Credit and debt, two sides of the same proverbial coin, place a bet on time. Credit makes money mobile and funds the future. Soon enough, however, it becomes debt, with the lender demanding from the borrower returns with interest that threaten to constrict the possibility of further credit. Personal debt masquerades as moral obligation, a contract freely chosen, yet at the heart of the promise debt creates is not social reciprocity, as the late David Graeber wrote in Debt: The First 5000 Years, but a “simple, cold, and impersonal” market transaction. As nothing more than a “matter of impersonal arithmetic,” debt requires shame and ultimately the threat of force to fulfill its terms and realize the returns for creditors it promises. It lodges coercion at the heart of the supposedly “free” market.

The squeeze is only intensified in the seemingly impersonal world of institutional finance. If debt ensures stability and solvency for some, the economic growth it propels fuels dependency and inequality for others, not only between creditor and debtor but also further down the line, as the borrower passes on the costs of debt to those with less power to control the terms of the deal. This devil’s bargain is particularly true when it comes to municipal debt, argues the Stanford University historian Destin Jenkins in The Bonds of Inequality, his new book on the power the bond market has leveraged over San Francisco and other US cities. The debt-financed spending that cities have long used to spur growth, Jenkins contends, has also underwritten the racial and income inequality of the post–World War II metropolis, while funneling profits to bankers and reinforcing city dependency on finance capitalism. This unequal compact hid in plain sight until the 1970s, when the urban fiscal crises of the era revealed that cities were deeply in hock to financial institutions. But debt was just the way business was done, and banks and other lenders saw no reason to ease the terms of this deal, preferring instead to underwrite the continued hollowing-out of the American metropolitan landscape.

The Bonds of Inequality jumps off from 40 years or so of work by urban historians exposing the platitudes conservatives and liberals used to explain the “urban crisis” that began in the 1960s. Not long ago, the conventional wisdom about urban life in the years after World War II unfurled in a series of overdetermined catchphrases. Cities, peaceful and prosperous through the 1950s and early ’60s, “went downhill” after the riotous “long hot summers” and “white flight” of the late ’60s. The cause of this urban collapse, conservative and liberal piety of the ’80s and ’90s assured us, was not a lack of money in cities but too much: Overeager liberals, looking to usher in Lyndon Johnson’s Great Society with War on Poverty programs, welfare payments, and other instruments of social engineering, supposedly created a permanent “underclass” living in a “culture of poverty.” The only way to end these so-called cycles of “dependency” was, as Bill Clinton did in the ’90s, to “end welfare as we know it” and “get tough on crime.”

Urban historians have long shown these easy judgments to be disconnected from life on the ground. Taking their cues from neighborhood and labor organizers, civil rights lawyers and fair housing campaigners, as well as many in the Black and Latinx community who have resisted the ill effects of this consensus all along, these historians have unearthed the fact that white Americans, working- and middle-class alike, were the primary recipients of postwar government dollars. They followed federal subsidies to the suburbs, while government policy neglected Black and Latinx neighborhoods. Far more important than government welfare was government support for urban deindustrialization, urban renewal and “slum” clearance, highway building, and segregated and underfunded public housing. Less the beneficiaries of federal largesse, Black and Latinx urban dwellers were simply left behind by a postwar welfare state that systematically overdeveloped suburbs and underdeveloped cities, leaving behind the racialized and bifurcated metropolitan landscape of George Floyd’s America.

The real story of postwar metropolitan inequality has gradually made its way into the public eye, displacing the older conservative and liberal accounts of urban decline. Along the way, however, a new kind of simplification has begun to take hold. Even as we learned to understand the continuing power of race in shaping America’s unequal democracy, the culprit in the popular story of metropolitan inequality has too often been winnowed down to one malign malefactor: the federal government. The “forgotten history” of postwar cities, as the subtitle of Richard Rothstein’s The Color of Law tells us, can be summed up as the story of “how our government segregated America.” What was once a simple tale of federal government overreach threatens to become a simple one of federal government corruption.

