All language subtitles for Explained.S01E01

[narrator] 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.

[Martin Luther King Jr.]
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.

[narrator] 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.

[narrator]
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?

[Martin Luther King Jr.]
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.

[Martin Luther King Jr.]
...that all men are created equal.

[Malcom X] 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.

[narrator] 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.

[upbeat music playing]

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?"

[narrator] 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.

[Jay-Z]
♪ I bought some artwork for one million ♪

♪ Two years later
that shit worth two million ♪

♪ Few years later,
that shit worth eight million ♪

"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.

[narrator]
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.

[narrator] 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.

[woman]
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.

[Cory Booker] Most people don't understand
the power of housing,

of where you live,

of what opportunities exist
in that community.

[narrator] The government played
a huge role in making that happen.

During the Great Depression,

almost half of all city homeowners
were in default.

[male announcer] The men are sitting
in the parks all day long,

out of work, muttering to themselves.

[narrator] 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.

[narrator] 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.

[interviewer]
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.

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

the neighborhoods with more black families
were colored in red.

[Cory Booker]
Redlining is not a figurative metaphor.

You would literally see maps drawn

where entire neighborhoods
were redlined off.

[narrator] The effects of racism
became a justification for more racism.

[man] 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.

[narrator] 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.

[all] ♪ Keep your eyes on the prize... ♪

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

[Lyndon B. Johnson]
Fair housing for all human beings

is now a part of the American way of life.

[narrator] 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."

[narrator]
Booker's parents set up a sting operation

with a civil rights group.

The next time they were turned away,

a white couple arrived
and made an offer on their behalf.

[Cory Booker] The bid was accepted,
and on the day of the closing,

the white couple did not show up.
My father did, and the lawyer,

and the real estate agent was so angry,

stands up,
and punches my dad's lawyer.

Literally they're fighting, scrambling,

and there was a dog in the corner,
and he sicced the dog on my father.

So my father's now trying to fight off
a big dog, a window was smashed,

but eventually things settled,
and the real estate agent was desperate,

and started begging my father:
"You don't wanna move here,

your people are not here."

He was so afraid
that one black family would move in,

and somehow it would destroy his business
and drive down real estate rates.

[narrator] Cory Booker and his parents
ended up getting that house

and that house helped build his future.

It built wealth incredibly.

My father rolled into another house
in the same town,

an even bigger house, going from poverty

to being very comfortably
in the middle class

in the United States of America,
and really thriving.

[narrator] That wasn't the typical story.

100 years of discrimination since slavery

left a huge home ownership gap.

By the '90s, banks and politicians
realized what that meant...

an opportunity.

Discrimination is patently immoral,

but it is now increasingly being seen
as unprofitable.

[narrator]
In the '90s, the government made a push

to open up the mortgage market.

...to help families who have historically
been excluded from home ownership.

[narrator]
Black home ownership started ticking up.

It looked like the wealth gap
might start closing at long last.

So you've got people who are hungry
for these loans,

but what they want is the regular loans
that everyone else got

from 1934 until 1980.

[narrator] Instead, African-Americans were
twice as likely as white Americans

to get subprime loans,

a loan that starts out cheap,
and gets much more expensive.

for borrowers with lower credit.

But one in five black borrowers
with good credit

still ended up with a subprime loan.

I was a loan officer at Wells Fargo
in their subprime division.

[narrator]
So Beth heard the conference calls

where Wells Fargo planned to target
black churches.

[Jacobson] They were termed
"wealth building seminars"

and that was about purchasing homes.

The minister of these churches
thought this was a great idea,

something to help the parishioners
in the community.

[narrator]
The bank would give the church a donation

for each parishioner
who ended up getting a mortgage.

[Jacobson] So the people
in the congregation didn't realize

the loan officer they were talking to

was only going to sell them
a subprime loan,

even if they had 800 credit scores.

[man Four and a half, six.

[female reporter] Stock market breakdown.

The worst financial crisis
since World War II.

...fueled by mortgage lending
that wasn't sound or responsible.

[female reporter] ...led by borrowers
of high-risk subprime loans.

Black communities lost 53%
of their wealth.

It's hurtful to see a lot of those folks

who were at the highest levels
of the world of finance

who made
fabulously irresponsible decisions,

that those people have been made whole,
those institutions have been made whole,

but for communities like mine
that are still struggling,

that there wasn't some kind
of vision or plan

to try to help those folks
get back on their feet.

[narrator] Many of the biggest
mortgage lenders in the country

settled discrimination lawsuits.

Although it denied targeting
black borrowers,

Wells Fargo agreed to pay
$175 million.

Unlike in FDR's New Deal,

the government's $440 billion
program to address the housing crisis

mostly didn't go to home owners.

The assistance, and a single viral clip,
triggered a backlash.

How many of you people
want to pay for your neighbor's mortgage

that has an extra bathroom
and can't pay their bills,

raise their hand.

-[crowd boos]
-How about we all...

-President Obama, are you listening?
-You wanna...

We're thinking of having
a Chicago Tea Party in July.

All you capitalists
that want to show up to Lake Michigan,

I'm gonna start organizing.

[crowd chanting] USA! USA! USA!

If we were to go to an equity scenario
where whites and blacks

had the same amount
of educational achievement,

it would lower the racial wealth gap
somewhat minimally.

[narrator]
And maybe not even that much.

[Thomas Shapiro]
The Fed Reserve Bank of St. Louis

did a study that came up with a finding
that white college graduates,

over a couple of decades,

their wealth increased dramatically,
as one might expect.

Black college graduates,
over the same period of time,

their wealth actually decreased.

[narrator]
The reason isn't that graduates made

very different amounts of money.

It was how they spent it.

[Thomas Shaprio]
It's much more likely to be the case

that an African-American college graduate

is the most successful
in their family network...

and therefore relatives ask them for help,
and they give it.

That doesn't mean
that white college graduates

are less charitable or less giving,
or anything like that.

It just means that they're like others
in their network.

[narrator] African-Americans were wealth
for 246 years.

For a hundred more years,

and discrimination continues today.

The wealth gap has grown so large
over so many years,

it would take something truly radical
to close it.

How do you close this gap,
this huge gap in wealth,

-between whites and blacks?
-You don't.

Reparations.

How much are we talking here?

We don't actually know, but I will
take a check on behalf of myself.

[Anderson Cooper]
Is anyone on this stage for reparations

for slavery for African Americans?
Are you?

I am. The Bible says, "We shall be
and must be repairers of the breech"

and a breech has occurred
and we have to acknowledge that.

[Cory Booker] This does have
a generational cost to it.

We can't just hope
that we are going to thrive as a nation

when there are still so many wounds
that have not been addressed.

This is something
that started with slavery,

but it's never diminished over time,
and that's because government policy

keeps perpetuating the circumstances
for the wealth gap.

It's the Billie Holiday song, right?

"Them that's got shall have,
them that's not shall lose."

It is truly self-perpetuating.

[Cory Booker] "Whenever this issue
of compensatory or preferential treatment

for the Negro is raised,

some of our friends recoil in horror.

The Negro should be granted equality,
they agree,

but should ask for nothing more.

On the surface, this appears reasonable

but it is not realistic,

For it is obvious that if a man
enters the starting line of a race

300 years after another man,

the first would have to perform
some incredible feat

in order to catch up
to his fellow runner."

♪ God bless the child ♪

♪ Who's got its own ♪