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

By Rebecca K. Marchiel

Focusing on Chicago's West Side, After Redlining illuminates how urban activists were able to change banks’ behavior to support investment in communities that they had once abandoned.

American banks, to their eternal discredit, long played a key role in disenfranchising nonwhite urbanites and, through redlining, blighting the very city neighborhoods that needed the most investment. Banks long showed little compunction in aiding and abetting blockbusting, discrimination, and outright theft from nonwhites. They denied funds to entire neighborhoods or actively exploited them, to the benefit of suburban whites—an economic white flight to sharpen the pain caused by the demographic one.

And yet, the dynamic between banks and urban communities was not static, and positive urban development, supported by banks, became possible. In After Redlining, Rebecca K. Marchiel illuminates how, exactly, urban activists were able to change some banks’ behavior to support investment in communities that they had once abandoned. The leading activists arose in an area hit hard by banks’ discriminatory actions and politics: Chicago’s West Side. A multiracial coalition of low- and moderate-income city residents, this Saul Alinsky–inspired group championed urban reinvestment. And amazingly, it worked: their efforts inspired national action, culminating in the federal Home Mortgage Disclosure Act and the Community Reinvestment Act.
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While the battle for urban equity goes on, After Redlining provides a blueprint of hope.

• Language: English
• Publisher: Open Road Integrated Media
• Release date: Sep 16, 2020
• ISBN: 9780226723785

Book preview

After Redlining

EDITED BY LILIA FERNÁNDEZ, TIMOTHY J. GILFOYLE, BECKY M. NICOLAIDES, AND AMANDA I. SELIGMAN

JAMES R. GROSSMAN, EDITOR EMERITUS

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After Redlining

The Urban Reinvestment Movement in the Era of Financial Deregulation

REBECCA K. MARCHIEL

THE UNIVERSITY OF CHICAGO PRESS

CHICAGO AND LONDON

The University of Chicago Press, Chicago 60637

The University of Chicago Press, Ltd., London

© 2020 by The University of Chicago

All rights reserved. No part of this book may be used or reproduced in any manner whatsoever without written permission, except in the case of brief quotations in critical articles and reviews. For more information, contact the University of Chicago Press, 1427 E. 60th St., Chicago, IL 60637.

Published 2020

Printed in the United States of America

29 28 27 26 25 24 23 22 21 20    1 2 3 4 5

ISBN-13: 978-0-226-72364-8 (cloth)

ISBN-13: 978-0-226-72378-5 (e-book)

DOI: https://doi.org/10.7208/chicago/9780226723785.001.0001

Library of Congress Cataloging-in-Publication Data

Names: Marchiel, Rebecca K., author.

Title: After redlining : the urban reinvestment movement in the era of financial deregulation / Rebecca K. Marchiel.

Other titles: Historical studies of urban America.

Description: Chicago : University of Chicago Press, 2020. | Series: Historical studies of urban America | Includes bibliographical references and index.

Identifiers: LCCN 2020004119 | ISBN 9780226723648 (cloth) | ISBN 9780226723785 (ebook)

Subjects: LCSH: Reverse discrimination in mortgage loans—United States. | Discrimination in mortgage loans—United States. | Community development—United States—Finance.

Classification: LCC HG2040.2 .M373 2020 | DDC 332.7/220973—dc23

LC record available at https://lccn.loc.gov/2020004119

This paper meets the requirements of ANSI/NISO Z39.48-1992 (Permanence of Paper).

