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Money After Redlining with Rebecca Marchiel

In this episode, Money on the Left hosts speak with Rebecca Marchiel, Assistant Professor of History at University of Mississippi, about her important new book, After Redlining: The Urban Reinvestment Movement in the Era of Financial Deregulation (University of Chicago Press, 2020). After Redlining tells the story of the anti-racist urban reinvestment movement in early post-New Deal era Chicago. Transforming from a focused politics of housing into a broader politics of money, the movement began in the neighborhood of Austin and grew into a nationwide effort between the 1960s and the 1980s. We talk with Rebecca in depth about the central figures and pivotal moments of this story and also about her disciplinarily unique focus in After Redlining on the central role of credit in the urban reinvestment movement. Together, we reflect on the implications of her findings for the field of U.S. political history and the lessons the contemporary left can learn from the movement’s insights and blindspots.

Theme music by Hillbilly Motobike.

Transcript

The following was transcribed by Richard Farrell and has been lightly edited for clarity.

William Saas: Rebecca Marchiel, welcome to Money on the Left.

Rebecca Marchiel: Thank you for having me. I’m excited to be here.

William Saas: So we’ve asked you to join us today to discuss your important, recently published book, After Redlining: The Urban Reinvestment Movement in the Era of Financial Deregulation, which is just out from University of Chicago Press. Perhaps we can begin by asking you to tell our listeners a little bit about your personal and professional background and how it is that you came to this project?

Rebecca Marchiel: Sure. So I grew up in Frazier, Michigan, which at the time, was an all white suburb outside of Detroit. My parents grew up in Detroit and moved to the suburbs in the 1970s. They have a lot of nostalgia for Detroit–a lot of stories about the old neighborhood. Growing up, already the importance of urban neighborhoods and the relationship between the city and the suburbs was something that was very much on my radar. But even more important for the project, I worked in fundraising and media for a nonprofit law center in Chicago right after I graduated from college in 2005. While I was working there, I learned about this 1977 legislation that was called the Community Reinvestment Act. Now and then, in my job as a fundraiser, we would sometimes ask banks to fund our programs in financial literacy or children’s savings accounts. And every once in a while, if we had a program that meshed with their priorities, we might raise some money. So I learned about the CRA from that experience.

But to jump forward about two years to when I was back in graduate school and trying to decide on a dissertation topic, it was the summer turning into fall of 2008 and I was out for a jog listening to a podcast. And I heard financial lobbyists talking about the role of the Community Reinvestment Act in causing this emerging global financial meltdown. I actually stopped running to make sure I was hearing this correctly. I knew enough about the CRA from my time in nonprofits to know that it did not have the power to produce what was turning into a global economic crisis. And so, when I got back home, I literally sat down at my computer in my jogging clothes and started searching around to see if anyone had written about the CRA’s origins. And there are some really great works by sociologists, urban scholars, and legal scholars. I was really grateful to learn about the work of Dan Immergluck, but none of them told exactly the story that I was looking for that really put the CRA in a longer and broader historical context. I was really interested in questions like, how does the CRA fit into the story of the rise of neoliberalism? How was it shaped by the Black freedom struggle and other social movements for inclusion? What did it mean in the context of attacks on the labor movement that were also happening in the 1970s? What did it tell us about white flight and the political power of the postwar suburbs?

So I started digging around with those questions in mind and was just so excited to find out that there was a social movement behind this story. And even more excitingly as an historian that they also have a treasure trove of documents in the basement of this organization. It was called National People’s Action. Now, they just go by People’s Action. They’ve dropped the national in recognition that their solidarity is extended beyond national borders. But they granted me unlimited access to the documents in their basement. I could just dig around and see what I found in there. That’s sort of how I found the project.

Scott Ferguson: Wow, that’s amazing. It’s also kind of amazing that your dissertation and your book came out of this profound experience jogging to a podcast–it somehow feels appropriate to talk about that on a podcast. So your book tells the untold story of the anti-racist reinvestment movement in the neighborhood Austin in Chicago that grew into a national and, as you say now, international movement from roughly the 60s to the 80s. Before we dive into that story, maybe you could briefly flesh out the kind of origin story, prehistory, or backdrop out of which your particular story emerges? You do that in the book really, really nicely by laying out the discriminatory politics of investment in the post-New Deal era, out of which this whole thing kind of emerges.

Rebecca Marchiel: Sure. So the story ends up being about a social movement that wanted broadly defined reinvestment. One of their demands was for an end to redlining. Redlining means the practice when banks would refuse to make loans in certain sections of a city because those places were integrating, majority-minority, or sometimes because the housing stock was old and the assumption was that the value would just continue to decline. The activists that I wrote about came of age really during the heyday of the New Deal financial regime. When they were upset about redlining, they were upset about the behavior of very specific kinds of banks–banks that were created by New Deal laws and regulations. These are historically specific financial institutions. Here, “thrifts” were the most important for this story.

Thrift savings and loans banks were really locally oriented savings and loans institutions. And as activists saw, the relationship between these thrifts and a local community was supposed to be a two way street, in that the thrift survived by collecting community savings as they saw it. And then, the thrift’s job was to act as a kind of steward of local wealth or to give people a safe place to put their money–just as safe as under the mattress but with some interest since there was deposit insurance–but also to give people access to mortgages that would help them buy their own homes. There was a particular image of thrifts as community institutions, much like the image of George Bailey’s bank from It’s a Wonderful Life. And a lot of that idea that’s forged in this post-Depression, New Deal period, comes from thrift’s own self fashioning. They named themselves after local neighborhoods, local streets, or Catholic parishes nearby. They’d open their parking lot so people could park there during community events. They’d create savings programs for children and sponsor programming at schools, like art contests. And a lot of white people seem to feel a real connection to this local thrift, this local institution.

