Michael: Let’s play a quick game. Guess the value of a typical white family’s household wealth in America. Now, guess the value for a typical Black family. Kevin: Oh boy. I'm guessing it's not great. Okay, for a white family... maybe $100,000? And for a Black family... maybe half that? $50,000? Michael: Not a bad guess, but the reality is much starker. The median white family has about $134,000 in wealth. The median Black family? Just $11,000. Kevin: Whoa. Eleven thousand? That's not a gap, that's a canyon. How is that even possible? Michael: That staggering difference is the ghost in the machine of the American economy. And it's at the heart of the book we're diving into today: "The Color of Law: A Forgotten History of How Our Government Segregated America" by Richard Rothstein. Kevin: And Rothstein isn't just some pundit. He's a distinguished fellow at the Economic Policy Institute and was a national education columnist for The New York Times. He comes at this with decades of policy research. Michael: Exactly. And his core argument is explosive, and it's what made the book a finalist for the National Book Award. He says that the racial segregation we see in every American city isn't an accident. It's not de facto—meaning, by fact or by custom. He argues it's de jure—by law. And that changes everything.

Kevin: Okay, 'by law' is a huge claim. Most of us learned that segregation was about private prejudice, you know, people wanting to live with their 'own kind,' and the market just sorted it out. Where does Rothstein even begin to prove the government was the one drawing the lines? Michael: He begins by showing that the government wasn't just reinforcing segregation; in many cases, it actively created it where it didn't exist before. The story of public housing is one of the most powerful examples. We tend to think of public housing as a program for the very poor, but it didn't start that way. Kevin: Right, it was a New Deal thing, wasn't it? To help people who were struggling during the Depression. Michael: Precisely. It was for working- and lower-middle-class families who'd been hit hard. But the government made a crucial decision from the very beginning: where to build these projects and who could live in them. And the story of the Techwood Homes in Atlanta from 1935 is just jaw-dropping. Kevin: What happened there? Michael: Before Techwood was built, the land was occupied by a neighborhood called the Flats. It was a poor neighborhood, for sure, but it was racially integrated. About a third of the 1,600 families living there were African American. They were neighbors. Kevin: Okay, so an integrated community. Michael: Yes. Then the Public Works Administration, a federal agency, comes in. They declare the Flats a "slum," demolish the entire neighborhood, and displace all 1,600 families. In its place, they build the nation's first-ever federal public housing project: the Techwood Homes. Kevin: And let me guess who got to live there. Michael: The 604 brand-new apartments were for whites only. The government took an integrated neighborhood, bulldozed it, and replaced it with a segregated one. The Black families who were evicted? They were forced to crowd into other already-packed Black neighborhoods, making conditions there even worse. Kevin: That is... the opposite of what you'd expect. They literally destroyed an integrated community to build a segregated one. That's not reflecting prejudice, that's manufacturing a racial border. Michael: It's manufacturing a racial border. And this wasn't just a one-off. Rothstein documents this pattern across the country. It gets even more intense during World War II, with the boom in war industries. Take the Sojourner Truth Homes in Detroit in 1943. Kevin: What happened in Detroit? Michael: The government needed to house Black war workers who were migrating to the city for jobs at a new bomber plant. They planned a project for them, the Sojourner Truth Homes. The problem was, it was near a white neighborhood. Kevin: I can see where this is going. Michael: The white residents went ballistic. A local congressman threatened to cut off all funding for the housing agency unless the project was designated for whites. There were riots. White mobs, with police often standing by or actively helping, attacked any Black families who tried to move in. Kevin: So the government just caved? Michael: Initially, they waffled. First Lady Eleanor Roosevelt actually had to intervene to ensure the project went to the Black families it was promised to. But the key takeaway is how the government’s actions created the conflict. By choosing to build explicitly segregated projects, they turned housing into a racial battleground. They could have built integrated housing, but they chose to draw a line in the sand. Kevin: So public housing wasn't a safety net for everyone, it was more like a sorting hat, but for race. The government would point and say, 'You live here, you live there,' and that's how it created these concentrated, segregated ghettos. Michael: That's a perfect analogy. The government was the architect. And this was happening everywhere. In San Francisco, the Navy demanded that a public housing project for shipyard workers be segregated, so the housing authority moved all the Black tenants to separate buildings, leaving apartments in the white sections vacant while Black families were on a waiting list. Kevin: It's so systematic. It's not just one bad mayor or one racist policy. It's a blueprint. Michael: It's a blueprint. And they used other tools, too. Racial zoning was a big one. Cities would pass ordinances that literally said Black people couldn't live on blocks where white people were the majority, and vice versa. When the Supreme Court struck that down in 1917, they just got more creative. Kevin: How so? Michael: They invented what we now call economic zoning. A city planner in St. Louis, Harland Bartholomew, pioneered this. He couldn't legally zone by race, so he zoned by building type. He'd designate a neighborhood "single-family homes only." Kevin: Which, conveniently, most African American families at the time couldn't afford. Michael: Exactly. It had the same effect as a racial sign, but it was hidden under the cover of neutral-sounding city planning. They would also zone Black neighborhoods for industrial use, allowing polluting factories and junkyards to move in right next to people's homes, which destroyed property values and created toxic environments. Kevin: So they built the physical walls with public housing, and then they used zoning laws to reinforce those walls and make sure they'd never come down. Michael: That's the first half of the story. The government built the physical containers. But the next step was even more insidious: they created a financial system to ensure nobody could escape those containers. This is where the modern wealth gap was truly born.

