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FHRJ EP 5: Asymmetrical Access Jesse Van Tol on Power Imbalances that Lead to Wealth Inequality

Rose: I’ve the pleasure of being joined today by Mr. Jesse Van Tol CEO of the National Community Reinvestment Coalition NCRC. Jesse, welcome. Thank you for joining us.

Jesse: Good morning. Thanks for having me.

Rose: Awesome. So, Jesse could you tell us a little bit about NCRC?

Jesse: Sure, the National Community Reinvestment Coalition is a membership organization of more than 600 groups around the country who have an economic justice mission and we fulfill that mission by championing fairness in banking housing and in business.

Rose: Awesome, what kind of projects is NCRC engaged in when you’re talking about championing businesses and housing and economic justice?

Jesse: A wide range of projects. So NCRC is primarily a policy organization. We work on the policies that impact people’s ability to build wealth and has such we’ve advocated on everything from the Dodd-Frank Wall Street Reform Act, the response to the foreclosure crisis. Anything that impacts people’s ability to build wealth; through buying a home, through starting a business. And so, we also run a number of programs designed to do just that. We’re one of the largest housing counseling organizations in the country. We both provide housing counseling to people seeking to buy a home, but we also work with organizations around the country who do just that. We work in entrepreneurship, helping people start businesses. We’re an affordable housing developer. We rehab and build homes for people looking to move into homeownership. And so those are some of the programs, some of the ways in which we help people build wealth and advocate for our economic system that helps people build wealth.

Rose: As a national organization, I think being based in Washington DC you kind of led with this even though you have a lot of projects that are community focused and really direct services type of work. You led with that you’re a policy organization, right? So, a lot of your efforts are at a national level, I’m assuming? So, looking at economic justice sort of on the macro level how does NCRC help local communities?

Jesse: As a membership organization, you know, we often say all politics is local and so our theory of change has to do with impacting federal policy but we do that by working with our members who are based all around the country. We also firmly believe that the policy solutions that we advocate for have to be grounded in practice and in the views of practitioners. So, when you look at our board of director, it’s made up of you know people who leave local community organizations. When you look at the membership who informed the policy work that we do, they’re leaders of local community organizations.

Jesse: So there’s a really significant way in what in which what’s happening in community informs what we do here in Washington. But also, our mission in terms of our members is to build their capacity to affect these issues locally. So, we do a lot of training in communities working with community organizations to help them be more effective at what they do. We take on campaigns. You know we’ve over the course in the last few years $150 billion dollars worth of community benefits agreements with banks that are aimed at getting banks to be more engaged in communities. To lend more to low- and moderate-income people and communities. To work with community-based organizations to tackle problems in their community. Everything from affordable housing to entrepreneurship. Getting banks more invested in helping to solve problems that our members face every day.

Rose: I love that you’re talking about banks and financial institutions and how you’re focused on targeting them, their regulations, and that kind of work because I think a lot of the times we hear the phrase ‘too big to fail’, we’re always going to bail out banks and when the financial crisis hit it really triggered a massive destruction of wealth for African-Americans.

Rose: We see today that the median net worth of white families is nearly 10 times that of black families. So, we see that the racial wealth gap and racial wealth divide is really linked to housing and in the ability to create wealth, but how did we get here? I think that there is this idea that the racial wealth divide just happened overnight, and the ability for a black and brown communities to build wealth is something that all of a sudden now that a hundred democratic candidates are running for president, it’s something that we’re consistently talking about bridging that, but really how do we get there? Why is there such a consistent barrier when it comes to access to credit and lending opportunities such as home ownership, small business loans, those kinds of things?

Jesse: The racial wealth gap can be understood in a number of ways. I think that you have historic discrimination, you’ve ongoing discrimination. I really think about it in terms of power. We have an economic system, capitalism, which produces more wealth than any other system we’ve ever known but it doesn’t distribute it equally. And if you think about the theory of capitalism this notion that Adam Smith had that when two parties engage in a transaction, you know, it’s mutually beneficial.

Jesse: So, when we look at the history of capitalism, we see that power imbalances lead to more power imbalances over time. And so, you might think of physical and coercive force as being part of the original power imbalance, but on an ongoing basis, part of what we see today. So, thinking about Europeans engaging in the slave trade, right? That was a power imbalance that was physical and coercive. Well it led over time to an accumulation of wealth by slave traders, by people engaging the slave trade, by farmer capitalists in the United States. And that wealth and balanced led to an accumulation of power.

Jesse: When we think about people engaging in our economic system, when you’re at a disadvantage in terms of power, when there’s an information asymmetry. You look at someone who’s engaged in getting a mortgage loan, for example. In your family, you don’t have a lot of accumulated wealth and maybe that’s because hundreds of years ago your wealth was robbed from you, your family were slaves over time that compounds. It’s harder to get a mortgage loan if you don’t have accumulated wealth. It’s also a transaction that you will engage in once in your life maybe twice, maybe three times four times. Mortgage companies can engage in it a thousands or millions of times. So, there’s an information asymmetry. There’s a power asymmetry there for a lot of different reasons. And unfortunately, it makes it more likely that the transaction that you’re engaging in is going to the benefit of the company engaging in it.