They’d go in there to cash their paychecks or to take out spending money. This is the era before ATMs so a lot of thrift transactions are taking place face to face. And I think a lot of folks of that generation, of the activists I write about, or those of us who have parents in that generation, might understand the relationship I’m describing. It’s kind of a joke in my family that my dad is the only customer who still goes into the Comerica Bank in my town. But I think it’s more than an anecdote. I think it’s reflective of a larger historical trend of how people used to interact with these local financial institutions–face to face relationships that often felt personal and meaningful to the customers. Like they always gave me a Dum Dum sucker when I had to go in there with my dad. But it was more than thrift’s own self fashioning that created this image of thrifts being a part of the community’s social fabric. It was also the state that shaped these ideas about thrifts.

The laws and regulations that were forged during the Depression and during the New Deal really created a financial policy infrastructure that made thrifts the type of financial institution where white people of modest means would encounter most and go for their banking needs. For example, it was New Deal legislation that made sure that thrifts would lend primarily in mortgages. By regulation, they were supposed to have 80% of their assets be in residential mortgages. Thrift legislation also encouraged ordinary people of modest means to open their banking accounts at the thrift. They would get a slightly higher rate of interest than a commercial bank was allowed to offer on its accounts. New Deal regulations also standardized the long term, often 30 year fixed-rate self-amortizing mortgage, which was a huge improvement over previous generations, or previous eras of mortgage lending, wherein you’d have shorter loan terms, which meant bigger payments and interest rates that could change year to year and make it really hard to predict how much one was going to pay for their housing.

Sometimes borrowers would owe the entire principal at the end of the loan. If you think about what that meant, then you needed a rich relative, a rich friend, or maybe a second loan to afford homeownership before these New Deal regulations. For white people in the post-Depression era, this was a huge improvement in home financing. It put homeownership in reach for a lot more people of modest means. But, and this won’t surprise your listeners, access to thrifts, their savings accounts, and their mortgage products hinged on whiteness, like many other New Deal benefits. The assumption by the real estate industry and by thrifts who relied on appraisers to decide how much a home was worth was that Black residents drove down property values. Thrifts would refuse to loan in neighborhoods that were understood to be Black. They would refuse to lend to the first Black family that might move into an all white neighborhood.

To speak of the discriminatory policies in relation to being without access to thrifts and these sort of regulated mortgages that were more affordable, Black homebuyers were often left to buy on contract–the system was called “buying on contract.” And this was essentially a form of home buying that was kind of like “rent to own.” Black homebuyers would sign a contract to purchase a home and it often stipulated that they did not actually have claim to the home until the entire cost was paid off. A lot of times, if they missed even one payment, it would mean the loss of the home. They didn’t build equity through contract sales so they’d make payments over and over and never build equity. They had no wealth to take out of the house to buy a new one or to borrow and pay for something else, like the cost of school or something like that. That’s kind of the story of how thrifts function during this period.

When neighborhoods like Austin started to integrate, white Austinites found that savings and loans started to treat their neighborhood like they had long treated the neighborhoods that were understood to be Black. These activists started to hear anecdotally of a neighbor’s kid who couldn’t get a mortgage, or Black members of the community organizations started to report that there suddenly seemed to be more contract selling happening in Austin where previously it might have been happening in a nearby neighborhood but not in Austin yet. So there was this sense that these thrifts that were supposed to be a part of the social fabric of the community had really reneged on their social obligation to the communities in which they were located. As activists saw it, they really thought that their neighborhood built the thrift–that there would be no thrifts without these customers as they understood it.

This changing relationship between the neighborhood and the thrift really politicized a lot of folks and got them asking questions about home financing that white activists had previously just taken for granted. Around the same time, there was the passage of the Fair Housing Act, which was in 1968. This was civil rights legislation that was supposed to make race-based discrimination in housing illegal. It still happened, of course, but the expectation was that discrimination in housing would now be illegal. At the same time, you start to see Black activists in Austin and other communities who have an expectation that they’ll finally be able to access the benefits of the New Deal financial regime, and then they’re frustrated by the reality that they’re still not given access. So that’s a sort of origin story on the role of these discriminatory politics of investment.

Maxximilian Seijo: Transitioning then, could you introduce us to some of the key figures in this urban reinvestment movement that you sort of began to talk about and perhaps walk us through some of its key phases? Coming out of that civil rights context, what spurred the beginning of the activism?

Rebecca Marchiel: I would love to talk more about some of the central players, because there are some really interesting characters who emerge from the archive. To tell the story of this social movement, I focus more narrowly on the national network of community organizations that’s called, National People’s Action, which I mentioned is still around today under the name, People’s Action. There’s a larger movement of folks working on these issues, but National People’s Action, or NPA, is sort of recognized by contemporaries as really leading the grassroots arm–the community organizing arm–of this broader effort. And so, the story of where NPA comes from really starts on the west side of Chicago at this moment when the neighborhood was on the brink of racial integration. It was an all white neighborhood, but integration in Chicago and many other cities took place in a kind of block by block pattern. There’s a great book by the historian Amanda Seligman that explains this phenomenon really beautifully, and it’s also set on the west side of Chicago.