Jenkins’s new book lays the groundwork for a third story. By following the money, he turns our attention away from federal malfeasance alone and toward the capital markets and financial instruments that floated 20th-century city-building in the first place. The true source of urban and racial inequality, he argues, can be found in the cities’ “structural dependence on the municipal bond market.” Once they became markets for investment and commercial banking, Jenkins argues, cities were little more than supplicants to capital, relying on a system of debt-fueled finance that would, in time, come to require urban officials to put the needs of bankers above the well-being of their most vulnerable constituents. Government, Jenkins contends in his innovative book, only made urban inequality with the help of capital markets.

Cities have long been hamstrung by their place in the US political economy. For most of the country’s history, they’ve won favor in state capitols only when they can deliver economic growth beyond their boundaries, and outside a short 40-or-so-year period between the New Deal and the Great Society, they have been largely neglected by the federal government. City governments have always needed to find a way to make property pay—primarily through taxes and fees—in order to keep the lights on and deliver the social infrastructure necessary to meet the demands of a complex industrial order. Caught between the need to bring in revenue and the absolute command to keep private property developers and homeowners happy, urban officials face a perpetual double bind.

Balancing those interests has long been the name of the game—and the ultimate challenge urban liberals and municipal socialists have faced since they came to power back at the turn of the 20th century, during the Progressive Era. It was then that they saw that to afford the big public infrastructure projects necessary for urban living, they would have to turn elsewhere—to bankers, who would buy municipal bonds as loans and charge low interest rates on long-term payment schedules. (Cities had issued debt earlier in the 19th century, but for several decades many had chafed under a political culture that favored a “pay as you go” model for city services that relied on taxes alone, thereby constraining development and putting politically hazardous burdens on individual property owners.) Cities still depended on taxes and fees to repay debt obligations—but in a hazy future, when it was assumed that urban growth would swell city accounts and fulfill the bills.

Jenkins shows how San Francisco, like all big cities, came to depend on this market even after the New Deal began to funnel federal money to city coffers. Bankers and other investors, in turn, favored municipal bond offerings for their steady and predictable returns. Then, after 1941, the deal got even better: The federal government began to tax profits on the interest earned from loaning it bond money. Now, profits earned on interest from loans to state and local governments enjoyed a tax exemption.

What Jenkins calls an “industry of debt” rose up to service this need, an ecosystem of expertise made up of various sectors of “bondsmen”: municipal finance professionals in city government, lenders in commercial and investment banks, financial industry investors who bought the debt from lenders in secondary markets, and, crucially, the ratings agencies like Moody’s and Standard and Poor’s that certified city debt as market-worthy. Most bonds had to be approved by voters, but in elections where much of the relevant information about the bond issues was insulated from the public. Bankers and municipal officials pitched their wares on sheer faith in future growth rather than explanations of financial hazard or unevenly distributed spending.

For 20 years after World War II the municipal debt machine hummed along, roaring to life with each election cycle. Whether individual bond issues were approved or not—and many failed to pass—San Francisco was able to use bond loans to build or maintain parks, playgrounds, schools, transit, water and power infrastructure, sewers, hospitals, parking garages, the airport, an aquarium, and even landmarks like the Palace of Fine Arts and the auditorium at the Civic Center. These were flush years for San Francisco, one of a handful of older cities across the country whose investment in white-collar amenities shielded it from the full impact of deindustrialization.

But the postwar boom concealed pervasive economic and racial inequality. Municipal officials and lenders rightly claimed that bonds financed universal infrastructure that served all, but as Jenkins shows, they also underwrote the creation of the “consumer’s playground”—a new built environment for white people devoted to the office economy, tourism, and middle-class neighborhoods built by the white-dominated construction trades. Even the city’s urban redevelopment authority floated bonds in order to pursue building projects that attempted to keep white middle-class residents in the city by tearing down working-class neighborhoods, while “black neighborhoods were routinely deemed unworthy of debt.”