Jesse: So, we’re very focused on this sort of power imbalance that we see. Wealth inequality is the result of an economic system that many times has been based on coercive power. This led to wealth accumulation in the hands of the very few and that in and of itself tends to lead to even more wealth accumulation in the hands of the very few. Both because wealthy people have a lot of political power and they have a lot of economic power. There’s a lot of ways in which power gets expressed through our system of economics. I think many people would argue that when you look at rates of incarceration among black people in this country, that you have sort of a criminalization of poverty that exists to express some physical power in many cases over a certain part of the population and that also impacts people’s ability to build wealth, to hold a job, to make an income and in turn to invest in things that might help them secure their wealth assets over time.

Rose: So how does NCRC make sure that they are bridging that gap of information and making sure that there is an equal access to information for consumers? That banks are aligning with their credential regulations to be sure that they are meeting those obligations to their communities.

Jesse: Well part of it is making sure that there’s rules for the road, well understood protections that protect both sides of a transaction and making sure that there are clear and easy to understand disclosures that are required in those kinds of transactions. It’s also acknowledging that in some cases you’re never really going to overcome the information asymmetry and you have to have certain protections. One of the things we learned in the foreclosure crisis for example, is because of the economic incentives that were built into mortgage lending that many of the institutions making mortgage loans weren’t retaining any of the risk. We had to put in place protections to make sure that when you make a mortgage in this country that you’re verifying that the person getting the mortgage has the ability to repay that mortgage.

Jesse: Some people would say you don’t need to regulate that, but that’s something that would just naturally happen as part of a market transaction. It turns out given the complexity of mortgage lending, of mortgage securitization, we have a scenario where the people sitting down and making the mortgage had little or no incentive to ensure that the person they were making the mortgage to could pay it back. That’s sort of one part of information asymmetry and another part of economic incentive. We had to regulate that, we had to say you can’t make a loan to someone who can’t afford to pay it back. So, part of it is making sure that there are rules for both that sort of help to overcome the information asymmetry, but also make sure that mortgage companies banks are acting in people’s best interests.

Rose: I think that during or prior to the financial crisis that individuals thought that banks were really in the business of helping people. Making sure that people were creating that path to wealth because home ownership is, the biggest driver of wealth in our country and that just proved not to be the case. So how do you ensure that communities have power that’s not reliant on the people that are in power or the politicians? How do community members and individuals make sure to reclaim their power and have enough power to challenge these institutional policy issues?

Jesse: Well, it’s a very challenging thing. I wish I could say I had the complete answer to that. You know, it’s often said that there are two sources of power in this world money and people. In a system in which a lot of the money is concentrated in the hands of the few you have to think about the power of people to overcome those kinds of issues and I think our philosophy is that your power is in your relationships. We have a membership that is based in local communities to build power to be able to work on policies that level the playing field. To work on policies that help more people build wealth in this country.

Jesse: Malcolm Gladwell wrote an entire article around sort of strong tie versus weak tie organizing and argue that really important system of changes only ever happened in this country as a result of building very strong and very deep relationships with people who are able to do hard things. You think about the civil rights movement, you think about the labor movement, you think about really any significant movement in this country’s history. It was built off of people making incredible sacrifices, of banding together in the face of danger, in the face of attacks, in the face of really a power structure and crashing down on them. That’s really our theory. Our theory is that we need significant relationships with a significant number of, in our case our members are community-based organizations around the country. Because we understand that in order to correct things like the racial wealth gap, to work on inequality in this country, it’s going to take people making sacrifices. It’s going to take people doing hard things to overcome what is an incredibly powerful system of capitalism. Our capitalist economy has produced more wealth than any other system in the history of the world; it just doesn’t share it very equally.

Rose: What does economic justice mean to you?

Jesse: Well economic justice to me is not an act charity. It’s not about doing something that makes us feel good. Economic justice is about ensuring that in terms of the systems that we have, the policies that we have, that everybody has an opportunity to provide for themselves and their family. That they don’t start life at a disadvantage just because of where they were born, their race, what family they were born into. That people have this kind of opportunity to do well and I don’t think we have that kind of system. People will point to sort of exceptional figures, the person who was born poor and somehow made it out of poverty and became wealthy. I think of wealth building as fundamentally sort of a team sport. It’s not an individual effort. It’s reliant on a whole lot of things. It’s relying on people to produce that kind of wealth. It’s reliant on government and policy and protections. You can point to as many examples of a brilliant innovative person who did not become wealthy because they didn’t take advantage of the system as to everyone who became a billionaire as a result.

Jesse: I’ll give you one example. I was I was recently touring a Frank Lloyd Wright house, the famous architect, and I was really shocked to learn and to discover that when he passed away his wife had to liquidate pretty much all of their assets to pay his debts. He had not become a wealthy guy. I mean, this is one of the most famous architects of the 20th century and it turns out along the way he invented many things. He invented for example, the infinity pool. He never patented a single one of them. And so this is an example of a person who didn’t take advantage of the laws, the policies, the systems, the infrastructure that has been built up in this country, really designed to protect one thing and that’s property and capital.

