Beyond corporate statements of solidarity and CEO rhetoric of equality

High Fidelity, a black owned business on Melrose Avenue, displays a "Minority Owned" signed in the window with hopes that their business would not be looted or damaged during the riots that took place the night before in Los Angeles, CA on Sunday, May 31, 2020. (Photo by Desmond A. Hester / Sipa USA)No Use UK. No Use Germany.

George Floyd’s final pleas were deeply traumatizing and agonizing for every Black mother and father who watched in horror as four police officers drained the life from Floyd’s body. Officer Derek Chauvin pinned Floyd beneath his knee for nine minutes. No apparent signs of stress, exertion, or anxiety flickered across his face. Fellow officer Tou Thao, standing a few feet away, seemed unphased by the entire event. Their indifference reflected a sense of normalcy in dispensing the duty to “protect and serve.”

Any society that normalizes the casual murder of a human being must reflect on its values, history, and future. We must interrogate the systemic and cultural norms that embolden, normalize, and indemnify police violence. More importantly, these norms must be reconfigured to recognize that the murder of one individual sends waves of trauma throughout a community. For that reason, any efforts to address police brutality and misconduct must provide restitution to Black and Brown communities impacted by such practices.

Although our legal system appropriately allows individual families to collect civil money settlements when their constitutional rights have been violated, recompense for the toll exacted on the broader community has been largely ignored.

In 2016, Jeronimo Yanez—a Minnesotan police officer—brutally murdered Philando Castile in front of his girlfriend and her 4-year-old daughter. Each of Yanez’s seven bullets pierced the security blanket of every Black family in St. Paul, MN (and beyond), yet the wrongful death settlements, totaling $3.8 million, did not provide a single dollar of remuneration to a community now re-traumatized by George Floyd’s murder. In 2018, police misconduct, multiple instances of excessive force, and cases of evidence fabrication cost New York City taxpayers more than $68 million, without recompense to the communities that were also the silent victims of police misconduct. Meanwhile, Chicago’s City Council recently approved a $153 million provision to cover the city’s anticipated legal settlements for fiscal year 2020.  St. Paul, MN, like every Black community across America, accumulates PTSD each time we relive the trauma of the death of an unarmed Black man, and our fear and anxiety mount each time our sons encounter law enforcement. It’s time we acknowledge community PTSD and design policies to redress the emotional trauma inflicted on Black and Brown communities and make commitments to ensure that future generations in these communities thrive.

Financing Community Restitution

How can we take a fresh approach to remedying community trauma?  One way to think about a possible remedy is to understand that the reality of police brutality is already calculated into the ways in which municipalities finance their operations.  Municipalities budget for police misconduct payments and those budgets then serve as the basis for drawing up municipal bond sales. There is, therefore, tacit acknowledgment that the consequences of systemic racism, as expressed in police misconduct, need to be financed along with other municipal costs.

Banks, pension funds, investment banks, and insurance companies readily finance and securitize municipal credit facilities, which earn them substantial discretionary fees including underwriting, management, rating agency fees, and interest amortized over the bond’s duration.  So, financial intermediaries generate income on the issuance of the municipal lending used to pay out police misconduct settlements. Many of these very same institutions are also subject to the Community Reinvestment Act of 1977 (CRA) a law that obligates financial institutions to serve the credit and capital needs of low-income and underserved communities.

CRA financial institutions should be thinking now about their own financial responsibilities to Black and Brown communities whose trauma, in part, creates municipal demand for the debt that is needed to pay out legal settlements to the families of victims of police brutality. Beyond corporate statements of solidarity and CEO rhetoric of equality, financial institutions have an opportunity to participate in the rehabilitation of harmed communities by reinvesting some portion of the proceeds from municipal bond sales into the network of community organizations working to rehabilitate the neighborhoods at the frontlines of police violence and misconduct: social justice organizations, workforce development boards, community colleges, citizen HBCUs, and affordable housing developers.

We need to co-opt the Equal Credit and Opportunity Act (ECOA) framework to engineer a mechanism that automatically directs some portion of the private proceeds generated by the sales of municipal bonds into communities hollowed out both psychologically and financially by longstanding police brutality.  This would allow us to create an automatic redistribution mechanism that addresses community trauma by financing community restitution and generating a stream of capital investments to rebuild terrorized communities.

For decades, government-sanctioned discrimination and violence have deliberately deprived communities of color of systematic financial investment. Financial institutions that have long profited from the business of discrimination have an ethical obligation to finance our journey to equity.

Prudential regulators have signaled a willingness to expand the range of CRA-credit qualifying financial activities as part of their efforts to modernize the Community Reinvestment Act. The automatic reinvestment of police abuse bond fees and interest in affected communities, particularly the traditionally underserved, should easily qualify for CRA credit under a modernized framework. Banks willing to accept this ethical challenge must initiate this consequential redistribution of capital to communities of color. The CRA provides a framework to both automatically reinvest millions of dollars and to reward financial institutions that fund the long-term work of addressing community trauma.