Bond money did reach San Francisco’s working-class communities and communities of color through the public housing agency, which likewise relied on short-term municipal loans in the 1950s. But its projects, largely built in redlined parts of the city, failed to disrupt structural inequality and reinforced long-standing patterns of segregation. In the end, Jenkins argues, the bond ecosystem drove an “infrastructural investment in middle-class whiteness.”

This compact—bond-spurred, top-down money fueling municipal growth and underlying inequality alike—lasted into the 1960s. But a series of political revolts and rising interest rates spelled the end of the boom years and the arrival of a new era of fiscal crunch for cities gutted by deindustrialization and suburbanization. Conservative homeowners on San Francisco’s quasi-suburban fringe, Black civil rights advocates, and activists on the city’s vibrant populist left all came to be suspicious of debt-financed development. Concerns about future tax burdens and unequal development dovetailed to doom more and more bond issues, including, tragically, several intended to direct more public amenities to Black neighborhoods like Hunter’s Point in the late ’60s.

Meanwhile, the cost of long-term borrowing, which had been creeping up since the war, really took off in the middle of the decade. Interest rates, which had hovered around 1 percent in 1946, hit almost 4 percent during the credit crunch of 1966 (crippling Johnson’s Great Society programs) and went up from there to 7 and 8 percent by the 1970s. Voters still approved some bond issues, but lenders increasingly offered only short-term loans, fearing that they would never see returns over the long run. Most lenders did fine—higher rates meant higher returns, of course—but by the mid-1970s and ’80s the rating agencies began to downgrade city bond issues, warning of the specter of default. Bondsmen opposed federal lending to cities—even in the shape of low-cost loans at fixed rates for long terms—insisting that, as one investment banking industry representative put it, “dependence on the Federal Government” would license “a gradual erosion of the responsibility of the local government.”

This parsimony, needless to say, was self-serving. As the fiscal crises of cities deepened in the 1970s, it became brutally clear who was dependent on whom. Bankers insisted that the payment of debt obligations in San Francisco and other big cities—particularly New York, which faced an infamous bankers’ revolt over high municipal spending in the ’70s—should come before funds for city services. They demanded budget cuts, municipal layoffs, and increased taxes and fees, and they pitched them to the public as inevitable medicine. In the long run, lenders would get paid back one way or another—sometimes taking losses they were loath to shoulder—but many cities found themselves mired in intractable and persistent debt, forced into extractive terms in order to maintain credit ratings that would allow further borrowing.

For Jenkins, the squeezed cities of the 1970s and ’80s were only the catastrophic end-product of a half-century or more of lenders’ profiting from racial inequality. By funding the divided city and extracting payment from its suffering, they practiced “accumulation by dispossession.” Sometimes Jenkins sees the bondsmen’s standard operating procedure as a kind of predatory practice—with lenders as parasites unconcerned with the life of the city and keen to milk it for all they could. He shows that San Francisco’s bondsmen operated in effect as a men’s club, publishing their own in-house grind rag called the San Francisco Tapeworm, a kind of amateur Mad magazine for municipal bond sellers replete with the graphic racism and misogyny that marked their disdain for the everyday lives unfolding below their office windows. Any fan of Mad Men, however, would recognize this brand of cruel homosocial bonhomie as a hazard of the mid-century office. It marked them as representative of their class, not their particular profession. At other moments, though, some bondsmen appear to have had a kind of paternalistic regard for their city and a hope to make the best deal they could for its welfare. Before the 1970s, many were local bankers, with more attachment to urban fortunes than a later generation of global financiers. In the end, though, the bankers’ motives were beside the point: Their main loyalty was to the terms of a loan and to realizing a return on their investment.

For Jenkins, the relationship between bond money and racial inequality turned on more than the lenders’ relative degrees of civic consciousness. Over the course of the century, the deal city officials made with bankers evolved into a virtual cage. “The imperatives of the bond market,” he argues, “helped to make middle- and upper-income housing in San Francisco racially exclusionary…. The pressures to make sure that new housing, commercial development, and amenities for white consumers would generate revenue to pay creditors,” Jenkins continues, “led to a privileging of those tenants who were deemed least ‘risky’—in other words, white and relatively high income.”

