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Full resolution (TIFF) - On this page / på denna sida - IV. Economics - 14. The Negro in Business, the Professions, Public Service and Other White Collar Occupations - 3. Negro Finance
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3i6 An American Dilemma
significant that some of the most successful Negro-managed institutions
had a partly white clientele, which means that they had a larger business
and a greater diversification of risks than they otherwise could have had,
if all the activities were concentrated in one or a few Negro neighborhoods.
Most Negro associations, however, are small, which tends to make costs
rather high. The actual average interest rate charged on building loans in
1935-1938 was between 7 and 8 per cent, which was somewhat higher than
that charged by white-managed institutions. Obviously, it is practically only
upper and upper middle class Negro families who can afford to use them
for the purpose of financing their homes. It seems that, at least until 1938,
few of the Negro establishments had started to use federal insurance in
order to safeguard the depositors and the shareholders, and but a handful
of them were affiliated with the Federal Home Loan Bank system. Some
of the associations may have done some Federal Housing Administration
business, but in all probability it was less than for white-operated institutions.
These various federal-sponsored services, by which deposits are made secure,
loans inexpensive, operations more rational, and building programs better
planned, have more or less revolutionized the whole system of credit,
particularly in the housing field. It is a safe bet that Negro-managed institu-
tions will have increased difficulties in competing, unless they are willing
and able to qualify for such services, and the various federal credit and
housing agencies are prepared to put in oome special efforts in order to do
something about the Negroes desperate need for better housing.^^
The fact that Negroes have made much better headway in the life insur-
ance business is due to several factors. For one thing, ever since the i88o’s,
Negroes have been subject to differential treatment by white insurance
companies in that some of them, at that time, started to apply higher
premium schedules for Negro than for white customers, whereas others
decided not to take on any Negro business at all.“^ The underlying reason,
of course, is the fact that mortality rates are much higher for Negroes
than for whites.® This, however, is a social and economic, rather than a
racial, phenomenon, and most Negroes in the upper and middle classes
must consider the practice as highly discriminatory. And even when this
differential treatment is economically justifiable from the point of view
of the life insurance companies, it is only natural that it must be resented
by all Negroes, and that they will be inclined to get around it by founding
their own insurance institutions.
Discriminatory practices have been followed by other white financial
institutions as well. But there is this difference: insurance is used even
among the poorest families, Negro as well as white, in America. Sometimes
the majority of all families with an income of but $500-$!,OCX) have some
form of insurance, and even among those with less than $500, usually a
•Sec Chapter 7.
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