TO PETER, BRUCE, MAGGIE, MOM, DAD, AND BRIAN

Contents

INTRODUCTION.    Neighborhoods First

CHAPTER 1.    Beyond the Backlash: Organizing against Real Estate Abuse in a Transitional Urban Neighborhood

CHAPTER 2.    The FHA in the City: Red Lines and the Origins of the Urban Reinvestment Movement

CHAPTER 3.    It’s Our Money: Defending Financial Common Sense in a Collapsing New Deal Order

CHAPTER 4.    Communities Must Be Vigilant: The Financial Turn in National Urban Policy

CHAPTER 5.    Reinvestment for Whom? The Limits of Bank-Led Reinvestment

CHAPTER 6.    Let’s Make the Market Work for Us: The Lost Fight for Credit Allocation and the Rise of Community-Bank Partnerships

CONCLUSION

Acknowledgments

List of Abbreviations for Archival Collections

Notes

Index

INTRODUCTION

Neighborhoods First

In early 1975, Chicago community organizer Gale Cincotta announced a damning report on her city’s financial institutions. She and other activists had spent the past three years accusing these firms of redlining—refusing to make loans in aging, integrated, and majority-minority neighborhoods. Bankers, for their part, had spent the past three years denying the accusations. But in 1975, for the first time, activists had evidence to support their claims. A new federal law gave them access to financial institutions’ records, which they analyzed to reveal where the institutions issued loans compared to where their offices were located. The patterns were striking. Local banks collected savings from the city’s older, racially changing neighborhoods, but rarely lent money there. On the West Side, one financial institution collected over $10 million in deposits from customers but made zero mortgage loans in return. Of the forty-one Chicago banks examined, thirty-nine lent less than 0.1 percent of their combined $42 billion in assets to redlined neighborhoods over the course of an entire year. In contrast, these institutions lent plenty of mortgage money in the suburbs and in wealthier neighborhoods. What was happening, the activists argued, was that the banks serve as one-way conduits for the deposits from the [city] neighborhoods, taking them in and depositing them along the lake shore or in the suburbs.¹

By 1983, however, the relationship between these activists and their banks looked quite different. That fall, First National Bank of Chicago proudly announced its plan to commit $100 million in home and small business loans for the neighborhoods that activists had identified as redlined eight years earlier. And community groups would play a large role in implementing the program. Neighborhood representatives helped distribute those loans to underserved areas. They screened applicants and identified promising urban redevelopment projects. Cincotta and other activists joined local bankers on review boards that assessed borrowers’ creditworthiness and discussed changes to improve the program. Over the next months, two other Chicago banks followed First National’s lead by allocating $173 million for housing, commercial, and industrial development in inner-city Chicago neighborhoods.

FIGURE 1. Gale Cincotta speaks at a press conference announcing the First National Partnership.

Courtesy of People’s Action

Our communities have been written off up to this point, said one activist, but these new community-bank partnerships would set a new tone and direction for the future. Cincotta celebrated the First National agreement as an outstanding, comprehensive example of the kind of program that can be worked out between local financial institutions and the community groups fighting for neighborhood revitalization.²

This book explains the changed relationship between urban community groups and their financial institutions during the last third of the twentieth century. Putting urban reinvestment at the center of their agenda, urban community groups demanded recompense for redlining and formed a social movement that led to community-bank partnerships like the one created by the First National agreement. The activists who comprised the urban reinvestment movement were working- and middle-class white, black, and Latinx people in racially changing, or self-described transitional, urban neighborhoods, where redlining was a common occurrence. They believed that the decline of American cities was the result of antiurban, bank-friendly public policies.

These activists shared a form of social democratic populism that opposed power brokers—from real estate companies and bankers to regulators and Washington policymakers—who they believed rigged the game in favor of new suburbs and metropolitan centers in the growing Sun Belt. Trained in the methods of groundbreaking community organizer Saul Alinsky, activists brought the confrontational tactics of the labor movement out of the factory and into the community. They agitated to improve life in urban neighborhoods, despite popular perceptions that American cities were doomed.³ Their struggles with bankers were thus more than fights over loans. At stake was the survival of their neighborhoods: communities they invested with deep meaning.

