Wealth Disparity + Resiliency with Louise Story (part 1)

Have you ever wondered about the true extent of wealth disparity in America? Award-winning journalist and media powerhouse Louise Story graces our podcast with an examination of the haunting 15 cents on the dollar wealth gap between black and white communities. As she previews her upcoming book delving into this issue, join us for an eye-opening discussion on the challenges and triumphs within the spheres of resilience, real estate, and the racial wealth gap. We take you on an educational expedition, where real estate emerges as a pivotal tool for wealth creation, albeit one whose benefits have not been uniformly distributed across different demographics.

In this riveting episode, we don't just scratch the surface—we unearth the deep roots of historical barriers, such as the racially exclusive GI Bill and the devastating effects of subprime lending on people of color. Alongside Louise, we dissect the cultural perceptions of real estate as an investment and the shifting strategies post the 2008 financial crisis that drastically affected Black and Latino Americans. From the anxiety-inducing racial bias in home appraisals to the contemplation of equities as a more equitable wealth-building avenue, we confront the personal and systemic complexities head-on. This conversation is not only about understanding the systemic struggles but also about exploring potential pathways to mend the racial wealth divide.

About Louise:
  
She is a prize-winning investigative journalist who spent more than 15 years at the New York Times and the Wall Street Journal, where she was the top masthead editor running coverage strategy. Her work investigating corruption led to the largest kleptocracy forfeiture in U.S. history, a scandal known as the 1MDB case. Her work during the 2008 financial crisis led to a multi-billion dollar settlement in the derivative market and to Goldman Sachs’s S.E.C. settlement. Projects she led have received honors including Emmy Awards, Pulitzer Prize finalist citations, and Online News Association awards. Louise’s film "The Kleptocrats" aired on the BBC, Apple and Amazon. She teaches about racial wealth gaps at The Yale School of Management.

www.15cents.info

Transcript

Speaker 1: 0:06

In the grand theater of life. We all seek a comeback, a resurgence, a rekindling of our inner fire. But how do we spark that flame? Welcome to Reignite Resilience. This is not just another podcast. This is a journey, a venture into the heart of human spirit, the power of resilience and the art of reigniting our passions.

Speaker 2: 0:29

Welcome back to another episode of Reignite Resilience. I am your co-host, natalie Davis, and I am so happy to be back with you all. Joining me is none other than Pam.

Speaker 1: 0:39

Cass. How are you, pam? I am fabulous. It is again a Friday, even though we say we're not going to record on Friday, but we still do and I still love it. It's like my favorite day of the week.

Speaker 2: 0:52

It is yes, well, and your Fridays are going to start to look different. Now, right, you have a little bit of a oh my gosh.

Speaker 1: 0:59

Yes, starting on the 31st, I will start watching my grandson. Yes, and I'm nervous because he's so little. So it'll be fine, it'll all come back.

Speaker 2: 1:09

It will be fine. I love it. I know you're going to have an assistant in-house on Fridays. We do record on other days other than Fridays but I feel like our Friday afternoons we're like wait a minute, what's happening here? What's going on? I love it, oh my gosh.

Speaker 2: 1:24

Well, I am so excited to jump in today because we have a guest that is joining us, a special guest, and we're going to, I think, talk about a topic that we've not even touched on on the podcast, but one that I feel definitely impacts a huge segment of our population and definitely the US economy. We all share that. Pam and I are involved in the real estate industry, and we talk about the wealth that is created through the world of real estate and how that's a vehicle for many people to build wealth and turn generational wealth, but that's not necessarily the case for many. So we are going to dive in Our guest today, louise Story. Louise is actually an award-winning journalist and media executive, and she has played a pivotal role in the digital transformation of both the Wall Street Journal and the New York Times, and so she also teaches MBA students at Yale University on racial wealth gaps, and she has a new book coming out about the black-white wealth gap, and that book is called 15 Cents on the Dollar. That will be released in June.

Speaker 2: 2:29

So welcome, thank you. I'm very happy to be here with you all. Fabulous, I'm so excited. Well, first I'd love to hear, just in terms of your profession, tell our listeners a little bit more about you, who you are and how you have come to the space of being an award-winning author and journalist. Thank you so much.

Speaker 3: 2:51

Well, I've been in journalism for 20 years and most of my time has been spent at the New York Times and the Wall Street Journal, so those are two great institutions. They cover a lot of readers across the countries. As you know, their opinion pages are a little bit different, so there are more conservative and more progressive readers at both of those places, and I've been able in my career to think about how to reach audiences of all types. That's a really important. The news industries had to focus on how to attract readers, how to change to more of a digital subscription base, and I have my MBA and so I got involved. Though I was in the newsroom, I got involved both in New York Times and the Wall Street Journal, ultimately in leadership roles, helping to change the business model and lead digital transformation at both of those places, and that's been a great journey.

