Red Loan District

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Franklin D. Roosevelt’s administration can be blamed for many sins: a prolonged depression, the creation of a federal welfare state that fostered dependence, establishment of the imperial presidency in foreign policy)’, Japanese internment, retrograde civil rights policies, etc. Now, another FDR legacy can be added to this list.

In a carefully researched article for a recent issue of Social Science History, Amy

E. Hillier describes how federal New Deal housing policies led to the creation of redlining – the practice of denying credit to certain neighborhoods because of their racial or ethnic composition.

The origin of the term can be traced to the color-coded “Residential Security Maps” of American cities produced by the Home Owners’ Loan Corporation, a New Deal agency created in 1933. Each map had four classifications, ranging from most to least desirable: green, blue, yellow, and red.

Most desirable were the green areas. They were ethnically “homogeneous” and worthy of loans in “good times or bad.” The second and third-grade areas were blue and yellow. Least desirable were the red ones. According to the maps, they had “detrimental influences in a pronounced degree” and an “undesirable population [that is disproportionately black] or an infiltration of it.”

The Federal Home Loan Bank Board used the maps as a basis for its loans, usually denying them to red areas; hence the term redlining. Federal policies also encouraged the private sector to follow similar policies by providing the maps to banks and developers as guidance for their own loan ratings. The benefits of a centrally managed social welfare state.

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