The Ghetto Is Public Policy

In Chicago, black people were pariahs whom no one wanted to live around. The housing authority turned that prejudice into full-blown racism.

Beryl Satter's Family Properties is really an incredible book. It is, by far, the best book I've ever read on the relationship between blacks and Jews. That's because it hones in on the relationship between one specific black community and one specific Jewish community and thus revels in the particular humanity of all its actors. In going small, it ultimately goes big.

But the most affecting aspect of the book is the demonstration of the ghetto not as a product of a violent music, super-predators, or declining respect for marriage, but of policy and power. In Chicago, the ghetto was intentional. Black people were pariahs whom no one wanted to live around. The FHA turned that prejudice into full-blown racism by refusing to insure loans taken out by people who live near blacks.

Contract-sellers reacted to this policy and "sold" homes to black people desperate for housing at four to five times its value. I say "sold" because the contract-seller kept the deed, while the "buyer" remained responsible for any repairs to the home. If the "buyer" missed one payment they could be evicted, and all of their equity would be kept by the contract-seller. This is not merely a matter of "Of." Contract-sellers turned eviction into a racket and would structure contracts so that sudden expenses guaranteed eviction. Then the seller would fish for another black family desperate for housing, rinse and repeat. In Chicago during the early 60s, some 85 percent of African-Americans who purchased home did it on contract.

These were not broken families in need of a lecture on work ethic. These were black people playing by the rules. And for their troubles they were effectively declared outside the law and thus preyed upon.

Americans did not escape the implications of racist public policy. Here is Satter foreshadowing much of what we see in today's housing crisis:

[B]y the late 1960s, the system began to falter. Buildings were in such a sorry state that buyers were increasingly likely to put $100 down, make a few months of high payments, and then, overwhelmed by the avalanche of expenses necessary to make their new homes livable, abandon the properties. Without steady contract payments, Lawndale's contract sellers had no intention of continuing to pay their own mortgages. 

Instead, they defaulted on their loans, dumping hundreds of crumbling, overmortgaged buildings back onto the lending institutions. Since the near-ruined buildings were now worth only a fraction of the original loans, the institutions essentially lost their loan money, amounting to millions of dollars. These losses pushed First Mutual to the point of collapse. Desperate to recoup something, the company offered the buildings for sale, at "rock bottom prices," to whoever would take them. 

The scavengers who gathered to buy were often the same men who had dumped them in the first place. In one day alone, Moe Forman turned six slums over to First Mutual; five of the six ended up back in his hands, with Gil Balin as copartner. Al Berland dumped approximately sixty buildings onto First Mutual and then repurchased them at a fraction of their former worth.

By 1968, First Mutual was out of business, and 659 of its defaulted mortgages--worth $7.8 million--landed with the Federal Savings and Loan Insurance Corporation (FSLIC), the governmental agency that insured savings and loan deposits. Many of these debts had been owed by Lawndale's worst contract sellers. They included $756,920 in delinquent mortgages owed by Berke, $280,000 by Berland, $502,323 by Forman's F & F Investment company, $28,945 by Forman himself, and $241,658 by Fushanis's estate.
In the interest of racism, the American taxpayer ended up bankrolling a massive fraud perpetrated on black communities in Chicago. It gets worse:

Some observers found it difficult to understand why Forman and his circle were so eager to reclaim the buildings they had so recently shed. "Slums don't pay. If there was a conspiracy, it was stupid," claimed Pierre DeVise, an urbanologist who taught at the University of Illinois in Chicago. In fact, the "stupid" one was probably DeVise. As the Tribune commented, "Such disbelief ... has been the slumlords' greatest ally." For those ruthless enough to stomach the consequences, it was easy to make profits out of buildings for which one paid cash and on which one owed nothing. As Timothy O'Hara pointed out, "If you're not making repairs ... you are making 100 percent profit." 

However, O'Hara noted a growing trend among slum landlords: to "avoid paying gas bills until your tenants freeze." Leaving one's building without heat during Chicago's winters was of a different order from refusing to fix faulty wiring or broken windows. It indicated a new phase in their operation, in which the goal was not to get money from tenants but to force them out altogether. For tenants, the results could be lethal. After her nineteen-month-old son, Scott, died of pneumonia, Mary Miller told reporters: "We had to huddle together around the stove and pile on coats and blankets. But it didn't do any good." Every time she complained, "the landlady would say 'If you don't like it get out.'" In the winter of 1969, three babies died over a three-week period because their West Side slum apartments had gone unheated. Their deaths confirmed the insight of the Chicago Tribune's investigative reporters, who noted that, "when someone has to die in this shabby shell game played for money, it is usually a child." 

Slumlords' eagerness to rid their buildings of tenants was part of yet another profit-making scheme. It involved the manipulation of the Illinois Fair Plan, which was established in the aftermath of the 1968 riots to ensure that black neighborhoods were covered by fire insurance. As a result of the Fair Plan, buildings in Lawndale were now insurable for the same amount as those on the city's North Side Gold Coast. Slumlords realized that they could insure their rotting, neglected structures for twenty to thirty times what the buildings were worth. Of course, as one observer noted, they "aren't worth anything unless you burn them"--but if you didn't mind arson, then "even an abandoned building could be turned into a $60,000 windfall." 

Al Berland didn't mind. By August 1970, fires had broken out in forty-seven of his buildings and he had collected $350,000 in insurance. In one case, a tenant saved the lives of his four children by dropping them one at a time from a second-floor window. In another, Berland and Wolf were observed entering a property they owned at 715 South Lawndale "carefully" carrying some liquid in a bucket. The two men left "in a hurry" and shortly thereafter the building went up in flames. Later that day the police found Berland at his paint store, still wearing the clothing described by a witness. The witness later withdrew from the case "after his car caught fire mysteriously in front of his home." Chicago police sergeant John Moore, an arson expert, said that in his department Berland was known as "a torch."
One retort that people often make when discussing the history of racism is "We should not dwell on the past." It's an opportunistic claim--no one looks at July 4 and says "We should not dwell on the past." But more to the point, this is not the distant past. The men and women who suffered at the hands of the FHA and the racist aspects of New Deal legislation are very much alive today. Furthermore, their children are alive and the effects of that policy on the country are fairly obvious. We know what we want to know. We believe the ghetto is manifestation of individual will and amorphous culture values because that is what we would prefer to think. It's not so much that we don't want to dwell on the past, so much as we want to choose our past.