This book tells the story of the reinvestment movement’s lead organization, National People’s Action (NPA), and its impact on federal urban and banking policy. A loose federation of neighborhood organizations, NPA began as National People’s Action on Housing but dropped Housing from its name when its mission expanded. The umbrella organization coordinated national campaigns for urban reinvestment from its headquarters in Chicago while its member organizations fought local struggles ranging from housing conditions to health care to affordable utilities.⁴ The group’s two founding organizers rejected the idea that one had to leave cities in order to find the good life. The first, Gale Cincotta, a white stay-at-home mother of six boys, became an activist when her youngest son’s kindergarten class became overcrowded and she worried that his education would suffer as a result. Cincotta recalled her realization that if you didn’t get involved and do something about it, your kids weren’t going to learn to read.⁵ Cincotta was a natural organizer, by neighbors’ accounts, but she worked hard at it, too. Her eloquence in bargaining and representing a voice of the people, said coworkers, matched her militant passions.⁶ NPA’s other founder, Shel Trapp, complemented Cincotta’s public leadership with his capacity to do the groundwork required to build organizations. Trapp was a professional organizer, rather than a homegrown leader, known for his chain-smoking and his ability to sneak a cuss word into any sentence. A white former Methodist minister with a commitment to racial justice, Trapp found organizing to be a career through which he could work for social change. Joining Cincotta and Trapp were former seminarians, urban sociologists, VISTA volunteers, and innumerable local residents who chose organizing over moving, could not afford to move, or, in the case of some black activists, found their neighborhood choices restricted by racial discrimination.

FIGURE 2. Gale Cincotta and Shel Trapp discuss organizing strategy.

Courtesy of People’s Action

These activists built local community groups, won allies in government and in small banks, documented suburban favoritism, and became frequent witnesses for the congressional committees in charge of banking and urban affairs. They developed local strategies to increase urbanites’ access to capital, including mortgage commitments from local banks and loan counseling for new urban homeowners. Drawing an analogy to the Marshall Plan, which helped Europe recover after World War II, they called on policymakers to make a national decision to prioritize neighborhood revitalization.⁷ They advocated for tax breaks for the purchase of older homes, programs to combat urban housing abandonment, and increased assistance for the urban elderly.⁸ They reflected a larger trend of activists of the late twentieth century pursuing urban revitalization through community control.⁹ Their constant pressure for a national neighborhood reinvestment policy ensured that national conversations about the urban crisis did not end with the late-1960s urban rebellions. Instead, reinvestment activists helped make the 1970s, as one historian put it, the decade of the neighborhood.¹⁰

At the movement’s peak, its crowning legislative achievements created a unique role for community organizations as grassroots financial regulators who policed urban redlining at the street level. These legislative achievements laid the groundwork for community-bank partnerships. Activists organized for and celebrated the passage of the 1975 Home Mortgage Disclosure Act (HMDA), which forced banks to reveal the geographic distribution of the loans in their portfolios. Armed with data that suggested race-based geographic discrimination in lending, reinvestment activists’ allies in Congress next pushed for the Community Reinvestment Act (CRA), which, when passed in 1977, activists hoped would become affirmative-action legislation for previously redlined neighborhoods. These new laws gave neighborhood activists standing to leverage new loans from banks that had previously failed to meet the credit needs of nearby communities. The partnerships that grew from activists’ use of reinvestment regulations directed an estimated $1.7 trillion dollars to American cities by 2004, while increasing the flow of fair credit to minority communities.¹¹ As one sympathetic banker said of Chicago, the reinvestment movement showed that the expertise of community groups, paired with fair bank loans, just might make this city viable again.¹²

Activists had surprising successes winning new banking regulations like the CRA for two primary reasons. First, activists’ demands on banks meshed with broader American expectations for how banks ought to behave during the era between the 1930s and the 1980s—expectations I call financial common sense. By that, I mean that activists echoed a widely shared understanding of financial institutions as special types of businesses, rather than typical for-profit firms. Financial institutions required a government charter to open and operate. They acted as stewards of people’s wealth. And their choices had enormous ramifications for the distribution of resources across the metropolis and the nation. By this logic, financial institutions were quasi-public institutions that should serve the public interest.¹³ When demanding fair access to credit, activists often drew on a language of consumer rights, as bank customers. But they also claimed citizens’ rights, as members of the public that these quasi-public banks were obligated to serve. A second cause of reinvestment activists’ success was that they found a receptive audience in local, state, and federal policymakers. In the 1970s’ economics of scarcity, activists’ policy proposals to enlist banks in urban redevelopment offered a way to revitalize American cities without adding costs to government budgets.

