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1-Page Summary of The Color of Money

Black Americans are on the wrong end of the wealth gap.

Despite reforms over the years, many Black Americans are broke. They have a fraction of the wealth of their white counterparts and lack cash cushions that would help them through tough times. The 2008 financial crisis hit Black Americans especially hard because they didn’t have enough money to weather it.

Meanwhile, Black-owned banks have not been able to help the wealth inequality problem in a segregated economy. Many people believe that these banks could be the solution and have supported them throughout history. Even presidents such as Richard Nixon, Ronald Reagan, Alan Greenspan and Bill Clinton believed in them. However, they haven’t been successful because of historical subjugation and segregation.

Banks that cater to Black customers face a near-impossible task.

Black banks were popular in the past, and they promised to serve their communities. The idea was that Black people would have a convenient place to deposit money and borrow from. However, reality proved more complicated than expected. Because Black people were not financially stable, they weren’t good clients for these banks. Also, because most Black people did not own homes or have significant amounts of wealth, lending business wasn’t available for these banks.

To some people, Black banks would help keep wealth within the African-American community. In truth, these banks were not beneficial to the communities they served because of their higher costs and riskier loans. The money that was deposited into them was redirected to Washington, DC by investing in government securities.

America was founded on a belief in equality, yet it was also home to millions of slaves.

African slaves weren’t allowed to vote, nor were they considered people. They were just property that was used as collateral for loans and had a collective financial value of more than $1 billion during the time period in which the book is set. Blacks could open businesses but couldn’t sue white customers or competitors because they weren’t citizens and didn’t have voting rights. Black entrepreneurs also couldn’t get bank loans, so they turned to family members for credit instead.

The end of the Civil War was supposed to be a fresh start for Black Americans. The Freedmen’s Bureau Act promised that they would get 40 acres of land each, but this didn’t happen because Andrew Johnson became president and reneged on Lincoln’s promises. Former Confederates also violently prevented any reparations from being given out. By the end of Reconstruction, Black people were still just as marginalized as they had been in slavery: without assets, unable to vote or participate in most trades and barred from acquiring skills like subsistence farming.

The first attempt at Black banking came in the form of the Freedmen’s Savings Bank and Trust.

In 1865, Lincoln established the Freedmen’s Savings Bank in order to help Black people become financially stable. The bank was marketed as a branch of the government and attracted many customers who wanted to save money and get out of poverty. However, white bankers saw it as an opportunity for profit, not as a way to empower Black Americans.

Henry Cooke was a reckless investor who used the bank’s money to speculate on railroad bonds. His investments were successful, so the bank started opening more branches and doing advertising campaigns to attract more customers. But in 1873, when economic conditions took a downturn, Cooke’s investments failed as well, and he lost nearly $3 million from his customers’ savings accounts. Many African Americans felt betrayed by the government since they thought that their money would be safe in this bank.