’s latest analysis.
A Pew Research Center study that analyzed data from 2005 and 2009 found an even wider disparity. The typical white household had a net worth in 2009 of $113,149 compared with $5,677 for blacks — a 20-to-1 ratio that was twice the pre- crisis gap.
Black workers, statistically less likely than whites to have a college degree, suffered as the economy shed lower- skilled manufacturing and construction jobs. Minority-owned small businesses are often the first to feel the pinch as corporations retrench.
Warren Arrington, a small businessman in Raleigh, North Carolina, says sales of his industrial safety products “hit rock bottom” in 2004-05. He surrendered the lease on one of his two offices and dismissed his two employees.
Arrington’s annual sales of more than $1 million, though recovering from the crisis depths, still aren’t back to their $1.6 million peak of the mid-1990s.
Arrington, 64, who started American Safety Products in 1985 after being laid off from a corporate accounting job, grew up in rural North Carolina in the 1960s. He recalls segregated schools, civil-rights protests and the assassinations of black leaders such as Martin Luther King Jr. and Malcolm X.
“We’re worse off now than we were 40 years ago,” he says, citing the weak economy and a conservative backlash against an African-American president.
Blacks lost more ground than whites in recent years because the financial crisis was centered on housing, which accounted for 60 percent of black wealth. “We may have lost more property in that than we did in slavery,” says William Barber, president of the North Carolina NAACP.
Racial bias was a factor. In July, the Justice Department announced a $175 million settlement with Wells Fargo & Co. (WFC) of charges that it had discriminated against 34,000 black and Hispanic borrowers by steering them into risky subprime loans even when they qualified for conventional loans or by charging them higher fees than whites.
Almost one-quarter of African-American borrowers will lose their homes to foreclosure before the crisis ends, according to a November 2011 study by the Center for Responsible Lending, a nonprofit group that fights predatory consumer lending. Since entrepreneurs often tap home equity to start new businesses, the housing crash will likely retard wealth accumulation for decades.
Not ‘Bold Enough’
“The process of wealth generation is driven by the resources the previous generation has at hand,” says William Darity, a professor of African and African-American studies and economics at Duke University in Durham, who criticizes Obama for not being “bold enough.”
Before the crisis, whites already were roughly twice as likely to run their own businesses as blacks, according to the U.S. Bureau of Labor Statistics. The evaporation of housing wealth not only leaves African-American homeowners without a financial cushion to pay for college or cover unexpected expenses, it will also likely further depress formation of black-owned businesses.
Leah Brown, 48, chief executive of A10 Clinical Solutions in Cary, North Carolina, and no relation to Richard Brown, tapped a $150,000 home-equity loan to keep her company going in its early days. Revenue last year topped $22 million.
Now, “there’s no home equity,” she says. “If the folks don’t have anything to leverage, how the heck are they going to borrow the money to start a business?”
In 2008, Obama received a rapturous reception in Durham, as he campaigned on Parrish Street, once known as the “black Wall Street” for the black-owned banks and insurance companies that arose there during Reconstruction. The Blue Collar Café, just down the street from Richard Brown’s office, still displays four framed pictures of a smiling Obama taken that day.
Brown, the son of a textile-mill worker, was the first in his family to earn a four-year degree. He’s just about given up on the idea that each generation will do better than the one that preceded it. Now, he just hopes his kids can maintain the family’s standard of living. “We’re not talking about the American Dream,” he says.
Still, for African-Americans, economic clouds haven’t extinguished the glow from 2008. Even black executives from banking and energy, two industries normally critical of the administration’s regulatory policies, are squarely behind the president.
Rickey Hart, founder of NDR Energy, a natural gas marketing firm based in Charlotte, had trouble obtaining health insurance after being diagnosed as a diabetic in 2006. Thanks to the health-care overhaul championed by Obama, he now can afford coverage.
“I’m a staunch supporter,” says Hart.
Kim Saunders, chief executive officer of M&F Bancorp Inc. (MFBP) of Durham, personifies the poised, immaculately coiffed corporate executive, right down to the strand of pearls around her neck. But as she describes what it means to have an African- American in the White House, she visibly chokes up.
Saunders, 52, recalls a story from her mother’s youth, about a black man chased out of her small South Carolina (BKSC) town, just for trying to register to vote. And she describes her elderly father on Election Day in 2008, one month before his death at age 83, struggling to reach the polls in his Maryland neighborhood on the outskirts of the nation’s capital.
“The symbolism — to be able to see him walk to vote for a black man for president,” she says, growing emotional. “Even if he had to get sick, he was going to go.”
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