To: Mayor Rudy Giuliani
From: Jude Wanniski
Re: The price of profiling
At the turn of the 20th century, Mr. Mayor, Italian immigrants in California found it practically impossible to get a bank loan. California bankers assumed they would be poor credit risks and automatically turned them away, unless they were borrowing small amounts against big collateral. They were being profiled. Along came a young Italian named Amadeo Peter Giannini with no experience in banking, but with a business feel for the opportunity in the marketplace. He founded the Bank of Italy, which actively and solicited and loaned freely to the immigrant community, on the assumption the borrowers would make every effort to make good and liquidate their debts -- to establish their credit in the new land. Those whose first credits enabled them to build growing enterprises never forgot the start that Giannini gave them. Yes, there were bad loans, but there were so many good ones that Giannini leveraged his little bank into what became the Bank of America. Giannini's Bank of America became so big and so powerful that the Eastern banks had to use their political clout in Washington to pass banking laws that prohibited interstate branching, so fearful were they of Giannini's genius, his power and his reach.
Giannini could properly be viewed as a financial genius, which is the label we apply to those who are able to see a diamond in the rough. Remember Ronald Reagan's jest, that if there is a pile of manure, there must be a pony nearby? In our time, we could apply the same label to Michael Milken, whom we know as the inventor of "junk bonds." Actually, Milken and Giannini were mining the same mother load. "Junk bonds" is really another term for loans to "junk people." In Milken's heyday at Drexel Burnham Lambert, he was so successful in matching capital to promising enterprise in exactly the right amounts that the marketplace was thrusting unlimited amounts of money into his hands. The investment community knew he would make far better investments than they could, being unable to tell one manure pile from another. Milken is the one man on Wall Street who did not have to profile. He could look at any business plan and decide whether or not it could produce the returns to justify a capital investment.
Where Giannini excelled especially with Italian-Americans, Milken was amazing in his ability to put capital in the hands of African-Americans whose business plans caught his imagination. In the five years before he went to prison, more than half of all capital investment in the black community passed through Milken's hands -- and there were black opinion leaders who genuinely believed there was a conspiracy to remove Milken from the playing field to prevent his continued financing of black "junk people." Just as the Establishment found a way to block Giannini from getting out of California to reduce its power, it arranged for charges to be trumped up against Milken to stop him in his advance. You, of course, were the instrument in putting him in federal prison, when you fell for the line fed you by Ivan Boesky that Milken, not he, was Wall Street's evil genius. I hope someday you have the opportunity to review that case and see the injustice involved. Milken himself was being profiled, I think, in the sense that people who did not understand his genius assumed he could not have gotten so rich, so young, by lawful means. He had to be a crook to have amassed $2.5 billion before he was 40, from a standing start.
Profiling in the police business is just as important as it is in banking. This is one of the reasons I came to defend the jury's acquittal of Amadou Diallo. If the four police officers were as smart as you are, Mr. Mayor, I think Diallo might still be alive. Ordinary bankers tend to turn away loan applications from people who are in a classification that carries higher risks -- for example that class of people known to be the last hired and the first fired. Ordinary policemen who are looking for a black man accused of rape, in a section of town that is known to have produced a high percentage of violent men, are more likely to fire their weapon when confronting a black man who appears to be pulling his weapon than they would if they were looking for a white man accused of rape in a more pacific part of town.
Jesse Jackson remarked several years ago that when he is walking alone at night in the big city, if he hears footsteps behind him he hopes it is not a black man and is relieved when it is not. The Rev. Jackson reacts the way everyone does in making such risk calculations with lightning speed. The fact that this week in March of 2000 the number of men and women in prison in the United States will top 2 million -- and the majority will be people of color -- reminds us that it would be unreasonable to expect any American to treat footsteps in the dark any differently than Rev. Jackson. For our own safety, we all discriminate when we are at risk. People of color of course bear a greater burden in this society because color is visible. Black investment bankers shoulder this burden even when they try to hail a taxi at the wrong time of day in the wrong part of town.
Of course it is perfectly proper for Rev. Al Sharpton to give voice to the outrage in the black community when the price rises to the level of an innocent life, which reminds all of us that this tax on people of color still extends across the entire range of human activities -- down to taxi cabs and bank loans. The fact that Rev. Sharpton acted to channel the outrage into peaceful demonstrations was not only commendable. It also helped subtract from the general perception that people of color are prone to violence, which is of course part of the existing profile. At the margin, if this situation occurs again in exactly the same sequence, we can hope that another split second would be sufficient to cause the officers to realize the error. The larger challenge for political leadership, whether in the Mayor's Office, the U.S. Senate, or the Oval Office, is to find myriad ways to chip away at this "tax," so that at some future point it does not exist at all.