The bankers’ decisive but removed role in urban development raises the question, however: What kind of power did they actually have? One reading of the evidence Jenkins has uncovered is that the final relationship between bond money and inequality is structural—almost abstract—and not strictly causal. The “pressures” and “imperatives” that Jenkins describes only rarely materialized as overt demands for anything other than honoring the terms of the deal. For all their ubiquitous power to shape the realm of the possible—without bond money, cities would seize up—they did not cause urban racial inequality in and of itself so much as set the financial terms by which it could be realized. They put in place a structure of uneven reciprocity that licensed, funded, and perpetuated the inequality forged by other means.

The Bonds of Inequality goes a long way toward revealing the role of financial markets in the making of urban inequality. And Jenkins is right to want to modify the recent popular “master narrative” that has coalesced around the idea that “public policies fueled the growth of the ghetto or the racial wealth gap between cities and suburbs.” But in laying all the blame at the feet of bankers and other “bondsmen,” Jenkins at times risks obscuring some of the true lessons of the new histories of metropolitan inequality.

Urban historians have never ignored the private market in their accounts of federal government malfeasance. But they have focused primarily on the real estate market, not the market in municipal debt. That’s where the rubber meets the road: The market in urban land was the scene of the many millions of street-level deals that the bond market underwrote and government policy directly promoted. It was where the insidious conflation of property value and race got started and where it was eventually institutionalized in local, state, and federal policy. From Kenneth Jackson and Arnold Hirsch to Thomas Sugrue, Dolores Hayden, Robert Self, Margaret Garb, Becky Nicolaides, David Freund, Nathan Connolly, and many others, historians have shown how the familiar urban bogeymen—redlining, zoning, restrictive covenants, public housing policy, urban renewal—were products of a public-private compact in which government policy took its cues from a private real estate market with commitments to class and racial segregation nurtured long before the New Deal origins of federal intervention in cities. For decades, American political culture had revolved around perpetuating a political economy and social landscape of single-family homes built in neighborhoods divided along the lines of race and class. Federal dollars followed and ratified this already existing private-sector investment in suburbanization and urban inequality.

Popular accounts of government corruption have tended to gloss over the complex story of metropolitan inequality, but Jenkins’s work gives us an opportunity to ask not only how public policy and private markets were related but also how the bond and real estate markets worked together. For instance, Jenkins shows how San Francisco’s urban renewal administrators issued bonds to help finance postwar redevelopment. They took land from small landlords through eminent domain and transferred it to real estate developers for “slum clearance” and rebuilding. The injustices that resulted—working-class neighborhoods, often of color, were razed to build the new landscape of the white-collar “consumer’s playground”—rewarded the developers and ensured profits for banks, while uprooting poor people and taking property from smaller capitalists. The bond market supplied capital, but urban renewal involved no small amount of direct federal subsidy too. And local officials could win support from Washington and the bankers only by assuring them that redevelopment would proceed according to principles long codified by the private real estate industry.

Who, ultimately, was behind all of these changes? There is no one clear malefactor in this grim period of history, in which federal subsidy, bond market capital, and real estate practice all combined to redouble rather than redress racialized inequality. But Jenkins asks us to look closely at this troubling relationship and its consequences, even if he never quite brings the story down to the streets to show us how the bond market functions in relation to this other wellspring of government-supported inequality: the real estate market.

By the end of The Bonds of Inequality, we are left with a picture of cities hamstrung by their need for private capital, destroying their potential through round after round of borrowing. Ultimately, Jenkins argues that cities will have to turn to Washington to escape the perils of bonded debt. He is rightly wary about an overreliance on the federal government, given its checkered history of supporting racist property markets, but he is right that a new politics of municipal finance—if it can ever force the government to reopen the spigot of direct support for cities—would certainly reduce urban reliance on the real estate and bond markets alike and, as a result, would likely help a new generation of social democrats, racial justice advocates, and even liberals to reduce inequality. Shifting the terms of dependence to a more democratic realm, one where growing cities might have more say over their fate, could end the coercion of bonded indebtedness once and for all.