Speaker 3: 3:45

I'm in journalism because I care about making an impact and about equity and fairness in the world, and so the journalism projects that I've personally done or edited have often had a theme of looking at unfair situations, and so, for example, I covered the 2008 financial crisis and I covered Wall Street then for the New York Times, and I did some big investigations into Wall Street business dealings that were making bankers rich while they were actually involved in imploding the housing economy something you all in real estate know very well from back then and hurting ordinary homeowners. So I did investigations of that. There was some big legal settlements of that. I ended up doing a lot of work on international corruption and that's when I discovered this large kleptocracy case, which also what I did in this international corruption investigation was actually a lot of ill-gotten gains from around the world hidden in real estate in the United States. And so I traced the money and money's stolen in Mexico by a Oaxacan government and Russian senators who had stolen some money and that was hidden here, and a number of countries and the country that ended up being tied to $6 billion that was returned out of my investigation. The people of Malaysia 6 billion with a B that was Malaysia. Out of my investigation, the people of Malaysia $6 billion with a B that was Malaysia. And it was the prime minister of Malaysia who had it hidden in the US a lot of it in real estate. And so ultimately, after my piece, the US government brought a case and seized the money and it went back.

Speaker 3: 5:19

So that's been my storyline in journalism and I was very engaged in discussions in the summer of 2020, like many of you were about racial equity after the killing of George Floyd and that story, and at that moment I was running all of the news coverage strategy at the Wall Street Journal a lot of change and I was getting coverage looking at, well, what is the situation with racial equity. And I'll never forget the day that I crunched the numbers and I crunched them a little bit differently than people usually talk about them and I saw, when you divide the typical black wealth divided by the typical white wealth and you normalize it on a dollar, you get to 15 cents on a dollar and it's such a striking statistic. And I turned to a woman who was working on my team at the time. Ebony Reed said did you know that this is the black white wealth gap? It was 15 cents on the dollar. Did you know that, ebony? And she's like I knew there was a big gap, but I didn't know it was that level.

Speaker 2: 6:16

And we realized there is no book in existence that covers the black white wealth gap through history, and so we decided that we would write it and that's what we've done the past three years and it's coming out now beautiful oh my gosh, and I think, like the courage in when you talk about, like the reason that you got into journalism, I feel that that's the reason that you are where you are right now and why you're currently working or just wrapped up this book, because the amount of courage that it takes to dive into that right we're talking about investigation of governments right, like just the economy for government and different countries and what that looks like.

Speaker 2: 6:52

And so, first of all, kudos and thank you for the work that you've done so far, but then to continue that investigation, now to bring the book forward 15 cents to the dollar. Tell us a little bit about the book because, as I mentioned, it will be released in June, june 18th to be exact, is that correct, june 18th? So tell us a little bit about the book and some of your discoveries and ahas that you didn't have on your radar prior to.

Speaker 3: 7:18

Sure, yeah, I'm very excited for people to read the book and you can pre-order it now. So back for a minute. My author Ebony and I we're viewing this as a public impact project and we have three goals in our project, and our number one goal is to make the statistics 15 cents on the dollar, a nationally recognized statistic. You know, when people in society started talking more about the male-female pay gap and putting a number on it, people talked about it differently, and there's research today that shows that many people think that the black-white wealth gap is either gone or much smaller than it is. So we want, with your help and all of your listeners' help, just to make more people know that it's 15 cents in the dollar. That's very large. That's about where it was in the 1950s. So, despite all the different things that have happened since the civil rights movement, it hasn't really, in a long-term, sustainable way, decreased this wealth gap very much, only very slightly. So that's our number one goal. Our second and third goal. Our second goal is we're trying to convene communities and get within industries and get the conversations that they're having about other things that are related, like affordable housing and education and DEI programs. Get those conversations to include this data, Because we think when people know the facts, it may shift you know their views on things and then to help and create that people have for people who are different from them.

Speaker 3: 8:46

And you know when you read our book, our book is a narrative book. It's like reading a novel. There are these seven people that you're following through the book. They have really interesting, inspiring and sometimes sad stories that you read about their life from 2020 into 2024. And as you're reading about things happening in their life in this very interesting time in society, right during the racial, this racial reckoning and then the recent backlash, we're now getting around things like affirmative action and DEI.

Speaker 3: 9:17

When you're reading about their lives, you also meet their families and we take you back in history and through their families, we cover all the things since the mid-1800s that we have determined have affected this black-white wealth gap. But you meet their family members who experienced them. So it's a narrative through people, through people, and when you spend time with these people and their stories, I think it's impossible not to open your mind to understanding other people differently when you get this much inside of someone's story, especially their financial story, because it's kind of hard to get inside numbers with people. People don't like to talk about wealth. A lot of people don't even talk about wealth with their own families. So to dig in and get to look at that is pretty unique.