In Austin, a group of white residents already living there and Black residents moving in, decided to work together under a Saul Alinski-style community organization. Their goal was to try to keep the neighborhood a decent place to live, with decent and safe housing, and with viable schools that weren’t overcrowded. But most importantly, they wanted the neighborhood to stay integrated at the moment of integration rather than see it resegregate as had been the case for a lot of other nearby neighborhoods. A lot of those neighborhoods became majority or all Black neighborhoods, rather than staying racially integrated. In that effort, they developed this critique and argument that it was real estate agents and abusers who were causing problems in integrating neighborhoods. They made it a point not to blame folks along the lines of race. Instead, they argued that there were these exploitative real estate practices called “panic peddling,” also called “blockbusting,” that were hurting white sellers who would panic and sell their homes for really cheap. This would also harm Black buyers who would pay more for housing because segregated housing markets mean more expensive homes–they have fewer options and higher prices. And so, they said it was really these real estate agents that were causing harm and not their neighbors.

One of the most important figures who emerges early on is a woman named Gale Cincotta. She was a white stay at home mother and became an activist when her youngest son’s kindergarten class became overcrowded. She was really worried that if no one did anything about it, his education would suffer. So that was the thing that first sort of politicized her and got her involved in local organizing. But according to a close friend, she had already had a history of thinking about politics from a leftist angle. The rumor was that her family owned a restaurant and sometimes she listened to them talk about socialist politics around the tables of the restaurant. But Cincotta also had a really strong preference for urban living, specifically. She was not a person who loved the idea of being in the suburbs where everybody needs to be in their car–t sounded just terrible. She liked to go to bingo nights in the city and she didn’t want to have to get in her car to do it.

Also importantly, she and her husband owned a two-flat in Chicago, which is a kind of structure where you have two separate units on top of each other. They had six kids. They lived in the upper unit, and then Gale Cincotta’s aging parents lived downstairs so she helped to take care of her parents in her home. That kind of setup is also much harder to swing in a single family home in the suburbs. She really was committed to staying in the city and there were a lot of things that she liked about city living that she didn’t want to give up. But I think she was also very angry about injustice. She did not like the idea that people were trying to extract wealth from Austin. She didn’t want other people to tell her that her neighborhood was a bad neighborhood. And that sense of righteousness drove her to organize as well. She emerges as one of the key figures in Austin and then will be one of the co-founders of this national organization as they progressed through the 60s and 70s.

The second key leader who co-founded National People’s Action alongside Sincotta was a man named Shel Trapp. He was a professional community organizer, he was also white, he was known for his chain smoking, and apparently he was very good at swearing. But interestingly, he was also a former Methodist minister–who’s very good at swearing. He described his own commitment to racial justice as being really inspired by the Black freedom struggle, and specifically its iterations in the south. He thought that community organizing would be a career that would give him a good shot to achieve the social change that he wanted during his finite amount of time on the planet. So these two ended up working with several other activists and organizers and neighbors to build an interracial group in Austin starting in 1966.

You also asked to move through some of the key moments. They started this local organization. All of the demands and concerns are very much at the level of what’s going on in Austin. But when they start to organize against this real estate abuse and this panic peddling, the Chicago organizers conduct more research and they learn that there are actually new federal housing policies that are providing a financial infrastructure that really helps panic peddling. These are the programs from the Federal Housing Administration that come out of the HUD Act of 1966 that Keeanga Taylor just wrote her brilliant award winning book, Race For Profit, exploring these programs in greater detail. But the long and short of it is that activists learned that these new programs created by the FHA, that were supposed to support low income homeownership, are actually quite exploitative, and make it such that a house missing plumbing, needing roof repairs, or infested with rats can actually be an insurable home, according to the FHA’s new standards.

The activists realized that this new FHA system, these new FHA programs, have supplanted an older system of home buying and selling that whites in the neighborhoods we’re used to under the New Deal financial regime and working through thrifts. These Chicago organizers, who had been trained to organize at the local level, realize that it’s a federal agency that’s helping create some of these problems. And so, on that logic, if it’s a federal agency and they’re federal programs, they imagine that there must be other neighborhoods like theirs in cities around the country, because this federal legislation must be having similar impacts in other parts of the country. The story from NPA’s lore is that a group of organizers and volunteers actually went up to O’Hare Airport, because they thought that was the nearest place where they could get their hands on a lot of different phone books for metropolitan areas around the country.

These volunteers went up to O’Hare to flip through pages and find organizations with words like housing or community in their titles, and then sometimes just cold-called to say, “Have you seen this pattern of home flipping in your neighborhood, too?” They sort of compiled this list of organizations from there. And they also built on organizer relationships. Some of these community organizers are linked up with each other through clearing houses, training programs, and those kinds of things. That’s sort of how they move national. They recognize that it’s these FHA programs that are causing problems all over the place. As they work to stop the abuse in these FHA programs, they begin calling more broadly for reinvestment. They want these savings and loans to return to their neighborhoods, because from where they’re standing, it seemed like those regulated banks have really disappeared at the moment of racial integration. This does not seem coincidental to them.

I show in the book that even as the organizers were thinking about the role of thrifts, they were always very aware of the idea that more bank loans would not be enough to solve the problems that older urban neighborhoods were suffering from by the 1970s. These problems included: losses of good jobs, buildings in need of serious repairs, rising energy costs, and so on. It was also really interesting that in a lot of these neighborhoods a lot of elderly folks, especially elderly white people, were living in these communities as well. You also start to see the needs of urban seniors living on fixed incomes as one of the things they’re concerned about. They called for federal programs that would help themselves too, with things like reduced costs for senior prescriptions. I can’t recall now if that part is actually in the book, but there’s this awareness that there are a lot of urban seniors who need a lot of help too. When they’re talking about reinvestment, there’s always this more robust vision of public and private cooperation to revitalize the neighborhoods that had suffered the consequences of redlining.