Kevin: Okay, so if the government built the ghettos, how did they lock the doors? Because people could still save up, buy a house somewhere else, right? Michael: You would think so. But this is where the Federal Housing Administration, the FHA, comes in. After the Depression, the FHA was created to make homeownership accessible to more Americans by insuring mortgages. This made banks much more willing to lend. It was the birth of the 30-year mortgage and the American middle class. Kevin: That sounds like a good thing. Michael: It was a great thing—if you were white. The FHA created detailed "Underwriting Manuals" for its agents. And Rothstein quotes from them directly. The manuals explicitly stated that "incompatible racial groups should not be permitted to live in the same communities." They warned against the "infiltration of inharmonious racial groups." Kevin: Wait, that was in an official government document? "Inharmonious racial groups"? Michael: Word for word. The FHA institutionalized racism as federal policy. They created color-coded maps for every metropolitan area in the country. Green areas were "safe" for investment—these were exclusively white, suburban neighborhoods. Blue areas were still desirable. Yellow areas were "declining." And red areas were "hazardous." Kevin: And I'm guessing I know what made a neighborhood "hazardous." Michael: Any presence of African American families. This is the origin of the term "redlining." If you lived in a redlined neighborhood, you could not get a federally-backed mortgage. Period. It didn't matter if you were a doctor, a lawyer, a veteran with a steady income. If you were Black, or if you lived in a neighborhood with Black people, you were cut off from the single greatest wealth-building tool of the 20th century: homeownership. Kevin: Wow. So the American Dream of a suburban home with a white picket fence was, by government design, a whites-only dream. And the government was the one funding it. Michael: Funding it and demanding it. Rothstein tells the story of the most famous suburban developer of all, William Levitt. He built Levittown, the iconic post-war suburb. He received massive FHA and Veterans Administration subsidies to do it. But it came with a condition. Kevin: Let me guess. No Black families. Michael: Explicitly. Levitt's FHA-approved deeds included restrictive covenants, clauses that legally forbade the owner from ever selling or renting the home to a non-Caucasian. Rothstein tells the personal story of Vince Mereday, a Black WWII veteran who had a good job delivering drywall to Levittown. He helped build the place. But when he tried to buy a home there, he was refused. He had to buy a smaller home in a nearby, all-black suburb with a much worse mortgage. Kevin: That's just devastating. So the very people who fought for the country were denied the benefits of its prosperity, by the government they fought for. Michael: And here's the final, predatory twist. Because the government artificially restricted the housing supply for Black families, their demand for housing was huge. Speculators and real estate agents saw a business opportunity. This is where the practice of "blockbusting" comes in. Kevin: I've heard of that. How did it work? Michael: A speculator would buy one house on an all-white block near a Black neighborhood. They'd sell it to a Black family. Then, they'd go door-to-door to the white homeowners and create a panic. They'd say things like, "The neighborhood is turning! Your property values are going to crash! Sell to us now while you still can!" Kevin: Creating a self-fulfilling prophecy. Michael: A government-sponsored self-fulfilling prophecy. The white families would panic and sell cheap. The speculator would then turn around and sell those same houses to desperate Black families at massively inflated prices. And because Black families couldn't get FHA mortgages, they had to buy them on "contract." Kevin: What's a contract sale? Michael: It's a predatory loan where you make monthly payments, but you build no equity. If you miss a single payment—even the very last one—the speculator could evict you and keep all the money you'd paid. You'd lose everything. It was a system designed to strip wealth from Black families. Kevin: So the government creates the segregated areas, then redlines them to cut off investment, which creates desperation, and then speculators, protected by this system, swoop in to profit from that desperation. It's a complete, closed loop of exploitation. Michael: A closed loop, sanctioned and supported at every level by government policy.

Kevin: So when you put it all together, it's not just a series of isolated, bad policies. It's a coordinated, multi-decade federal project to segregate the country. Michael: That's the core of Rothstein's argument. It's an unconstitutional, state-sponsored system. And it has a direct, measurable legacy. That $123,000 wealth gap we started with? A huge portion of that is the direct result of home equity that was granted to white families and systematically denied to Black families, generation after generation. Kevin: Because that Levittown house that the Mereday family couldn't buy for $8,000 in 1948 is now worth hundreds of thousands of dollars. That's wealth that was passed down through white families, wealth that Black families were legally barred from accumulating. Michael: Exactly. The appreciation of that home paid for college educations, for starting businesses, for comfortable retirements. It's the foundation of middle-class security. And Rothstein's point is that this was not an accident. It was the law. Kevin: Which makes you think... if the problem was created by law, what's the solution? The Fair Housing Act of 1968 made this stuff illegal, but it didn't undo the damage. Michael: And that's the uncomfortable question the book leaves you with. The 1968 act basically said, "Okay, we'll stop doing this now." But it did nothing to remedy the half-century of state-sponsored theft. Rothstein argues that telling the descendants of the Mereday family they can now buy a house in the suburbs, if only they can afford it, is not a remedy. Kevin: It's like a 50-year head start in a race. You can't just declare the race "fair" on the last lap and expect everyone to finish at the same time. Michael: The book forces us to ask a really difficult question: If segregation was created by law, can it be undone without law? And what does that remedy even look like? Kevin: It's a heavy question, and one we can't solve in one episode. But understanding this history feels like the essential first step. It reframes the entire conversation. We'd love to hear your thoughts. What was the most shocking piece of this history for you? Find us on our socials and let us know. Michael: This is Aibrary, signing off.