Speaker 2: 10:03

Well, I think it goes even further than that. I know, even within our industry, within the real estate industry, there's so limited discussion about income, right, I mean it's, and I think, just as of three years ago possibly, is when our association research department started to track, kind of that, the gap between genders, the gap between races within our industry. But prior to we didn't have any of that market or that knowledge to even have the discussion.

Speaker 3: 10:30

Yeah, yeah, and I mean I think one of the things that comes up with real estate and home ownership is that kind of can confuse. The picture is that we all know that homeownership, in some periods of our country's history and in some scenarios, is a big wealth builder, and homeownership was a big way. The middle class was built after World War II with the expansion of credit the GI Bill helping many people buy homes. I will tell you, as we document in the book, black families were not able to take advantage of that as much as white families, but it was a big factor, and because of that, people think, you know, home ownership is going to build wealth, and there were reforms in the 1970s the Community Reinvestment Act and different reforms opening up more home ownership to more people so that it would not be so predominantly white homeowners.

Speaker 3: 11:25

And the thing is, though, when you look at most people, when they look at and they talk about gaps, they look at the homeownership gaps. They look at a chart where there's a line up high in the 70 percentages for what percentage of Americans own homes, and then they look at the line for Black Americans depending on the year, it's typically in the 40s and they're like, wow, that's the gap, but that's ignoring a few things. First of all, that's just what percentage of them own homes. That doesn't even get into what market value in homes do they own. Right, because it could be the case that, for example, the homes that the white homeowners own are worth more money. So if you graft it with what value in homes do they own, it could be even bigger.

Speaker 3: 12:10

And second of all, the other thing that that doesn't include is debt, and a lot of people look at people they know and they hear they bought a house and they see them and they think that means they're wealthy. But the definition of wealth is your assets minus your liabilities, it's the things you own minus the debt you owe. So if you have a two hundred thousand dollar house but you have a hundred and fifty thousand dollars in debt on it, you have have $50,000 in housing wealth, but debt is kind of invisible and people don't always see that. And so it may also be the case in many scenarios that some families have more debt on their homes than others, and this is why it's so confusing to people understanding who really has wealth, because a lot of assets are offset by debt which you can't see.

Speaker 1: 13:04

Yeah, and it's interesting to think about too. When you talked about the values of the homes, did the values track going up the same over these last years that we've seen these double-digit appreciation? Was that across the board or was that just in the homes that were predominantly white areas as opposed to-.

Speaker 3: 13:23

You know that certain zip codes have more appreciation that appraisals. There's also racial contours to appraisals. You have news articles, I'm sure, about homeowners, where a black homeowner gets an appraisal and then removes all their family photos in the same exact home in the same exact neighborhood and has an appraisal come back and they have photos of white people there and it changes. So there's all those factors. The other thing I'll just mention that, in terms of who's been making the money in the housing market, we have a portion of the book where we look at what's happened since the 2008 financial crisis, because we had covered that on Wall Street and Ebony. My co-author was an editor at the Detroit News and covered it like on the ground with foreclosures. So we're really curious what's happened since then and one of the big things that we found people of all races had foreclosures and short sales in that crisis, right, but it has come out that Black families who had credit scores that qualified them for prime loans were still steered into subprime loans and so that made the terms of their loans very prohibitive and sometimes interest rates ballooning and different things where it didn't make sense for them to stay in the homes, and it hit black and white families differently, and more white families were able to hold on and wait for the market to go up.

Speaker 3: 14:45

So the big thing we also document from a macro scale that came out of that crisis is that all these foreclosed homes many of them, were then owned by mortgage bonds, their mortgage bond servicers, or by Fannie Mae or Freddie Mac or by the FDIC, and then these big bulk of homes were sold in bulk after that, for years to come, after 08. For the next four or five years to investors. And still today, much of that inventory is owned by investors, not individual people. Investors have turned it over to other investors and these investors are renting the homes out. So it's changed the housing stock, but there's not as much to buy. So it's changed the housing stock, but there's not as much to buy, and in our financial system, a much greater percentage of investor capital is white capital. So therefore, just in a macro way, you can understand 08 also to have taken some of the individual homeownership away and sold it into these big blocks owned by investors, and that has now affected the dynamics of the affordability in the market.

Speaker 1: 15:49

Well, and I know we're still seeing that. We're still seeing investors coming in and buying whole blocks of homes that are in new construction areas and then turning them around as rentals. Very interesting Wow.

Speaker 3: 16:02

Yeah, the Atlanta Journal Constitution newspaper, which is excellent publication. They had a big investigation about a year ago on this and they called it Rent the American Dream.

Speaker 2: 16:14

Yeah.

Speaker 3: 16:14

So this is happening all over, yeah.

Speaker 2: 16:16

Yeah, all over Wow is kind of the how it impacts the culture and understanding of what homeownership really looks like or what it could potentially look like in the communities of color.