Then, the mid 1970s is really when the movement hits its peak and accomplishes its most important, independent victory, I would say, because in the next part in 1977, they get a lot more legislative help. But with the Home Mortgage Disclosure Act (HMDA) of 1975, also known as “hum-uh,” which is very fun to say, at this moment, the members of this organization in working with allies and Congress, they’ve convinced enough members of Congress to vote for this legislation that said that depository banks–thrifts and commercial banks that held deposits–those institutions had to disclose the geographic location of where they made their loans. Before this moment, activists had been researching deeds of local government buildings and trying to gather evidence to show that there were discriminatory lending patterns. But it was almost impossible. There was a lot of legwork to try to actually document these patterns. So this new information could help them show what before they could only describe anecdotally. This disclosure law in 1975, I’d say, is really when the movement hits its peak.

Two years after that, an ally, Senator William Proxmire of Wisconsin introduced the Community Reinvestment Act–that legislation that made me almost trip when I was jogging in 2008–and this really codifies the notion that depository banks had an obligation to lend in low and moderate income communities outside their offices. The rationale here is that Proxmire really built on that 1975 “hum-duh” law. The idea was that, if you had all these activists who knew where banks were making loans, then they could hold these commercial banks and these thrifts accountable as kind of grassroots financial regulators. Then, the CRA would give these community groups some kind of standing to do something with the information that they finally had. The way it worked was that, if a bank was going to merge with or acquire another bank, then community groups could file what was called a CRA challenge. They could stall that business deal if one of the banks in question had not been responsive to the local lending needs of low and moderate income communities. This is very important for them. It creates a mechanism for community groups to really act like financial regulators. It extends the power of the state to regulate financial institutions. It also gives community groups a new tool to create partnerships with local thrifts or local banks and to try to achieve some of those reinvestment goals that they’ve had in mind for redlined communities. Things like affordable housing developments, home improvement loans, and fair lending trends on older homes–all of these things become possible to ask for with the CRA challenge.

And so, I think the turning point in the book is, after activists have “hum-duh” in the CRA, they lose their ability to shape the national legislative conversations around community reinvestment and bank regulations more broadly. Toward the end of the story moving into the 1980s, the activists moved into using the CRA as a tool for goading banks into helping them acquire more mortgage money–and sometimes small business loans too, but more often than not it’s mortgage money. The CRA is kind of an imperfect tool. It relies very heavily on community bank partnerships to repair the harm that was caused by redlining. But even with those types of restraints, it still creates some opportunities for community groups to win some impressive victories and get new mortgage money into communities where there had been no access to regulated bank loans. And then, I end the story in the late 1980s and leave it at that.

Scott Ferguson: Yeah, that’s great. Can you tell us about maybe one of the, I mean, do you call them in the book sting operations? I don’t know if that’s fair. But they did some pretty crafty stuff, right?

Rebecca Marchiel: Sure. So the activists often used rather confrontational tactics to try to accomplish their goals of increasing mortgage lending and stopping panic peddling. There was an interesting story early in the Austin part of the story when the group is still working at the local level, where Cincotta and her colleagues would sometimes do what they called, “setting up a panic peddler.” What they would do in a case like this is one of the members of the organization might call a real estate dealer, a panic peddler, to say that they wanted to sell their house, to come on over, check it out, and then they’d make an appointment for the agent to come over. When that real estate agent arrived, he would sometimes find 20 to 30 people waiting for him. In one instance, he went down into the basement and found that that’s where they’ve been hiding. Then, they would sort of badger him and tell him to stop working in Austin. And in this one case, in the basement, they surrounded this real estate dealer, so he couldn’t get to the stairs until he agreed that he would not work in the neighborhood anymore.

It was interesting, in interviewing one of the activists a few years ago about his reflections–it was a man named, Joe Mariano–I was asking him to reflect on organizing in the 60s and 70s compared to today, and that was one of the things that he thought was making it harder for activists today. He felt activists have less ability to confront people who have power face to face given the increased concerns about security and those kinds of things. So it’s an interesting tactic, but it turned out to be pretty effective in a lot of cases.

William Saas: As we move into the Volcker era, at the beginning of our conversation, you mentioned that one of your driving research questions was what’s the relationship between this CRA and the dawn of neoliberalism? I’ll just invite you to share what you found there as we move forward into the glorious 1980s.

Rebecca Marchiel: That’s an excellent question. I’d love to talk more about that. At first, I thought I was going to interpret the CRA as kind of bucking the larger trend of neoliberalism, and this seemed at first to be a way in which the state was reaffirming some social commitment to its citizens or the social good by saying that banks had to do something for low and moderate income people. But the more I thought about it, the more the CRA seems to fit more tidily into the story of the rise of neoliberalism, especially when you think about this legislation in the larger context of what activists were really asking for. There was a call for a more robust set of federal programs that would specifically target communities and people who had been struggling in American cities–a call for better access to decent jobs, affordable energy, and so on. It was a very robust platform. But what the activists are really left with is just this tiny little piece of the platform, which is a bank regulation. Read in the moment of the 1970s, the CRA for policymakers in the 1970s, it gave them an out to seem like they were doing something to support low to moderate income people and urbanites without having to address questions of federal resources or federal spending.

