Racially Discriminatory Lending Leads to Black Community Wealth Decline
Baltimore study shows predatory lending by major banks across nation led to massive home foreclosures and wealth theft in Black communities
MARC STEINER: Welcome to The Real News Network. I’m Marc Steiner. Great to have you with us once again.
Remember, a few weeks ago, we spoke with economist Bill Black about a report that was released. It was called The Social Structure of Mortgage Discrimination. And one of the key representations in this study about discrimination was the story of Baltimore. Of course, that’s the city from which we broadcast from, and it’s also the city that I hail from. The research done by Jacob Brue, Len Albright, and Doug Massey looked at over 3,000 loans over an eight year period from 2000-2008 by Wells Fargo. These loans to black borrowers were charged higher rates than and given stipulations not applied to white borrowers. And this had nothing to do with the income of the borrowers or their credit rating and history. It led to massive home foreclosures in the black community. This discrimination cost a typical black homeowner fourteen thousand nine hundred dollars. And if that person lived in a predominately black community. Well, that costs was closer to sixteen thousand dollars. And as impossible as it sounds, the penalty was highest for black homeowners making more than 50,000 dollars a year. So Wells Fargo paid a hundred and seventy five million dollars to settle these lawsuits brought by allegations of predatory lending in Baltimore and other parts of the country. OK. Wells Fargo settled for millions. But black wealth is being devastated in this country and has not grown. Why have things changed? And how are they changed? What is the root of all this and what moves have been made or have to be made to stop these blatantly racist policies in the 21st century. We are joined today in the studio by Dedrck Asante-Muhammad who is Chief of Equity and Inclusion at the National Community Reinvestment Coalition. And, Dedrick. Good to have you hear at The Real News.
DEDRICK ASANTE-MUHAMMAD: Thank you. Good to be here. Yes, sir. Good to be here.
MARC STEINER: So where do we begin this? I mean, I think many people are looking at this will ask a question of, we’re in the 21st century.
DEDRICK ASANTE-MUHAMMAD: Yeah. No, no, no, no.
MARC STEINER: How is this happening?
DEDRICK ASANTE-MUHAMMAD: So I think, you know, you highlight two points that are very much connected. I mean one homeownership rates for African-Americans, right? Homeownership rates for African-Americans and Latinos is around 44 percent. Something like that. And then, I saw – I was just listening to an interview – that in 1930 African-Americans had about a 40 percent homeownership rate. So, you know, we oftentimes like to look at race relations in general as things might not be where we want them to be, but they’re heading in the right direction. But in a lot of key economic indicators, we’re not even headed in the right economic direction. And that’s true with homeownership, we’ve really been stuck. Homeownership rates for African-Americans did go up. Right. You know, during the bubble, right before the Great Recession, the crisis, but still never even got to 50 percent. And then it declined. Now, so, you know, below 45 percent, closer to 42, 43 percent. Now, there’s that picture which is also reflective of wealth. As you were highlighting, I mean, a lot of people don’t realize this. Yes, black wealth went down dramatically, as did Latino wealth. White wealth went down too. But black wealth and Latino wealth went down at a much greater kind of percentage wise after the Great Recession. But black wealth had declined since 2001. Black wealth had never. Blacks were on the decline from a recession in 2001 and then just went down even more dramatically during the Great Recession 2007, 2008, 2009. We haven’t seen a bounce back until about 2016 where, depending on how you measure it, but medium black wealth in 2013 was about 1,700 dollars in 2016. Again, depends how you measure it. It’s about thirty six hundred dollars. So when you say that there’s cost of 17,000 I want to put in that context where if the median household wealth is thirty six hundred. That’s five times the median wealth of African-American household. That extra costs in homeownership.
MARC STEINER: I mean one of things I saw there was a stat I was reading in the report as we were getting ready for this and it said that white wealth’s sort of like 141 thousand almost 142,000 in 2013, right? 13 times greater than the median black household income of only eleven thousand dollars.
DEDRICK ASANTE-MUHAMMAD: That’s right.
MARC STEINER: Ten times greater than Latino income, which I think was around 13.
DEDRICK ASANTE-MUHAMMAD: Right around there.
MARC STEINER: Almost 14,000 dollars. I mean. So, I mean, these disparities, again as we know have been driven all kinds of discrimination both public and private. I mean, to me the question is What do you do about it? I mean how do you intervene?