Despite success in winning new antiredlining banking policies and leveraging community-bank partnerships from them, the story of the urban reinvestment movement is nonetheless one of roads only partially taken and of inadequate small-scale solutions to big structural problems. This book explains how the movement failed to meet its larger goal of a Marshall Plan for American cities. New reinvestment regulations in banking were, in retrospect, a limited victory compared with the capacious vision that activists had in mind when they demanded urban reinvestment. The economic downturn of the 1970s set the limits for urban reinvestment and assured there would be no Marshall Plan for cities. Washington policymakers rejected new federal urban programs out of fear that increased federal spending would worsen the era’s persistent inflation. At the same time, financial deregulation shifted the ground beneath activists’ feet, as policymakers began to endorse banking deregulation to give bankers what they said they needed to survive the economic downturn. By the decade’s end, reinvestment referred largely to something that banks did—and banks were fast changing. Without a national urban policy rooted in neighborhoods, activists increasingly relied on community-bank partnerships as an important yet imperfect tool that created opportunities for locally led urban redevelopment but that ultimately hinged on whether such efforts meshed with bankers’ priorities.

Bringing Finance into Urban History

After Redlining shows how the US financial system shaped and was shaped by the community organizing of urbanites during the 1970s and 1980s. The ideas that drove Cincotta and many others to action grew from their financial common sense. Activists believed that the relationship between financial institutions—particularly locally oriented savings and loan associations (S&Ls), also known as thrifts—and local communities was a two-way street. S&Ls’ survival hinged on collecting community savings as a source of capital, activists charged. In turn, S&L customers relied on thrifts’ services, especially mortgages, to help them build and manage household wealth. It was the state that shaped these expectations. Indeed, during the post-Depression period, white urbanites in neighborhoods like Cincotta’s financed their homes with the help of regulated local financial institutions. By insuring customers’ savings and providing a vehicle for homeownership, the state regulated thrifts to ensure that they provided services that Americans came to expect as much as other New Deal entitlements.¹⁴ The nature of the local savings and loan gave S&Ls a reputation as social institutions with obligations to the communities from which they drew deposits. This view was oversimplified. It ignored the reality that financial institutions created money when they debited a customer’s account.¹⁵ But this oversimplification nonetheless shaped Americans’ ideas about the purpose of financial institutions. As activists, federal policymakers, and some thrift executives saw it, thrifts were not merely profit-generating institutions but also stewards of local savings. In the financial common sense created by the New Deal financial regime, most Americans believed that the customers of a particular thrift were bound to one another as members of the same community.

This financial common sense did not include black Americans, however, and that exclusion produced the crisis that set off the story told here. As previously white neighborhoods began to integrate, all residents of these neighborhoods found themselves written off as risky—a kind of one-drop logic wherein the arrival of any black residents indicated that neighborhood decline was coming. Activists expected the benefits assured by regulated banking, and when they lost them in older or racially changing neighborhoods, they mobilized.

Yet while nearly every US history textbook starts its New Deal chapter with a discussion of that era’s banking reforms that structured Americans’ access to credit, historians have yet to fully integrate the role of New Deal financial regulations into urban histories of the postwar United States. The social and economic entitlements created by the New Deal included not only minimum wages, Social Security, and laws bolstering labor’s right to organize, but also federal mortgage assistance and bank deposit insurance. And while historians have shown how important this first set of entitlements was in shaping Americans’ worldviews and animating their politics for decades thereafter, the benefits wrought by New Deal–era banking reforms, of which mortgage insurance was just one, have received surprisingly little attention.¹⁶ Yet the system created in the wake of the Great Depression governed how the next two generations of Americans managed household wealth and, more important for this story, borrowed to supplement their earnings. For reinvestment activists, preserving that system meant preserving control over how and whether money flowed within urban neighborhoods. As they saw it, the financial was political.