One of the reasons that the CRA had so much traction while these other versions of reinvestment didn’t is because, as policymakers saw, this wasn’t going to add any new items to the federal budget. Asking banks to do their part didn’t mean the federal government had to distribute resources at all. I end up seeing it more in line with the shift towards neoliberalism and privatism, then bucking the trend as I originally thought it might.

William Saas: They’re deputizing these community organizations as financial regulators, as you say, and they’re not empowered to do that much, right?

Rebecca Marchiel: Yeah, and I mean, ultimately, it’s a tool that can work. But it’s still a solution to repair the past harms of redlining that’s focused on increasing the debt of the people who it’s being served to. There’s a question about that strategy as a way to move forward to say, here’s new debt for you to manage without awareness about whether or not people are in a position to handle more debt. Maybe they need loans and to repair the past harms?

Maximilian Seijo: Yeah, I think speaking in this vein, one of the things we most appreciated about your book is the way it puts these questions of credit and debt, which is to say, money, at the heart of political history. And very often one imagines overt monetary politics occurring in a bygone past of populist movements of the pre-New Deal era. But you show how similar political impulses motivated this urban reinvestment movement during the mid to late 20th century, as we’ve been discussing. At the same time though, you’re careful to at once recover this movement’s impulses and recognize their limits. Could you spell out perhaps some of the ways you thread this needle?

Rebecca Marchiel: Thank you for reading the book that way because I did try it to be careful about that. I wanted to recover activist worldviews and their beliefs about how banks ought to behave, and to really use activist terms to describe the problems as they understood them. But I also wanted to be able to kind of zoom out, historicize their ideas, and see the ways that historically specific thought processes, ideologies, and institutions really shaped their understanding of what they were seeing. And so, one of the places where I tried to thread this needle, to use your term, was in thinking about banks as intermediaries.

In the book, I use the term the “intermediary myth.” Activists made this claim that they had the right to exercise some influence over thrifts, and eventually they’d say this about commercial banks too, because thrifts were lending their money. That’s the language that they used. That’s our money. And they argued that, as depositors who held savings accounts or passbook accounts at those banks, the money that banks were lending out was literally their dollars and cents being transferred from their savings account into someone else’s mortgage. That’s kind of like that famous moment from It’s a Wonderful Life, where your money is in Joe’s house and yours is in Mrs. Smith’s house, or whoever their names are in that bankruptcy. I was actually reading David Freund’s recent work on monetary orthodoxy and Mehrsa Baradaran, who helped me to think about whether or not this claim of “it’s our money” actually reflected how things work.

I’ll be honest, that’s how I always thought about things, too. I hadn’t really thought much about the relationship between deposits and loans before I started working on this project. I hadn’t thought about banks at all. I was kind of like, “Oh, my goodness, I have to learn all of these things in order to contextualize this social movement. What am I getting myself into?” So I learned from those works, and also following along conversations in Modern Monetary Theory groups, there are folks who’ve been really generous in answering my questions. I learned about the ways that banks create money. It wasn’t that this is our deposits going into Joe’s house–banks create money. The intermediary myth, the way that activists understood banks, it really ignored the reality that financial institutions create money when they make a loan. Actually, embarrassingly, I use the word debit in the book when I should have used the word credit. So I apologize to any MMT listeners who might read the book and know this is banking 101 but there’s always room to learn and grow.

But this intermediary myth really matters because banks are doing the work of the state when they create money. A loan brings into existence new spendable money that’s backed only by a smaller dollar amount in reserve and activists seemed to overlook this idea that banks were creators of state backed money–that thrifts, and banks more generally, were doing the work of the state. At the same time, banks and thrifts had the luxury of acting independently of making their own lending choices without much of a mandate from the state even though they were doing a state function. And so, the decisions that they made really had enormous consequences for resource distribution in the United States. And those choices also had enormous consequences for people living in neighborhoods like Austin.

If St. Paul Federal of Austin decided they wouldn’t make mortgages in one corner of the community, it meant property values could go down there and also meant there might be more vacant or abandoned buildings. If Tolman Federal said they weren’t going to make home improvement loans in that neighborhood, it could mean that a house otherwise in decent shape but needed a new roof might be really hard to purchase if you’re a person with modest means. So even though thrifts and other banks were doing the work of the state in creating money, all these thrifts got to make atomized and independent choices, and in doing so, they really shaped the obstacles and opportunities for people living in neighborhoods like Austin, where people wanted Austin and other neighborhoods to remain good places to live with decent and safe housing. Thus, when an activist said “that’s our money” about a thrift, they weren’t exactly right. A new loan doesn’t literally come from their deposits. But those claims are nonetheless persuasive because they were rooted in what I call the “financial common sense” of this New Deal financial regime.

By that I mean a lot of Americans, including many members of Congress who needed persuading, thought this way too–that it is our money that’s being lent out and goes into Joe’s house. I tried to take seriously the reality that this myth about banks as intermediaries obscured some important truths about banks as creators of money. But it also really mattered because the myth was a powerful one that had really consequential results to help persuade members of Congress to support new legislation. Because those policymakers also believed in the idea that thrifts moved the community’s money around. And so, of course, Gale Cincotta and her neighbors should have some knowledge about where their money was going or not going.

Scott Ferguson: Maybe now we could walk through how neoliberalization really changes the politics and economics of this history? I guess I’m thinking of at least two vectors, one being deregulation. What happens to the thrifts through deregulation processes? And then, at the same time, what happens with the Volcker shock, the rise of monetarism, and the decision of the Fed to try to control interest rates and really jack them up and supposedly try to combat inflation or stagflation?