Jesse: And when you think about that you start to understand that there are people who have taken advantage of this kind of system that we’ve built up to protect capital. That system was created for that purpose. The problem is when you have power imbalances both at the beginning and an ongoing basis those systems end up getting designed to largely protect the interests of the people in power and to perpetuate those interests.

Jesse: It’s remarkable to think that there are people in this country who have more wealth than they can spend in their lifetimes and we have people living homeless on the street, right? That’s the failure of a system that has allowed power to accumulate at the very top and allowed power to continue to perpetuate a system largely designed to protect their interests.

Rose: Yeah. I think that you made a good point in that individuals have taken advantage of the system that protects capital and property because there’s kind of like this myth that people can just pull themselves up by their bootstraps. They can just work hard and make it out and make sure that they go to get an education. Then you see individuals going into large student debt. Predominantly in black and brown families as like first-generation, so there’s kind of this myth that anybody can make it out and become you know, you’re like Jay-Z’s or anything like that.

Rose: The reality is that’s not actually possible because of the system that we’ve created and I guess my question to you is how does how does that affect how you lead the organization, knowing that there is this power dynamic and the reality is unless you can change that and you’re just one organization right you’re just, one organization of 75 employees and you’re invested in a lot throughout the country and in a lot of communities but how does that affect how you lead the organization knowing that the reality is you’re up against like too big to fail?

Jesse: In terms of how I lead the organization, first and foremost we have a movement building mentality. We recognize that the organization is not a movement. But we think it has a very important role to play in terms of creating a movement to solve these problems. The second thing is, running this organization is not a vanity project for Jesse Van Tol. I’ve been inspired by a model of servant leadership, thinking about what the people around you need to be successful. If we are to be successful in building a movement, in building an organization, that is powerful and capable we have to invest in a lot more leadership.

Jesse: A great number of our leaders people who maybe came out of the Civil Rights movement, came out of the sixties or seventies and were inspired to work on these issues. We see people retiring, we see people passing away. We need a new generation of leadership to address the unfinished work of the Civil Rights movement. To address the new and significant problems that have cropped up since then. So, when I think about leadership first and foremost is not a title; it’s a practice, it’s an act. When I think about what we need to do to express the kind of leadership to solve difficult problems you know first and foremost we need a lot more leaders.

Rose: How do you cultivate those leaders and how do people in their communities cultivate those leaders?

Jesse: I think the challenging thing about leadership again, it’s an act and not a title. For me the most challenging thing about leadership is you know, people are really driven by hope, by some possibility of making a difference. So, I think fundamentally, you know leaders and leadership has to be about winning, about changing the circumstances in which people find themselves, about building connection and relationships and delivering on your values and your commitment to make a difference.

Jesse: One of the things that’s maybe frustrating about the state of today’s politics and particularly at the national level, you know, so much of it is sort of partisan in-fighting. That’s about kind of making a lot of noise, convincing people that you’re doing something for them or that you’re fighting for them, but because of the gridlock in Washington very little changes. So, we have significant leadership perhaps that doesn’t necessarily go anywhere because of the dysfunction in Washington.

Jesse: So, for us, we really focus on leadership on the ground. On how can we make a difference in community and in doing that build the power to make change in Washington and at the national level.

Rose: I want to thank you again for sitting down with us and having this conversation around building power. One of the things that we ask every guest that comes on is what does racial justice mean to you? And what your call to action would be for local communities to really strive through what racial and economic justice means to you?

Jesse: Sure, so coming back to power fundamentally, I think racial justice means addressing this power imbalance. I get really frustrated sometimes I hear this phrase, demography is destiny. Thinking about the “ Browning of America”, that America will become a non-majority minorities society by 2042. I think inherent in some of those types of statements is an assumption that that will lead by itself to significant change. You hear it even in people quoting Dr. Martin Luther King, “the moral arc of the universe is long, but it bends towards justice”. Well it doesn’t bend by itself. I don’t think he meant it to say that. It bends through actions of people working together. If demography were destiny, we’d have a female president by now. Half the population is female.

Jesse: When people think about the system being broken, it’s not producing justice for everyone. You know, the really challenging and difficult thing about that statement is that the system’s not broke, it’s producing the outcome that it was designed to produce. And in order to change those outcomes you have to change the power dynamic in a way that might be threatening to some that might involve real or perceived loss to some people.

Jesse: When I think about racial justice, when I think about the fact that America is really in a lot of ways not dealt with its history and legacy of slavery, of racial exploitation. I think about how we in some ways we have to confront people who have something to lose, by the way, the system is designed.

Jesse: I believe when you’re thinking about a system of capitalism, you really have to address the core of capitalism itself. That’s why we’re so focused on banks. As you know, sort of part of the central nervous system around and how capital and credit gets distributed in this country and thinking about how we can make meaningful change on that level on a systemic level, which I think will allow alternative systems to flourish.

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