But these urban activists also recognized that bank-based reinvestment could not solve all of the problems facing low-income urban communities, especially in the 1970s as unemployment was on the rise and inflation shrank the value of their money. Given the limitations of bank-based reinvestment, NPA sought a national neighborhood reinvestment policy that would coordinate federal funding and bank financing to improve the conditions of older, integrated urban neighborhoods. To activists who wanted a new Marshall Plan for the cities, urban reinvestment meant coordinating public funding and private financing to divert new resources to cities that had suffered from disinvestment through job and tax flight. Activists included the banks in their prescriptions not because they lacked faith in the government but because they believed banks controlled more money than the federal government did. Only substantial new resources, they believed, could rebuild their struggling urban economies. What they won instead was new regulations to win loans from local banks.

After Redlining puts these new loans in the broader context of a shift in federal urban policy. During the Carter administration, a new policy regime based on the principles of urban reinvestment emerged as critics from across the political spectrum lost faith in the clear-and-renew approach of postwar urban renewal. This shift came from grass roots, and the Community Reinvestment Act reflected its premises. Indeed, reinvestment activism was in large part a critique of the existing urban policy regime. The housing acts of 1949 and 1954 created the legislative framework for what became known as urban renewal, the federal strategy to remove blight by empowering city agencies to clear slums and build modern structures in their place.¹⁷ During the early 1970s, the Nixon-Ford administrations dismantled federal urban renewal and sought to decentralize the federal government’s role in revitalizing urban America, a policy framework they called New Federalism. As Democrats rose to power in the aftermath of Watergate, they changed course. Liberal policymakers—members of Jimmy Carter’s administration and Democrats on the Senate Banking Committee—embraced a financial turn in federal urban policy. They endorsed the CRA and other bank-based initiatives as a cornerstone of a new approach to urban policy and as a direct response to the urban activism that had already proved effective in enlisting local banks to help solve the urban crisis. But policymakers enlisted financial institutions to help combat urban decline without any explicit directives that they actually improve the material conditions of low- and moderate-income people. In the end, the CRA and other Carter-era initiatives—the Community Investment Fund through the Federal Home Loan Bank Board and the Urban Development Action Grant program—relied on the imperatives of finance for urban redevelopment, and their limits for low-income people quickly became clear.¹⁸ As the 1970s came to a close, bank-based reinvestment laid the groundwork for gentrification, or displacement, in some previously redlined communities.

Charting the demands of the urban reinvestment movement alongside these developments in federal urban policy also reveals the way in which monetary policy, not just tax-and-spend fiscal policy, created obstacles for resident-led urban revitalization in the 1980s.¹⁹ As bank-based reinvestment failed to meet its needs by 1980, the reinvestment movement resurrected questions about the relationship between money and democracy that historians have often associated with the Populists of the late nineteenth century. Forged during their urban antiredlining activism, NPA had the economic knowledge to emerge as a vanguard organization in campaigns to force the Federal Reserve Board to consider the ways that decisions about money and interest rates affected Americans of modest means. Yet their efforts to resurrect the money question did not lead to changes in monetary policy. Instead, they showed the difficulties of swaying the Fed at a time when central banking was assumed to be a technocratic enterprise outside the realm of politics—a stark contrast to the way the Populists framed the money question. But these efforts did reveal a surprising new articulation of working-class interests—one in which activists talked about redlining by class and economic discrimination, referencing unequal power relations in a macroeconomic terms rather than in terms defined by the workplace. Importantly, this articulation had urban roots. It was reinvestment activists’ experience combating banks through urban redlining that informed this critique, showing the ways that place-based identities shaped their class-based demands in an era of economic restructuring.