Rebecca Marchiel: Yeah, so in the instance of deregulation, what I found was an interesting story in which, as activists are making these demands for reinvestment and trying to double down on this New Deal, George Bailey-vision of local financial institutions that are rooted in specific communities, they unknowingly enter this larger debate about the future of thrifts. And it’s a debate that’s being shaped by instability in global financial markets. It’s a debate that is being shaped by concerns about inflation and questions about what interest rates should do to try to address inflation. But as I tried to chart it in the book, you have one group of free market enthusiasts and their allies in congress who think that the way that savings and loans have to weather this unpredictable 1970s moment and its high interest rates is that savings and loans need to become more competitive. They need to act more like commercial banks, they need to have more powers to lend, and they need to not be tied so closely to mortgage lending, in part because if they make a lot of loans or issue a lot of mortgages at a moment of high interest rates, and then 10 years down the line interest rates are much higher, savings and loans are locked into those mortgages at lower rates, and it becomes difficult for them to keep up.

And so, with this group of free market enthusiasts operating from some principles laid down in a 1971 document called “The Hunt Report,” they’re calling for deregulation and saying that thrifts will be able to survive if they are given more freedom to lend in new ways. At the same time, there’s another group of folks in Congress who are calling for a very different vision of how the financial system should respond to this instability in the 1970s. And those folks are calling for more state mandated lending that will look like credit allocation. It’s the idea that Congress needs to become more involved in the way credit is being distributed through the banking system to ensure that hospitals and affordable housing and farmers are getting the loans that they need in order to survive. And so, early in the 1970s, these free market enthusiasts don’t have quite the audience or the votes that they need in Congress to see their vision come to fruition.

Activists, really unknowingly, start to sound like the folks who are calling for credit allocation. They don’t realize that those conversations have been going on before they get to come to Congress in 1975 and ask for “hum-duh.” But by the end of the 1970s, there is an opening because the economic downturn of the era had lasted for so long. There are more members of Congress who are starting to say, “Maybe we need to experiment with something new.” And you also see the emergence of a new regulator of the thrifts through the Federal Home Loan Bank Board. McKinney, who sees it as his goal to help the thrifts survive this period, he imagines a way to do so that is speaking the language of reinvestment by saying that the thrifts will provide services to low and moderate income people, while at the same time asking Congress to grant increasingly liberal lending opportunities to the thrifts who had for so long been tied tightly to the mortgage market. And so, by the end of the 1970s, there is this push to follow the Hunt commission’s 1971 recommendations and let thrifts try to compete as the way to reform the industry.

I don’t remember how much I go into this in the book but there is a real separation between the big thrifts and the small thrifts about whether or not those executives are excited about this possibility, because a lot of the smaller institutions recognize that they’re not going to survive. They’ll be merged or they’ll go out of business as the brave new world unfolds in front of them. For activists, they gain the Community Reinvestment Act in these tools, but they do it at a moment when thrifts are behaving less and less like community institutions. And they increasingly have to rely on commercial banks to partner with them for community mortgage programs. And those commercial banks did not have the same kind of institutional culture that focused on service or community the way that the thrifts had. And so, it’s really an uphill battle, such that in 1979, the activists staged a protest at the American Bankers Association’s annual convention to try to demand more responsiveness for the CRA. A lot of the bankers in attendance didn’t even know what the CRA was even though it had been a law for two years. So there’s this moment of recognizing that getting what they need from commercial things in this era of deregulation is going to be quite difficult. 

There’s another interesting moment during the Volcker shock wherein activists are trying to make the most of the CRA by that point. And what they realize is that in an era of high interest rates, it doesn’t matter if a community bank partnership has been forged and banks are willing to make loans. If interest rates are 15%, then the interest rates are essentially pricing neighborhood folks out of being able to get the loans that a bank might have promised. At that moment, the NPA and some of its allies really start to target the Federal Reserve. They see Paul Volcker and the Fed as having the power to bring down interest rates to ease up on the monetarist experiment. And they say that the Federal Reserve is already controlling credit by allowing interest rates to be so high. So they raised the question: credit control in whose interest? There is already credit control and we need it to work for us instead of for more elite and wealthier people.

At one point, the activists in April of 1980 organized a protest outside the Federal Reserve building in Washington DC to confront Paul Volcker in person. This is an instance where there’s no corroboration in the records about how many people were there; activists say there were 2000, local police say it was maybe 350. But they carried signs that said they were at Volcker’s loan shark headquarters, accusing him of exploiting people because of these high interest rates. Also, one of the protesters involved was this guy named Richie Gallagher who had a friend who worked for Saturday Night Live. They borrowed the land shark costume that was famous from that era and brought it to the protest to have someone drive home the point that Volcker was a loan shark.

Out of this moment, you can imagine activists don’t have very much success trying to target the Federal Reserve to bring down interest rates. They do get a few hearings and a few meetings. But throughout this conversation, Volcker’s Fed repeatedly made the claim that they were not a political decision making institution–that those kinds of political questions about resource allocation were best left to Congress. And so, as the wonderful historian David Stein has shown, in making these claims, the Fed was really ignoring its historic mandate that it was supposed to combat unemployment as well as inflation, in which fighting inflation was the priority at this time. In the end, the NPA does not win this particular fight with Paul Volcker. But what they do walk away with is the sense that a democratic president, Jimmy Carter, appointed this person to the head of the Federal Reserve who is not going to look out for the best interest of working class people. For them, this was a lesson in the bipartisan nature of the shift towards neoliberalism.

