The Color of Law: A Forgotten History of How Our Government Segregated America

In Chapter 5 Rothstein describes the rise of restrictive covenants that excluded property owners from selling or renting to African Americans. This is a pattern established at the neighborhood level. However, Rothstein links it to his larger argument about the role of the government by focusing on how governments promoted and enforced these rules. He argues, “local governments aggressively promoted such covenants, undermining any notion that they were purely private instruments” (82). Local courts evicted African Americans from homes they purchased or rented, and state supreme courts upheld this practice when it was contested. Most significantly, in 1926 the US Supreme Court ruled that restrictive covenants were voluntary private contracts and could not be regulated by the courts. The report from President Hoover’s 1931 conference on homeownership recommended that new subdivisions include racial segregation. The FHA recommended, and sometimes demanded, that racially restrictive covenants be used in subdivisions funded by FHA-constructed loans.

In 1948, however, the US Supreme court overturned its 1926 ruling on restrictive covenants, ruling in Shelley v. Kramer that enforcement by state courts was unconstitutional. Because the evictions were enforced by state courts, the Supreme Court found that the state was directly involved. However, federal agencies undermined this ruling, with FHA commissioner Franklin D. Richards declaring “that the Shelley decision would ‘in no way affect the programs of this agency,’ which would make ‘no change in our basic concepts or procedures’” (86). Nearly two years after the Supreme Court ruling, Philip Perlman, the US solicitor general, announced that the FHA could not insure mortgages with restrictive covenants. The announcement was made on December 2, 1949, but the policy went into effect on February 15, 1950. Rothstein concludes, “This delay could only have been designed to permit property owners to hurry, before the deadline, to record restrictions where they hadn’t previously existed” (87). In response, FHA executives announced their intention to ignore the ruling, suggesting to field offices that they make “gentlemen’s agreements” to continue to include restrictive clauses. The FHA did not come into full compliance with the Supreme Court ruling until 1962, when President John F. Kennedy issued an executive order.

Rothstein argues that state regulatory bodies like the IRS should have withheld tax-exempt status from organizations that discriminated on the basis of race. The failure to do so contributed to de jure segregation. For example, Reverend W. Clarence Wright, a pastor at Wilshire Presbyterian Church in Los Angeles, sued to evict an African American who moved into the neighborhood in 1947. The man he sued to evict was a war veteran. Wright lost the case. Despite Wright’s discriminatory actions, the church’s tax status was not affected. Similarly, the University of Chicago helped property owners’ associations maintain racial segregation by subsidizing homeowners’ associations and spending $100,000 between 1933 and 1947 on legal services to evict African Americans who settled in the neighborhood.

Banks and thrifts also contributed to de jure segregation, despite being private organizations. There is extensive government oversight of banks’ lending practices because government deposit insurance programs underwrite bank profits. For instance, to ensure that bank lending practices were stable, the Federal Reserve, the Comptroller of the Currency, the Federal Deposit Insurance Corporation (FDIC), and the Office of Thrift Supervision regularly reviewed loan applications and financial records. Rothstein argues that banks and thrifts were discriminatory with loans because government regulators did not stop them. Often, the banks argued that their policies were not racially motivated but instead reflected economic realities. Rothstein also argues that regulators share responsibility for the devastating economic consequences of reverse redlining African American communities.

Chapter 8 returns to Frank Stevenson’s experience trying to find housing near the newly built Ford plant. Subdivisions insured by the FHA and VA were being built in between Richmond and Oakland, which were predominately African American, and Milpitas. San Lorenzo Village was built in 1944 by David Bohannon, a major developer in the San Francisco Bay Area. Financed by a $7 million FHA loan, the project was the largest government-insured subdivision. It was also Whites-only.

In response, the American Friends Service Committee (AFSC), a Quaker organization that supported racial integration, worked with Ben Gross, the chair of the Ford plant’s union housing committee, to find a developer to build an interracial subdivision in Milpitas. There were empty units in subdivisions, but the AFSC was unable to convince developers to sell or rent to African Americans. The AFSC found a plot of land in Mountain View, 10 miles west of Milpitas, and secured funding from the New York-based Metropolitan Life Insurance Company, which had a Quaker vice president. However, the Santa Clara Board of Supervisors rezoned the neighborhood from residential to industrial in response to this plan. Three other sites were identified, and all were canceled, causing the builder to drop the project. Another builder proposed two subdivisions, one all-White suburban neighborhood and an integrated subdivision between the Ford plant and two heavy industry zones, a region that was less desirable for a residential subdivision. Ultimately, members of the United Auto Workers (UAW) decided to only accept proposals from developers who were committed to integrated housing.

In 1955 the UAW secured an integrated housing development, Agua Caliente. However, the development ran into a number of blocks, including inflated fees and delays. The builder finally dropped the project. By the end of 1955, the UAW finally succeeded in building an integrated development. However, by this point, the plant had been open for a year and the cost of the housing was prohibitively expensive to most Ford workers. Many African American workers continued to commute. The company brought in a new policy that all new workers had to live in the area, blocking many African Americans from accepting work. Before the move to Milpitas, 16% of the workforce was African American. By 1967, it was 6%. Rothstein uses this story to show the creativity and manipulation of local governments in blocking integrated housing.