To that end, After Redlining builds on an understanding of the late twentieth century as a period of financialization and highlights the impacts of that economic transformation on American cities. Beginning in the 1970s in the United States, profit-making through financial channels, such as interest and service fees, grew disproportionately compared to profit-making through other economic activity.²⁰ The story of financialization has implications for urban history. Indeed, what we call financialization in hindsight did not look like large-scale economic restructuring to urbanites living through its early phases. Instead, financialization began more simply as financial deregulation. During the 1970s and 1980s, policymakers changed the way that thrifts worked in order to give financiers the flexibility they said they needed to do their part in fighting inflation and high interest rates. The effort to solve the inflationary crisis included rewriting the rules of banking, in the process undermining thrifts as institutions that had a stake in the local communities outside their offices. This policy regime changed just as the reinvestment movement won the Home Mortgage Disclosure Act and the Community Reinvestment Act, codifying banks’ obligations to low- and moderate-income neighborhoods outside their offices. In hindsight it is clear that activists won new banking legislation that built antiredlining protections into a financial policy infrastructure that was actually disappearing. This story of advancing toward a retreating goal helps explain the limits of community-bank partnerships as a mechanism for providing urban affordable housing, as well as the persistent resource disparities within the American metropolis.

Social Democratic Populism in Transitional Neighborhoods

Despite NPA’s ultimate influence on banking regulations and urban policy, its founders did not set out to build a national movement with a federal legislative agenda. Rather, they started with a smaller goal: to protect urban neighborhoods from real estate speculation. As the historian Beryl Satter has argued, most historians have been blind to the issue of speculators and their profits when explaining why some urban neighborhoods deteriorated as black families moved in.²¹ But in transitional neighborhoods, real estate exploitation was a fact of life. Speculators capitalized on popular beliefs that black residents reduced property values. They sought panicked white sellers who would accept low offers on their homes for fear that waiting would mean their homes’ values would fall.²² The speculators sold those homes to black families, whom they could charge more owing to the dual housing market in which black people had few housing options.²³ Real estate agents reaped enormous profits on both sides of the sale in transitional housing markets. As Cincotta watched hundreds of real estate speculators flock to her Chicago neighborhood alone, she and some others concluded that all neighborhood residents, regardless of race, were losing. It was in these transitional urban neighborhoods that the reinvestment movement took root.

In response to their experience with real estate abuse, reinvestment activists drew on a tradition of social democratic thought that was rooted in the conviction that social goods should trump market imperatives.²⁴ Their variant of social democratic politics provides an entry point for examining how ordinary people thought about the relationship between markets and society at a moment when prevailing assumptions were changing. As historian Daniel Rodgers has argued, economic concepts moved into the center of social debate during the 1970s, and Americans increasingly saw markets as ensuring freedom, choice, and reason.²⁵ Yet for those whose neighborhoods were labeled risky, the ideal of market choice did not mesh with the reality that financiers’ assumptions about urban riskiness made choice an illusion. Accordingly, reinvestment activists expected the federal government to intervene, through regulation and through targeting programs, to help the people and places the marketplace was stacked against. In other words, urban activists looked to the state to ensure that the market was more fair than free.

Reinvestment activists’ demands were shaped in large part by their financial common sense, but their shared political worldview was also rooted in their particular shared experience as residents of transitional neighborhoods. Life in postwar American cities created a set of common experiences for many who watched the social, political, and economic transformations of the postwar era from their front stoops. The black freedom struggle, federal attempts at urban renewal, the construction of new highways that eased suburban commuting, the onset of persistent inflation, the growing faith in the potential of the free market—these postwar transformations unfolded differently depending on where one lived in the metropolis. Thanks to a growing body of rich scholarship, we now know a great deal about the connections between place and politics in the postwar suburbs. Historians have well documented how for many white Americans, the suburbs shaped their aversion to government as well as their explanations for the persistence of racial inequality in a nation that purportedly outlawed race-based discrimination in the 1960s.²⁶ But with so much scholarly attention to the growth of the suburbs and the political Right, scholars have let the winners dominate the historiography.²⁷

The history of the reinvestment movement suggests that many urban Americans were keenly aware of the ways in which federal policy bolstered residential segregation. Urbanites encountered the power of the federal government when they protested new Federal Housing Administration programs. They ran into federal regulators when they demanded a solution to redlining. And they argued that state-sanctioned private lending policies wrote them off because their neighborhoods were coded as risky places due to the presence of black residents, the age of local housing stock, or the large proportion of low- and moderate-income people. While many white suburbanites could see neither the hand of the state nor the role of structural racism in securing the good life, these urban agitators were hyperconscious of both.