William Saas: Awesome. So like several of our guests, you and your work is particularly geographically specific. How would you say that you treat regional history, and why is it important to your overall project?

Rebecca Marchiel: Well, when I first started working on the project, I thought I was seeing activists respond to changes that were specific to the Rust Belt. A lot of older industrial cities in the Northeast and Midwest had these neighborhood groups and these patterns of racial integration and resegregation that looked similar in Buffalo, Cleveland, or Detroit. And in large part that was because the policy framework that structured profit making opportunities to flip houses from white to Black owners was a national policy framework. But then I realized there were other neighborhood groups in my sources from places like Richmond and Atlanta, San Antonio and Birmingham, and some in California like in Oakland and Los Angeles. So I started seeing some of these big and medium sized cities in the Sun Belt where activists were also talking about similar patterns. That raised questions for me about how to characterize what I was seeing in the sources. It seemed it wasn’t just a Rust Belt story.

Then, looking at the language used by these activists, I started to pay more attention to this term, “transitional neighborhood” that many of the activists used to describe their own communities. People would use this term to suggest a neighborhood that occupied both a spatial and imagined middle ground between the suburbs and the “inner city.” These were often largely residential neighborhoods within the city, or sometimes they would be inner ring suburbs, like Oak Park, Illinois, which is the first suburb outside the city’s limits on the west side of Chicago. It was in these transitional neighborhoods that redlining was really a common occurrence. Here, it was really the metropolis–when I was thinking about the importance of the region, it’s really the metropolis, the city and the suburbs together, that mattered more than the Rust Belt, per se. I thought what was really significant to my reading about transitional neighborhoods was that there seemed to be emerging from the sources a shared political worldview that was rooted in the shared experience of living in a transitional urban neighborhood. For folks looking at urban renewal or highway construction, those phenomena and those federal decisions look different in a transitional neighborhood than they might in a suburb or in other neighborhoods of the city.

I was really thinking about a lot that I learned in the existing historical scholarship about the way that the experience of living in the suburbs for white people shaped their aversion to government intervention. A lot of whites in the suburbs associated federal programs with handouts for the undeserving and couldn’t really see the ways that they themselves had benefited from state programs. But in transitional neighborhoods, these processes look very different. Folks living in transitional urban neighborhoods were very aware of the ways that federal policy bolstered residential segregation, or that federal programs, like the FHA programs that I talked about earlier, some of those actually made it harder to live where they live. They actually reduced their quality of life. And so, while many white suburbanites didn’t really see the hand of the federal government, or the role of structural racism structuring their lives out in the suburbs, folks in transitional neighborhoods are very attuned to the role of the federal government and the role of racism stacking the deck against them. I think that transitional neighborhoods were the instance where attention to place was really important to me, more so than a geographic region of the US.

Maximilian Seijo: Moving forward from there, we’re wondering how you see your book contributing to the field of history itself, including the subfields in which you work? In your eyes, what have historians overlooked? And what does your particular case study make newly thinkable for writing history specifically in the future?

Rebecca Marchiel: Well, for urban history, I tried to show a concurrent storyline that was happening alongside the story of white flight, because a lot of the stories of white flight chart the influx of African Americans from the south and an exodus of working and middle class whites who moved to the suburbs and brought their tax dollars with them. Sometimes the assumption built into this narrative is that Black people left in cities were left behind using cities as laboratories for innovative politics, but seemingly because they had no choice but to make do with what they were left with–underfunded governments, shrinking job pools, and growing crime. And so, with that narrative I feel the spotlight is often on the power of suburban white people and all the material and political benefits of suburban living, and that can sometimes make it difficult to imagine that anyone might have chosen to live in postwar American cities if they had the option to. I think that bringing in the story of the way that financial deregulation and attempts to win free investment helps us make sense of the obstacles and uneven access to resources that shaped some city people’s efforts to preserve the places where they lived. So I’d say that’s the contribution in urban history.

In political history, my research reveals other developments that occurred alongside the conservative ascendancy. And those are the histories that often seek to explain the rise of conservatism in electoral politics, and often most visibly in Reagan’s election in 1980. That scholarship sometimes seeks to explain the fraying of American liberalism during the late 20th century. And sometimes working and middle class whites, like the folks who joined the reinvestment movement, will be seen playing a starring role in which some historians think of them as by the late 1960s changing the Democratic Party much the same way they were changing cities by leaving. In my work, I try to suggest that place was really important to this moment of political transformation, given the focus on suburban voters, national elections, and the conservative ascendancy story. Sometimes the playspace politics of the reinvestment activism and other kindred spirits is absent from some of our stories. But what I try to show is that these activists from transitional urban neighborhoods who are thinking about life in the cities, they embrace a populist politics that was opposed to power brokers, whether they be politicians or thrift executives. But all of those people they thought had power used that power to write off their neighborhoods as risky places with no future.

I call this their “strand of social democratic populism” in the book. They demanded that social priorities trump profit motives. As I see it, they came to understand that there was no home for their vision, for their politics, and for national political parties by the end of the 1970s, as I mentioned with their take away from that Volcker moment and the fact that Carter was the person who had appointed him. But their local organizing for urban reinvestment shows the persistence of this social democratic worldview even late into the 20th century and early 21st century in cities. So even as conservative politics gain traction in the suburbs and in Washington, you still see this social democratic worldview among some urban organizers and city dwellers. Seeing the rise of folks like AOC or Rashida Tlaib in Congress, it’s no surprise that they represent urban communities. We almost don’t stop and think about that reality. But they share a lot of the ideas that many urban activists and city dwellers held throughout the late 20th century, and there’s been this kind of continuity of social democratic populism in some of these spaces, even as national electoral politics has rejected these ideas from national political platforms.

