The Bonds of Inequality: Debt and the Making of the American City by Destin Jenkins

Abstract

Reviewed by: The Bonds of Inequality: Debt and the Making of the American City by Destin Jenkins Joe William Trotter Jr. THE BONDS OF INEQUALITY: DEBT AND THE MAKING OF THE AMERICAN CITY. By Destin Jenkins. Chicago: University of Chicago Press, 2021. Focusing on the city of San Francisco from the aftermath of World War II through the late 20th century, this book creatively documents the role of municipal debt in the creation and maintenance of a class and racially fragmented and unequal metropolis. Carefully conceptualized, deeply researched and persuasively argued, this book makes a signal contribution to knowledge by focusing on the social, cultural, and political as [End Page 36] well as economic history of municipal debt. Unlike most existing studies of finance capitalism that give the lion’s share of attention to the ideas and behavior of the organized white labor movement, the real estate industry, and journalistic accounts among other similar sources, The Bonds of Inequality places the municipal bond market and a coterie of heretofore little acknowledged actors at the center of the story. This study revolves around the activities of what the author describes as a “fraternity” of white professional and business elites — specifically, city controllers, accountants, bondholders, lenders, bond financiers, peddlers of debt, credit analysts and bond raters (11). In careful detail, Jenkins demonstrates how municipal finance officers collaborated closely with banks and professional credit and bond rating agencies to sell municipal bonds. Together, bankers and their allies and city finance officers crafted a system of urban finance that depended on the sale of municipal bonds to secure capital for a variety of urban infrastructure projects — including schools, roads, public parks and playgrounds. The tasks of financial officers was by no means left to chance. Working through their “modernized” national Municipal Finance Officers’ Association of the United States and Canada (MFOA), city finance officers not only successfully accessed the municipal bond markets, but also used credit rating professionals, bankers, lawyers, and legal experts to stymie popular input into their actions. As such, they were able to shield municipal debt from the close scrutiny and demands of activist public service and civil rights groups. The buyers of municipal debt took a seat at the influential heart of urban financial strategy discussions. They served as members of urban governmental advisory committees and diverse governing bodies responsible for such local spending projects as urban renewal, public housing, and city transportation systems. Such in-house influence of bondholders ensured policy decisions that repeatedly favored the profit-making interests of finance capitalists over the social welfare and infrastructure-building needs of the vast majority of the city’s people. Moreover, the statutory power of such municipal organizations as the San Francisco Redevelopment Agency and the San Francisco Housing Authority enabled the approval of bond issues without a public referendum on the matter. When the interests of the broader public good clashed with the profits of funders, the former always gave way to the latter. But the broader public good was by no means monolithic. In the wake of the Great Depression and passage of the Glass-Steagall Act, New Deal financial policy helped to transform what Jenkins calls the “rights consciousness” of white Americans in “new ways.” To the painful and destructive disadvantage of African Americans and Latinx people, New Deal social policy facilitated the emergence of what Jenkins describes as an “Intraracial [white] cross-class compact.” The collusion of white workers and their middle-class counterparts enabled municipal government to dramatically expand the bonded debt by extensive borrowing for a series of infrastructural improvements: schools, roads, museums, and other leisure facilities, to name a few. These projects benefitted white citizens, particularly elite white men through such entities as the San Francisco Bond Club. Although communities of color paid taxes and put the weight of their votes behind most bond issues during the first two postwar decades, they received little in return for their support. After several decades of delivering benefits to white citizens, The Bonds of Inequality shows how this system finally broke down under the demands of the Modern Black Freedom Movement, an emerging left-wing critique of municipal bonds as lopsided “redistributionary” elite claims on the...