The urban reinvestment movement also recasts the current literature’s emphasis on racial divisions within the metropolis, another interpretation reinforced by a suburban focus. The leaders of this multiracial movement were trained in the Saul Alinsky tradition of community organizing, which adapted the strategies of labor organizing to the places where people lived. Most important for the reinvestment movement’s multiracial constituency, community organizing gave activists a framework for identifying the specific people and institutions that created local problems during racial transition rather than reflexively blaming neighbors of different racial or socioeconomic backgrounds. The reinvestment movement showed that despite racial divisions within the metropolis, cities proved fruitful ground for interracial politics where blacks and whites were fighting banks, not each other. The movement fused these principles of local community organizing with a discourse of antidiscrimination that its members adapted from the black freedom movement. While Cincotta, Trapp, and many other NPA leaders were white, black activists’ critiques of structural inequality proved particularly important in the movement’s struggle against geographic discrimination. In American cities, appraisers applied a similar logic to neighborhoods, as the arrival of any black residents prompted real estate experts to racially code the entire block or neighborhood as a risky investment. As activists saw it, all urbanites suffered the effects of institutional racism when they chose to live in neighborhoods that weren’t heterogeneously white. This logic prompted many urbanites to organize across racial lines and to identify their interests as shared through place, rather than at odds because of race.

In light of their conviction that structural racism and antiurban bias created unfair policies, reinvestment activists deployed a surprising use of affirmative action that historians have yet to incorporate into narratives of postwar urban social movements. Affirmative action expanded opportunities for workers who had been long denied access to good jobs due to race- and gender-based discrimination. As impressive, the impact of struggles over affirmative action fundamentally changed the way Americans think about work and fairness. But the reinvestment movement suggests that the legacy of the black freedom struggle extends beyond the way that other movements also deployed it to assert government’s responsibility to ensure equality.²⁸ Seeing that the state had favored suburban development for more affluent whites at the expense of lower-income and minority residents in the cities, reinvestment activists demanded affirmative action as a policy prescription to change that pattern. Pattern changing made affirmative action a powerful tool for addressing structural inequalities that were rooted in the intersection of race and place—inequalities that were difficult to combat in the wake of civil rights victories that made race-based discrimination against individuals, but not places, illegal.²⁹

An exploration of the reinvestment movement’s urban politics also suggests the role of place in the 1970s fragmentation of a shared political identity among working-class whites, whose electoral support historians have deemed crucial for making, and then undoing, the New Deal political order. In the scholarship that seeks to explain the fraying of American liberalism and the rise of the political Right, working-class and lower-middle-class whites have played a starring role. As historian Lizabeth Cohen has shown, when white workers of recent immigrant descent (sometimes called ethnic whites) recognized their interests as shared in the Great Depression, they created a new class consciousness that proved crucial to securing victories not only for a previously weak labor movement but also in the realm of electoral politics, ensuring the rise and reelection of FDR.³⁰ Some historians of postwar political history argue that by the late 1960s, white workers reconfigured the Democratic Party in much the same way they reconfigured American cities—by leaving. But the reinvestment movement suggests that the reconfiguration of white working-class politics should be understood not so much as uniform decline or realignment but rather as a fragmentation. Events beyond the workplace politicized these activists, but their identities were nonetheless rooted in class. Indeed, reinvestment activists described themselves as neighborhood people, community people, or residents of low- and moderate-income communities. These terms all had a class-based edge, but a place-based anchor.³¹

Neighborhoods First

This book charts the history of the urban reinvestment movement through a largely chronological story. It starts on Chicago’s West Side in the mid-1960s, where an interracial group of urbanites organized against real estate abuse. Urban activists, I show in chapter 1, acquired skills through their training as community organizers, which gave them a method for building an interracial group. In so doing, they analyzed urban problems in terms of power relations, rather than racial divisions. Their attempt to counter the influence of speculators in their local real estate market keyed them into the important role of home financing institutions and set the stage for activists to ask questions about why local thrifts stopped lending right when their neighborhoods started racially integrating.

