Racism was quite severe during the Jazz Age. During the 1920's, the Ku Klux Klan re-emerged as a major power in the United States. This time, the Klan had influence all over the country as black people moved North during WWI to take industrial jobs and escape the poverty of the South. Racism was quite common in popular culture as well, with blackface being normal in movies and cartoons. No African Americans played key roles in movies. They were usually portrayed as servants or as comic relief.

There was not a big push to make jazz records as most Americans wanted to return to "normalcy" which was a term used by the short-lived president of the early 1920's, Warren Harding. They wanted an America with traditional music and traditional small-town and rural values. Much of traditional America viewed urban America as fast, loud, morally loose and inherently "bad." They worried that the jazz music represented women with loose morals, drinking, and modernity. Some also feared what would happen if black culture mixed with white culture. They viewed this jazz music as something that would take the United States away from its traditional (white) roots.

During the 1920s, there was still a great deal of overt racism in US society. There was still no thought of integration of the races. The Army had been segregated in WWI. The KKK was strong even in such relatively northern states as Indiana. Major League Baseball had no black players and would have none until after WWII. So there was clearly racism.

Record companies that did not record jazz probably shunned it for the same reasons that they wouldn't record early rock-n-roll 30 years later.  The worry was that white audiences would not want to listen to "black" music and so the records wouldn't sell.