Public Comment

Jim Crow Economics in Berkeley

Steve Martinot
Saturday March 02, 2019 - 07:13:00 PM

Debt Servitude

The term “debt servitude” has a double meaning. It means one is placed in servitude to one’s debt, and it also means one is placed into servitude to another person or institution through that debt.

Debt servitude was the structure by which Jim Crow replaced the form of forced labor called enslavement that preceded it. Debt servitude and Jim Crow characterized the class structure during the second third of this nation’s existence. When an unlikely Supreme Court decision on education pulled the cork out of that bottle, two whole decades of unremitting struggle to democratize this country ensued. The Reagan administration then commenced to put the cork back in that bottle. And in the process, it deregulated real estate (as well as finance), initiating an era of rising rents and a concommitant problem of “homelessness.”

There is a civil suit (in Alameda County Court), launched by the city of Berkeley, that exemplifies the modern form of debt servitude. The name of this case is “The City of Berkeley vs. Leonard Powell.”

Leonard Powell is a black veteran with a large family who bought a house before Reagan, and got it free and clear by the 1990s. He is now in the process of losing it to debt servitude. 


Here’s how debt servitude worked under Jim Crow

Initiated in the late 1870s and 1880s, debt servitude was used to tie a freed black farmer or agricultural laborer to the land. It was a substitute for enslavement. Like enslavement, debt servitude tied an agricultural laborers to a piece of land, and forced him to work in order to pay off a debt that kept getting larger the more he worked. What tied him to that land was the Sheriff who had the power to arrest for any attempt to escape that debt, and throw the man on a chain-gang. 

The debt would be initiated by the need of the farmer or laborer to borrow money to buy seed and tools and donkey feed and the means for his own and his family’s survival during the growing season (food, etc.). The laborer and his family would work the land (his own or another’s), to raise a crop he had already mortgaged to get that loan. When the crop was harvested, the lender would then come and seize it. And after it was sold, and the amount of the laborer’s debt deducted, the laborer would find his pockets empty and his debt greater than it had been. So he would borrow more money to get through the next growing season. And so on. 

Here’s how debt servitude works today

Today, if a low income family’s house is found to be in violation of city codes, and the family cannot meet city demands for immediate repair, the city can sue to put the house in receivership. The receiver then initiates repairs which then become a debt for the owner. The debt increases as the cost of house repair increases. If the receiver then initiates expenses beyond the owner’s means, he places the owner in a position to lose his house. There is nothing that the owner can do to stop this process. And it happens more often to black families during periods of gentrification (white upper class influx) because black families have been held to lower levels of assets than whites. The low value for real estate means development will be more profitable. 

In 2014, the city of Berkeley found certain code violations in Mr. Leonard Powell’s house, and gave him a list. Being a man of meager means, he asked the city to negotiate with him on fixing and repairing what the city had listed. He had no objections to the list, and was happy to comply with the law, and to keep his house maintained. But he hit a wall. The city preferred to set strict deadlines, and hold it against him that he failed to meet them (in its suit against him). It offered him a loan that it knew he couldn’t use. And held that against him as well. The suit it initiated was to place the house under receivership, which was approved in March of 2017. (See my article, “Berkeley, a City with a Heart … of Stone,” in the Berkeley Planet, May 16, 2018, for the details on this). And everybody, city, court, and receiver, assured LP that he would be returned to his house with his family when it was over. 

The original repair work was estimated (in 2017) to be in the area of $150,000 to $180,000, which would have established a debt that Mr. Powell could have handled. By the summer of 2018, the receiver had managed to boost the total expenses for the project up to $700,000. Here’s how it works. 

The receiver is mandated only to repair the code violations. When he began work, he says he found some things wrong with the house that needed reconstruction beyond the scope of his original mandate. Without inspection or court approval, he went ahead with it. It was nedessary, he claimed, for returning the house to duplex status, as the condition whose absence ostensibly prohibited LP getting access to that money. 

The city didn’t require duplex status, however, and LP didn’t want it. And the transformation of the house to duplex status negated the "home" condition to which LP was promised he could return because it rendered the house rental property. This was the first step in the debt cycle. 

A debt cycle consisted of an increase in costs, LP’s attempt to get loans to cover them, the imposition of new requirements on the house for those loans, new construction to meet those requirements, and thus increased costs producing increased debt, sending LP out to get more loans. He went to banks and the VA and the federal government, etc. Each source of financing imposed new building requirements. The receiver would then do the work to "enable" LP to get a loan. After each cycle, LP owed more money on his house. It’s a treadmill, a debt servitude treadmill. 

Here’s how the receiver himself describes this in a letter to the Mayor of Berkeley, written on February 4, 2019. He explains the origin of the increased costs through a determination “that there were significant structural and foundation issues.” This was not pursuant to abating the Berkeley housing code violations. But it was done, without prior city inspection, and without prior court approval (at least none that appears in the court records, or in Public Records Request documents from the city). The immediate effect was the need for LP to obtain more funding. The receiver admits to this (in his letter to the Mayor). 