Speaker 2: 16:32

Because we think, you know, if you go back to passing of the fair housing law you mentioned like limited access as a GI bill for people of color, I mean, and that is like historically, you can see there are veterans of color that did not have the ability to utilize those VA benefits in order to purchase Passing of the Fair Housing Act in hopes that we could kind of level out the opportunity to attainable housing for everyone, for all Americans, right, that was the pretense on that.

Speaker 2: 17:05

And then the subprime lending, and so you have like this cultural piece that's built in. It's like okay, well, is it a benefit for us to own homes or is it not Right? Like that's truly the back and forth, and I know I've had conversations with individuals that have had conversations in their households. It's, you know, we're not going to go down the path of purchasing real estate because it seemed as a trap or as a way to kind of rob the wealth that was already created, and so there's kind of a stigma that's built up around it that I think we're continuously working to educate.

Speaker 3: 17:38

That's a good point because, again, a lot of people today they themselves or family members they had had negative experiences in the 2008 financial crisis and, by the way, that was really Black Americans and Latino Americans. Latino Americans' wealth was hit very hard by the 2008 crisis, also in part because Latino homebuyers, many of whom had been first-time homebuyers in the early 2000s, the markets that they bought in in the Southwest states, the prices there, also really toppled, as you know, in Arizona and different places, absolutely. But you know, the thing is that since the late 1980s, one of the very biggest factors in the reason the black white wealth gap has not closed much is the stock market. So if you look at black Americans and white Americans who have the ability to invest which is not everyone, because not everyone has money available to invest right but of the ones who do have investments and investments, I would include owning a house as being an investment. Owning a house, owning stock right, owning a business the percentage of their investment money that's in homes is much higher for Black Americans and for white Americans post-1980s. So it was like you know, black Americans were excluded from many things for a long time and then it became a little easier to do some of those things. And so Black Americans and this is generalization, but this is what the data shows who, when they did buy a home, they made it a very, very big share of their investments and did not invest as heavily in the stock market as white Americans. And the stock market has been a very big factor in white wealth creation, and you can see it up even through the most recent report that came out this past fall, that white Americans were making a lot more, not just by dollar value, but the percentage of white Americans making money in the stock market was higher.

Speaker 3: 19:37

And so I think I've talked with black Americans today and we've interviewed over 400 people for this book. Many of our interviews have been like three and four hours a piece, very in depth, and there are people today who are questioning whether they want to put in order to buy a home. Given how expensive homes are, it would have to be a very big part of investments that a person would have and there are people saying, well, maybe that's not the best way for me to make wealth, and they're looking at the stock market, and so I think that is a discussion that you will think that some of the people I've interviewed have pointed out is that the stock market if you own a share of Google and you're white or you're black, you're going to get the same. You both own one share, you're going to get the same appreciation. And there have been all these stories about unfair, discriminating, unequal treatment and things like, for example, appraisals with homes when people are of different races that that has created some distrust about real estate.

Speaker 2: 20:38

Yeah, I did think about that.

Speaker 2: 20:40

Well, yeah, and I think the sad truth is that it still exists. And you know the appraisals. We're getting more of that data now. I actually just sold a house a couple of years ago and I remember the day of the appraisal and I worked from home a great deal of the time and sitting in my home office, I contemplated, I went back and forth, I said, okay, should I leave before the appraiser arrives? Will it impact the value or should I just stay? And yeah, I would be lying if I didn't say that I had the thought. The thought absolutely crossed my mind because in those moments it's like, okay, well, this is a huge investment, right, if we're looking at it for and I look at real estate from an investment standpoint how do I want that to impact it? But I didn't realize that that shift was being turned towards the stock market, mainly because I'm a little bit risk averse. I have a question Did you leave or did you stay? I stayed, I stayed. Okay, I did. Yeah, I did, but you thought it over.

Speaker 1: 21:35

I did yeah, absolutely, and I think we will continue to see it as long as there's humans involved in making that decision because of their biases.

Speaker 2: 21:44

We hope that you have enjoyed part one of our two-part interview with Louise Story, the award-winning journalist and media executive that has spent so much time in the space of journalism. That has led to three major legal settlements, one that was even featured in the film the Kleptocrats. Louise has spent so much of her time in her career looking at the issues that are grounded in fairness and wrongdoing. Make sure you join us for part two, where we continue to dive into some of the work that came out of 15 Cents on the Dollar. We'll see you soon. Thank you for joining us on today's episode of Reignite Resilience. We hope that you had amazing ahas and takeaways. Remember to subscribe on your favorite streaming platform, like it and download the upcoming episodes, and if you know anyone in your life that is looking to continue to ignite their resilience, share it with them. We look forward to seeing you on our future episodes and until then, continue to reignite that fire within your hearts.