I recently read Jackie Robinson’s autobiography, I Never Had It Made, where he describes his first job after retiring from baseball, working for Bill Black of Chock Full O’Nuts.
William Black, a white businessman who was the founder-owner of the Chock Full O’Nuts Corporation, had started off in business selling nuts of various kinds. Business was so good that he moved to a larger location, one which had room for people to come in and stand at the counter. Soon Bill Black was in the restaurant business offering a limited number of rapidly prepared items at reasonable prices and with swift and polite service. The next step was to open chains of shops all over New York City and then to offer franchises and to sell his coffee and some of his other products in retail grocery stores. Bill Black became a millionaire with a flourishing business that eventually became a publicly owned company.
I was amused to learn that, in the minds of some bigoted people, Mr. Black was considered guilty of racial discrimination in hiring. The majority of his employees were blacks. A few racists referred to his company as, “Chock Full O’Niggers.” Mr. Black once faced the charge that he was discriminating against whites. He took out a full-page ad in some newspapers explaining in the ad that when he was organizing his business, he had serious problems hiring countergirls and other people necessary to a restaurant. Black men and women who were so severely discriminated against in employment areas were easier for him to get than whites. Since he didn’t give a damn about skin color if a person could do the job, he had hired black people. The ad went on to assure whites that if they applied, they would not be mistreated.
Robinson also wrote that even racist Dodgers gave him hitting tips in the hope that it would help them earn a few thousand dollars bonus for playing in the World Series. Economist David Henderson was similarly moved:
Last week, my wife and I saw the movie, “42.” It’s about Branch Rickey, general manager of the Brooklyn Dodgers, hiring Jackie Robinson to play baseball for him in the mid to late 1940s. I recommend the movie.
Besides being a good movie, it’s a beautiful illustration of what Gary Becker writes about in his seminal book, The Economics of Discrimination. My wife is not an economist, but she has lived with one for 31 years. About half an hour in to the movie, she said, “Wow. You would really have to be paying no attention to miss the message about how the profit motive undercuts [racial] discrimination.”
Some people refuse to accept the idea that profits undercut racism, according to Russ Paielli:
Based on a flawed study by the Boston Fed in 1992 (coauthored by an economist friend of Hillary), the Democrats claimed that minority homeownership rates were being held back by “racist” banking practices. The study found that minorities had a higher rejection rate for home loan applications than the general public. Without providing any direct evidence, the authors simply assumed that the underlying cause must be institutional racism in the banking industry.
Common sense tells us, however, that racist lending practices would backfire and harm no one except the very banks, if any, that engaged in such practices. If some banks were willing to pass up good business opportunities in order to deny loans to minorities, other banks would certainly be more than happy to step in and take the business. And if all white-owned banks were racist, a golden opportunity would exist for wealthy minorities (or non-racist whites) to open banks in under-served areas and do a booming business with little effort. Any wealthy entertainer or athlete, such as Oprah Winfrey, Michael Jordan, or any of hundreds of other wealthy athletes, could easily sponsor such a bank, for example. To believe that racist banks can stop qualified minorities from getting loans in this day and age, one must believe that (1) all white-owned banks are racist, and (2) no wealthy minorities (or non-racist whites) are willing to fill the void and make lots of easy money while providing badly needed services to minority communities.
But the Clintons and many other Democrats apparently believed such economic nonsense. To remedy the alleged racism at banks, they strengthened the “anti-redlining” regulations of the Community Reinvestment Act (CRA), which had originally been passed during the Carter years, and they instituted an aggressive campaign that forced lenders to abandon their established underwriting criteria and drastically lower their standards to accommodate minorities who would not otherwise qualify for a home loan.
Jackie Robinson was a wealthy black who thought that white banks were refusing to loan money to blacks to buy houses, so he started the Freedom National Bank in Harlem, and hired a successful black banker, William Hudgins, as manager. He describes in his book his hope that the success of his bank would force white banks to loan money to blacks, but he struggled to make the bank profitable. Robinson lived in Connecticut rather than Harlem, a mark against him and Hudgins in the minds of tribal blacks:
To the skeptics, the Freedom National Bank is simply an example of middle-class Negroes taking advantage of race sympathy for their own personal gain. To them, Hudgins’ bank, like the other ten, white-run, banks in Harlem, is one more part of the power structure, one more reason why Harlem is an economic colony of New York City. They feel that Negro bankers who live outside Harlem–as do almost all of Freedom National’s 50 employees–can drain money out of Harlem just as effectively as the white businessmen who own almost all of Harlem’s stores. Black bankers do not help Harlemites, they maintain, they help themselves.
I suppose Mexicans and Canadians feel like they’re a colony of the USA but on the bright side, living next to a huge mass of rich people makes it easy to ship goods to potential customers. The bank failed because black borrowers didn’t repay their loans:
Federal regulators will only say the bank failed because of “bad loans” and “mismanagement.” But through interviews with former bank officials and a review of Federal bank examiners’ reports, there emerges a detailed account of the bank’s snowballing decline. These are some of the bank regulators’ findings:
*Before the bank was closed, it reported that more than 11 percent of its loan portfolio was either in default or far behind in payment, twice the city average. Many of those loans were made without adequate collateral, regulators said. And though most of Freedom’s loans did go to minority entrepreneurs in New York, Federal regulators say that as a small community bank, it made an unusual number of loans outside its lending area.
In 1988, regulators identified $2 million in problem loans that were not in the bank’s reports to the Comptroller’s office. Over all, $6.8 million in commercial loans lacked current credit information, the examiner wrote.