“In order for Mr. Powell to qualify for federally subsidized financing, the entire property needed to meet the Federal Home Association guidelines for habitability. This required the repair of items that were not on the original list of code violations.” 

Several times during 2018, the receiver asked the court for an increase in his capacity to borrow money on the basis of the receivership. The latest, granted in June, 2018, by Judge Brand, was for an increase from $435,000 to $515,000. With his fees and legal expenses, the receiver, in his June 28, 2018, filing with the court, reaches the final total figure of $700,000, to be chargeable to LP. 

On February 22, 2019, we (supporters of Mr. Powell) witnessed the latest step in this cyclic process personally. Some 35 of us attended the court process in support and solidarity with LP, knowing what he had gone through to raise the money to satisfy the receiver’s bill of the previous month. Whatever transpired that day during an hour and a half conference in judge’s chambers, Mr. Powell emerged from that "conference" owing more money than he did when he went in. 


It is the same old story

When a black sharecropper works the land, it is to survive, to feed and clothe and house his family. The debt servitude of Jim Crow would place him in a situation from which he could never get free. If he tried -- to go north, perhaps, or to a city to get an industrial job – the sheriff (under Jim Crow law) would put him on a chain-gang. Today, when a city or a bank or a receivership process places a resident in unconscionable debt, and the person seeks to escape bondage to that debt, he will lose his house, and become homeless. 

If debt servitude was the analogue of enslavement after the outlawing of slavery, urban homelessness is today the latter-day avatar of the chain-gang of the Jim Crow era. It is where those who wish to escape an imposed debt – with no resources with which to do so – end up. 

The true purpose of Jim Crow was to set aside an entire sector of the population (black people) for hyper-impoverishment, to prevent them from accruing assets that could be used to support a non-impoverished life. By bestowing an “identity of prosperity” on the rest of the society (white people), it enabled white people to think in terms of a supremacy. It also enabled banks to think in terms of "redlining," and political parties to think in terms of "gerrymandering." And ultimately it allowed whole classes of people to oppose gun control. 

As Albert Memmi has said, the dominant group does not oppress the subordinate group because it hates them, it hates the subordinate group because it oppresses them. 

Today, it all happens in a courtroom

In his monthly accounting for January, 2019 (filed on February 22, 2019, the same day as the aforementioned court conference), the receiver stated that “The Receiver has reviewed the funds on hand and determined there are insufficient funds to pay all expenses incurred. Accordingly, if no objections are received within 10 days from the service of the Report, the Receiver will accrue fees until estate funds become available.” That is, the debt will increase until full payment by Mr. Powell is made. Even long after the building was finished. 

The work on the building was finished in October, 2018. It was given a Certificate of Occupancy. Yet the receiver refuses to allow Mr. Powell back into his own house, until he gets his money. Thus, the case remains in court. The receiver demands his money. The judge tells Mr. Powell to come into court with the money (in cash or promissory form). Mr. Powell appears with the money in promissory form, and is informed that he owes more than before because the receiver has charged him with fees from the intervening month. 

So it has gone for the last 4 months. The receiver continues to receive in excess of $10,000 a month in “fees and expenses” during this time, though no work is being done. Every month, the money Mr. Powell owes the receiver increases. 

Now (February, 2019), the receiver has filed a petition with the court to obtain permission to sell the house. He is implying that the only way he thinks he will be able to get compensation will be through such a sale. In other words, he is fairly confident that Mr. Powell will not get himself out of the debt the receiver has placed him in. 

Only the city of Berkeley can stop this travesty

Only the city of Berkeley can stop this travesty of justice because only its "uncivil" suit has created the condition in which Mr. Powell is victimzed by this form of debt servitude. The city is the author of the situation by which Mr. Powell is being impoverished through debt. 

The judge can’t do it. He finds himself immersed in a biased procedure because the law provides greater protection for the interests of this white receiver than it does for the interests of this black homeowner. The city of Berkeley knows this, but does nothing to alleviate it. Over the last 4 months, the Berkeley city attorney (or her assistant) has attended these hearings and conferences. She is thus a party to the discussions that impose endless increase in debt on Mr. Powell. 

In effect, the city’s suit plays the role of Jim Crow law, authorizing the debt servitude imposed on black laborers by lenders after emancipation. Here, it is being used to deprive a black family of their assets. 

Why wasn’t the suit terminated in October, 2018, when the work on the house was done (or in December, 2017, when repairs of code ciolations had been completed)? Had the city terminated its suit in November of 2018, some $84,000 would not have been added to Mr. Powell’s debt. 

Why couldn’t the city withdraw or terminate its suit against Mr. Powell right now? That would end whatever authority the receiver has by ending the receivership. While the receiver has been enriching himself at Mr. Powell’s expense, the city has offered no supervision. It did not care that this black family was victimized through the imposition of this debt cycle. Indeed, all knowledge the city had, in the context of this failure, amounts to collusion with the receiver.