I mean you had to take Wells Fargo to court. They had to pay X amount of dollars to people so you can’t -.
DEDRICK ASANTE-MUHAMMAD: And that taking them to court was for exploiting black borrowers. But it was not taken to court to try to equalize black and white wealth. That’s a much bigger projects, right? And so, just highlighting that even that ad even trying to get, you know, that 135 million dollars, we’d have to see. You know, I’d really be interested what type of studies about how much of that ended up going to black families and what -.
MARC STEINER: Some of the lawsuits at Wells Fargo.
DEDRICK ASANTE-MUHAMMAD: The lawsuits. And what impact that actually had on households’ wealth and development because, again, if you – if your house is foreclosed, you know, and you get 20 thousand dollars, that’s not going into wealth. That’s probably just getting into trying to get your life back together. Because, you know, wealth is what you have beyond your income, it’s what you’re – it’s what you have to hopefully invest in the future to help stabilize your life. And so oftentimes we’re in such massive asset poverty that even if we get a little bit of extra funds, it can’t go into wealth development.
MARC STEINER: I mean there’s a couple of questions here. First question is I’m curious what you think about the question of policies.
DEDRICK ASANTE-MUHAMMAD: Yes.
MARC STEINER: And what policies have to occur. A, to not allow institutions, Wells Fargo and any other bank, to charge exorbitant rates to black people borrowing money.
DEDRICK ASANTE-MUHAMMAD: Yes.
MARC STEINER: Buying a home. It seems like for whatever reason they cannot put their hands around anything that governs banks to stop them from doing it. Everything seems to be back stepping or doing things after the fact.
DEDRICK ASANTE-MUHAMMAD: Well, and that’s something, I think we thought there was some progress happening after the Great Recession where – and we thought with the creation of CFPB -.
MARC STEINER: Which is?
DEDRICK ASANTE-MUHAMMAD: Consumer Financial Protection Bureau that was, you know, kind of set up recognizing that – that we kind of – the whole deregulation of banks that had been so prominent since at least the 80s wasn’t acceptable and helped bring the economy to a crisis and that we actually needed a government agency to help protect consumers as they’re dealing with findings. But we’ve seen that, you know, that barely got off the ground before Trump got elected and has started turning back the few things that was happening with CFPB, Consumer Financial Protection Bureau. So, I mean, I’m saying that to say that if we thought there were some steps. Moving forward in dealing with banking regulation. But even that’s being unwound and I think even what was happening under Obama still wasn’t taking the really serious racial economic inequality lens we’d have to look at if you want to deal with these issues.
MARC STEINER: So if you look at the history, and we look at the history and it’s everything from the mob violence that happens any time somebody in Chicago, other places, even in Baltimore.
DEDRICK ASANTE-MUHAMMAD: Yeah.
MARC STEINER: I mean it happened in Baltimore just 10 years ago in a community called Hampden, which is mostly white, and a black family moved in. And people would burn them out, literally. Right?
DEDRICK ASANTE-MUHAMMAD: Yeah. Yeah.
MARC STEINER: And it happened like this across the country. So if you look at that and also when a black family moves into a white community, white families flee. People use that to buy houses for cheap and then – and charge exorbitant rates to black people coming in. And what was a white neighborhood, that was an interracial neighborhood for 10 seconds becomes a black neighborhood. And also then pushed into poverty. So that’s the history of it. The question is two things. I mean, A, if Dedrick Asante-Muhammad were sitting here and the government said OK, we’re going to put you in charge of the commission now and you’re going to design a policy that prevents this from happening, what would it be?
DEDRICK ASANTE-MUHAMMAD: OK. So let me first speak more at a local level and then we can talk about national policy if you want to.
MARC STEINER: Yeah.
DEDRICK ASANTE-MUHAMMAD: I mean, I think. One thing is we have to ensure and – you know, I grew up in Columbia, Maryland which is not too far outside of Baltimore and was meant to be a multi-racial, meaning black and white at that time –
MARC STEINER: And mixed income.
