Explained

Just over 150 years ago, this was money

for almost half of America.

On multiple bills were people picking cotton.

Enslaved people.

These slaves didn't just represent wealth in America.

They were wealth.

By 1863, they were worth over $3 billion.

Since then, America has slowly, painfully, transformed as a country,

breaking down racial barrier...

after racial barrier.

I am very optimistic about the future.

Frankly, I have seen certain changes in the United States that surprise me.

So on the basis of this,

I think we may be able to get a Negro president in less than 40 years.

I would think in 25 years or less.

Wealth is different.

Wealth is where past injustices breed present suffering.

I think the racial wealth gap speaks to the fact

that we still have a long way to go

to achieve ideals of equality in this country.

The racial wealth gap is a measure

of the white family and the African-American family

that's right smack-dab in the middle, the median.

The median white household's wealth:

their savings, assets, minus their debts,

is $171,000.

The median black household's is $17,600.

And that gap is still growing...

and growing.

Why?

We hold these truths to be self-evident...

We have the right to go to any school in America, but we can't pay the tuition.

I wake up every morning in a house that was built by slaves.

The American dream need not forever be deferred.

...that all men are created equal.

If they can't have their equal share in the house,

they'll burn it down.

I picked the cotton... and I built the railroads

under someone else's whip...

for nothing.

For nothing.

In January, 1865,

the Civil War was ending.

Union general William Sherman and Secretary of War Edwin Stanton

gathered a group of 20 black leaders

and asked them what the black community needed

to build lives in freedom.

Reverend Garrison Frazier, the leader of the group,

answered simply.

"The way we can best take care of ourselves

is to have land."

Four days after the meeting,

Sherman issued Special Field Order No. 15.

It set aside hundreds of thousands of acres of land,

saying, "Each family shall have a plot

of not more than 40 acres of tillable ground."

The day before his second inauguration,

Lincoln signed a bill that made the plan official.

America was almost a very different country.

But it didn't turn out that way.

Weeks later, Lincoln was dead.

His successor, Andrew Johnson, quickly reversed course.

Immediately once we say, "Okay, equal rights"

then you have a white backlash that says, "What about our rights?"

By the end of that year,

thousands of freed slaves who had received land were evicted.

In just a year after slavery,

President Johnson complained about discrimination...

against whites.

Quote: "In favor of the negro."

But slaves had been creating wealth for their owners for 246 years.

That wealth, whites got to keep.

And there's an amazing thing about wealth that people who have it know well:

it grows,

across generations. Just ask Jay-Z.

"I can't wait to give this shit to my children."

One thing it says is that wealth begets wealth.

Turn one million into eight,

raise your hand if you wanna take that deal.

It doesn't take a risky, Picasso-sized bet

to see wealth grow dramatically.

It just takes time.

If you live in a stable country and can invest long-term,

values generally go up.

That's why you need to know about compounding interest.

Imagine you took $100 and invested it in 1863.

The average annual inflation-adjusted return

in the US stock market has been around 7%.

The next year, it's worth a bit more...

and a bit more, and a bit more.

Today, that $100 would be worth more than $3.5 million.

To this day, African-Americans make a lot less money than whites.

They're far more likely to be unemployed,

and studies show employers still discriminate.

But even if we managed to close those gaps right now,

centuries of inequality have already compounded, most powerfully through land and housing.

Usually, in this century, any wealth that's captured is through property.

For the American middle class,

home equity accounts for around two-thirds of wealth.

So if you're a white American,

you're likely to have parents or grandparents with a story like this.

My parents bought a house

probably now 50 years ago, paid $14,000 for it then,

and it is worth now probably about $600,000 to $700,000.

Most people don't understand the power of housing,

of where you live,

of what opportunities exist in that community.

The government played a huge role in making that happen.

During the Great Depression,

almost half of all city homeowners were in default.

The men are sitting in the parks all day long,

out of work, muttering to themselves.

Franklin Delano Roosevelt took action with the New Deal.

...by providing for the easing of the burden of debt.

So the New Deal unleashes mortgage credit to the population.

The American dream and owning a home became synonymous.

But the new Federal Housing Administration

wouldn't insure mortgages in areas it decided were too risky.

And the way that risk is calculated is by race.

A black family moving in was seen as a threat to housing prices.

Do you think a Negro family moving here

will affect the community as a whole?

I think that the property values will immediately go down

if they're allowed to move in here in any number.

So when the FHA drew maps of where they wouldn't insure loans,

the neighborhoods with more black families were colored in red.

Redlining is not a figurative metaphor.

You would literally see maps drawn

where entire neighborhoods were redlined off.

The effects of racism became a justification for more racism.

If two-thirds of America's middle-class wealth

is in the form of home ownership,

that opportunity to own a home has now just been excluded.

Federally enforced segregation affected every part of life:

the jobs you could access, where your children went to school,

how safe they were,

and whether your home increased in value.

It wasn't until 1968 that housing discrimination was outlawed.

Fair housing for all human beings

is now a part of the American way of life.

But that didn't mean housing discrimination ended.

Consider what it took

for Cory Booker's family to get their house in 1969.

My parents began looking for homes, but finding just odd things happening,

where real estate agents, if they saw them beforehand,

they would only show them homes in African-American communities.

If it was a house in a white neighborhood,

my parents would be told, "This house is already sold."