Through this work, activists soon learned that the Federal Housing Administration (FHA) played a key role in structuring the housing markets in transitional urbanites. In chapter 2, I recount the little-known history of the FHA’s mismanaged urban insurance programs, which provided risk-free profits to real estate speculators.³² Cincotta, Trapp, and a core group of activists realized that FHA reform required changes in national policy, and they used real estate abuse as the issue to recruit neighborhood groups from around the country to join a new national network: National People’s Action on Housing (NPAH; later simply National People’s Action). Activists soon moved into the national realm of politics, the topic of chapter 3. During the mid-1970s, as national policymakers agreed that the financial system created by the New Deal had ceased to function properly, NPAH capitalized on a window of opportunity to win FHA insurance reform and to influence legislative debates over the nature of financial deregulation. During this brief but generative period, NPAH’s prescription to strengthen the relationship between financial institutions and local communities emerged as a viable reform strategy as they won access to bank lending data that would help them document race-based geographic discrimination in lending.

Chapters 4–6 examine the reinvestment movement at its peak and then follow it as activists made the most of community-bank partnerships when activists’ influence on national policy waned. At the movement’s peak, legislators passed the Community Reinvestment Act, which gave reinvestment activists standing to challenge bank mergers and acquisitions. But, as chapter 4 shows, activists wanted a national neighborhood reinvestment policy, not just a banking regulation. The CRA helped activists direct credit toward affordable housing, but it was a small-scale, piecemeal solution to the large-scale structural problem of urban disinvestment. The book then explores the limits of bank-based urban reinvestment in the absence of new federal funding and programming to complement it. As I show in chapter 5, the Federal Home Loan Bank Board, the federal regulator of savings and loan associations, developed its own ideas about what constituted urban reinvestment. The thrift regulator and its industry pursued new lending opportunities but with little regard for how its policies would affect low- and moderate-income people. The CRA provided no protection against the new threats of gentrification and, in 1980, the first steps toward financial deregulation. The narrative ends with the story of National People’s Action’s most radical proposal—credit allocation through the financial system—and shows how NPA and its allies lost the battle to protect Americans of modest means from the recession-inducing effects of monetary policy under the Carter and Reagan administrations. As the effects of financial deregulation became apparent, the CRA remained the most promising coping mechanism for urban activists seeking new resources for their communities. The CRA played a key role in empowering a network of neighborhood groups, community development corporations, and financial institutions that rehabilitated affordable homes in many neighborhoods, but it ultimately offered an insufficient solution to a growing affordable-housing crisis in American cities. By the late 1980s, as the conclusion reveals, the legacies of the CRA’s shortcomings could be seen not only in the disappearance of locally rooted financial institutions from Chicago’s West Side, where reinvestment activists first organized, but also in the persistent racial and economic inequality that characterized the American metropolis of the late twentieth century. Bank-based reinvestment did nothing to shrink the racial wealth gap, nor did it provide economic security for low-income people.

A short note on source limitations and terminology is warranted. Unlike many histories of social movements, After Redlining does not focus much on internal movement conflicts. The reasons are twofold. First, my primary archive, the unprocessed papers of National People’s Action, did not provide significant insight into tensions within the movement. Instead, the memos, newsletters, speeches, and organizer training materials provided rich evidence that highlighted the movement’s outward-facing strategies to win allies and combat adversaries. Second, my goal is to uncover the urban reinvestment movement’s impact on the political economy of the late twentieth century, particularly its mark on the financial system and its difficulty in affecting national urban policy priorities. Tracing this story often meant highlighting moments in which movement leaders came into conflict with opponents and presented a united front. Regarding terminology, I use the terms thrift and savings and loan association (S&L) interchangeably. I use the term commercial bank when I am referring to those financial institutions that typically served business but that increased their share of consumer savings deposits and mortgages starting in the 1960s. I use the term financial institution or simply bank when I am referring to either thrifts