Scott Ferguson: Getting back to the potentials and limits or blind spots question, I think about the work of Jakob Feinig, our friend who we interviewed several podcasts ago. He’s trying to tell a story about democratic monetary politics and populism in the United States before the founding. And he sees the New Deal as a compromise–and of course it is in many ways–on the money question where the the Roosevelt administration and that Congress were ready and willing to think and make big legislation and reshape the world anew, but basically foreclosed the big questions about how money is organized, who has control of it, who doesn’t have control of it, and so on. And this is a messy history, but I wonder to what extent the social reinvestment movement you’re talking about doesn’t have a national rhetorical purchase as we move into the 80s. Because that money question, in a deeper way in terms of its endogenous creation, had been foreclosed for so long.

Rebecca Marchiel: I think that’s very persuasive. No, really. I’ve read Jakob’s work. And I’m a big fan of his piece on the moral economy of money. I think that bears out what I found in these sources too. In terms of some of the limits they have when they get to that Volcker moment about what demands they might make on the Federal Reserve, they’re asking for things like a secondary discount window. And they’re asking for things like lower interest rates that the Fed would give to commercial banks that would agree to lend to them. But at no point do they say, money is a social relation or money is something we all need. Foreclosed is exactly the right word to describe what you see in the 70s and 80s. I think it’s consistent with Jakob’s work too because the effect of having some of these regulations and this financial infrastructure put in place starting in the New Deal for a lot of people seemed to be working pretty well through the postwar period, especially for a lot of white people. And so, they came to see the way that it worked as the way it was supposed to work. This was the new common sense. Those older questions about what is money and who ought to control it did not seem to be on their radar.

Maximilian Seijo: One of the lessons that I really take from your work, Rebecca, is that social movements around money and around banking and finance ought to be historicized very particularly and thoroughly. Coming then through the looking glass of neoliberalism, you mentioned Rashida Tlaib and Illhan Omar, it’s interesting thinking about today and the paradigm crisis around banking and finance that we seem to be going through in the COVID-19 crisis and depression as perhaps a new moment for learning from the social movements that you have just told us about–that his reinvestment push is perhaps being able to transform some of their limits, but also really honor the approach that all of these activists take. And so, I suppose that’s not much of a question but more of a compliment and framing for the work that you do in the present.

William Saas: How do we get Powell in a basement…just kidding.

Rebecca Marchiel: Yeah, thank you. Thank you for saying that. I agree, it’s sometimes hard to take one for one lessons from the past. But the lesson that everything needs to be deeply historicized is one that I definitely agree with.

William Saas: Are there any specific lessons you think folks might draw on in left social movements today from this social reinvestment movement?

Rebecca Marchiel: Well, I guess one thing that comes to mind is the way National People’s Action was a reading, writing, and thinking organization. Folks have said about the 20th century populace that a lot of their organizing had to do with educating members about how redlining worked, how the FHA worked, which Federal Bank regulator was responsible for overseeing which kind of banks, and what does the Federal Reserve do? This was all information that the Chicago organizers, Gale Cincotta, Shel Trapp, and their colleagues–the folks at the helm of NPA–they compiled this information and disseminated it to their members. A lot of those member organizations worked on local issues most of the time. And so, folks who might have joined a local community group because they were mad about dog poop all over the sidewalk of their Denver neighborhood would also learn about redlining or the Federal Reserve and how they might spot redlining and what strategies they might use to combat it.

And so, in the current moment, the first thing that comes to mind is the folks who are connecting local community needs like problems of unemployment, especially in the midst of the pandemic, school funding, health care, and linking those local problems to the federal government’s ability to issue currency. I think that those folks are probably on the right track if you follow the model of a reading, writing, and thinking organization. I also think we’re just so lucky that Stephanie Kelton’s The Deficit Myth just came out when it did since it’s such an accessible primer for folks who want to understand how it is that the United States can be such a rich nation with so many resources, but still have so much suffering. Kelton really takes down these myths about federal spending and the impact of the federal deficit, and then gives readers or organizers a different and an evidence based way to explain how the federal budget works. And it’s a description of the federal budget that can provide resources to accomplish what people need to live in dignity and security.

So I guess that’s what comes to mind making those connections. I will say there are some amazing organizations and organizers doing that kind of work right now, like Fed Up, today’s People’s Action, and the work of folks promoting that Uni proposal, as y’all have been doing, asking universities to see the shared interest they have in appealing to the Federal Reserve to survive COVID-19 rather than asking students to come back to campus so they don’t lose revenue from student housing and fees. So some of this work is being done, but there is a long way to go. But I still think that there are some reasons to be optimistic even in these grim times.

Scott Ferguson: Well, Rebecca, thanks so much for this incredible conversation. Congratulations on your new amazing book. Everybody should buy this and gobble it up as soon as you can. Thanks for joining us!

Rebecca Marchiel: Thank you so much for having me. I really enjoyed this conversation.

William Saas: One thing before we go, what was the podcast? If any of our listeners are like me, they’re gonna need to know what you were listening to in 2008. 

Rebecca Marchiel: Oh, you know, you know…

* Thanks to the Money on the Left production teamAlex Williams (audio engineering), Richard Farrell (transcription) & Meghan Saas (graphic art).

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