Federal housing policy, which powerfully reinforced residential segregation, revealed the limits of New Deal freedom. As in the case of Social Security, local officials put national housing policy into practice in a way that reinforced existing racial boundaries. Nearly all municipalities, North as well as South, insisted that housing built or financially aided by the federal government be racially segregated. (In Texas, some communities financed three sets of housing projects—for whites, blacks, and Mexicans.) The Federal Housing Administration, moreover, had no hesitation about insuring mortgages that contained clauses barring future sales to nonwhite buyers, and it refused to channel money into integrated neighborhoods. In some cases, the presence of a single black family led the agency to declare an entire block off-limits for federal mortgage insurance. Along with discriminatory practices by private banks and real estate companies, federal policy became a major factor in further entrenching housing segregation in the United States.

Federal employment practices also discriminated on the basis of race. As late as 1940, of the 150,000 blacks holding federal jobs, only 2 percent occupied positions other than clerk or custodian. In the South, many New Deal construction projects refused to hire blacks at all. “They give all the work to white people and give us nothing,” a black resident of Mississippi wrote to FDR in 1935. The New Dealbegan the process of modernizing southern agriculture, but tenants, black and white, footed much of the bill. Tens of thousands of sharecroppers, as noted earlier, were driven off the land as a result of the AAA policy of raising crop prices by paying landowners to reduce cotton acreage.

A black clergyman carrying a sign outside Peoples Drugstore in Washington, D.C., in the late 1930s. The “Don’t Buy Where You Can’t Work” campaign targeted stores that served black customers but refused to hire black employees.

Support for civil rights would eventually become a test of liberal credentials. But in the 1930s, one could advocate Roosevelt’s economic program and oppose antilynching legislation and moves to incorporate black workers within Social Security. Theodore Bilbo, the notoriously racist senator from Mississippi, was one of the New Deal’s most loyal backers. Not until the Great Society of the 1960s would those left out of Social Security and other New Deal programs—racial minorities, many women, migrants and other less privileged workers—win inclusion in the American welfare state.

A map of Charlotte, North Carolina, prepared by the Home Owners’ Loan Corporation, illustrates how federal agencies engaged in “redlining” of neighborhoods containing blue-collar and black residents. Wealthy areas, coded green, were given the best credit ratings, and white-collar districts, in blue, the second best. Residents of red districts found it almost impossible to obtain government housing loans.

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