DEDRICK ASANTE-MUHAMMAD: And mixed income, right? And there those things were together. And so they made sure that there was affordable housing and that all neighborhoods had single family housing, townhomes, and apartments. And then all these people would go to the same school. And they were very successful, I think, in having a multi-racial multi-income community for let’s say a generation or so and then we started seeing kind of communities emerging that didn’t have those type of stipulations. So I guess my main thing is to think you have to ensure affordable housing, multi-income level housing if you really ever want a racially integrated place that then also has good public services, good public schools. So I just saw an article yesterday that was highlighting that now Howard County in terms of income has the most segregated schools in the state of Maryland, which is crazy. Howard County is the county that’s over Columbia, but Columbia’s the biggest aspect of Howard County.
DEDRICK ASANTE-MUHAMMAD: So it’s fascinating to me.
MARC STEINER: That’s just between Baltimore and Washington D.C.
DEDRICK ASANTE-MUHAMMAD: Yeah, and it’s just fascinating to me that a place that was known for being developed to be multi-income and for being cross-class, cross-race has now because we haven’t had that same type of monitoring and of maintaining affordable housing with new developments. Because we started moving to Columbia at first because they wanted to be in a multi-racial, multi-income place.
MARC STEINER: Right.
DEDRICK ASANTE-MUHAMMAD: Then they just want to move there because they want to be in a good school system. And they – so they just wanted the single family home, they didn’t care, they didn’t want to be with lower income people. And you saw more and more developments like that. And I think it shows again, if you don’t regulate it and make sure. Cause it’s not just individuals, it’s also the market because those who are building homes, you make more margins on big single family homes versus the townhomes or what have you. So you have to kind of mandate – you have to mandate policy in order to fix the policies of the past. Because the free market will just kind of continuous into a segregated by income and by race kind of ongoing.
MARC STEINER: Right.
DEDRICK ASANTE-MUHAMMAD: Ongoing situation that we have been in.
MARC STEINER: I mean it’s almost like, you know, what you’re saying here basically is if you don’t regulate and control capitalist instincts and capitalism itself, then it ends up destroying things around it, especially when it comes to issues of race and equality. When you throw that into the mix.
DEDRICK ASANTE-MUHAMMAD: Yeah and -.
MARC STEINER: Right?
DEDRICK ASANTE-MUHAMMAD: Too, if people don’t even understand how whites became majority homeowners, right? Because it wasn’t just the market. It wasn’t just all the sudden white people started working hard in some way to buy a home. We had to create a finance system that allowed to be able to buy a home without having to spend a hundred thousand dollars outright but you can put down, instead of 50 percent you could put down 10 percent or 5 percent and then you had the New Deal which then also created great new subsidies for people to become homeowners. So that’s the first time that whites became majority homeowners. But the problem is we haven’t had a kind of massive New Deal program that was inclusive of people of color. And so we’ve never seen a true black middle class in terms of wealth and homeownership that whites have had. So people think the black middle class has been created because we started having more middle income, higher income employment and jobs. But we never had middle income wealth, middle wealth, high wealth or the homeownership of the white middle class. And so this – you know, I always say racial economic inequality is the foundation of racial inequality. And until we deal with these economics, we’re going to continue this kind of racial division.
MARC STEINER: There has some kind of policing over these kind of high risk loans that are given to black people. I mean that’s part of the problem here.
DEDRICK ASANTE-MUHAMMAD: Yes. Yes. And I would say that has to be policing and support for, you know, subsidies for homes for homeownership for lower wealth people, you know, and for median income people. Because again, the market itself won’t provide this. I mean, actually, you know, even those of us of higher income, we oftentimes are getting subsidized through different types of tax policies, what have you, to become homeowners. We have to have these incentives focus much more on working class people, people with lower wealth.
MARC STEINER: So as we conclude, Dedrick, I’m curious, where does your work take you then in this and your new position?
DEDRICK ASANTE-MUHAMMAD: Well, yes, so it is interesting and I’m learning more and more about this space and now as you said NCRC, and actually a lot of the work that my equity inclusion team does is fair housing testing, fair lending testing for small business, to try to see, you know, what are the disparities in individual treatment for blacks, whites, Latinos, women versus men, what have you. Getting that data and then trying to figure out how to work with financial institutions about what are best practices that could be used to make sure even the bank up top doesn’t want to reinforce the inequality we have today? What practices do they need to follow to do that? And then as well, work with regulators and even do lawsuits to try to ensure that they’re not breaking current law as it relates to lending and – because again, you know, if you just look at who is getting the capital, and where banks are. That in itself is part of the discrimination. I guess that’s one thing. It’s not one piece.
MARC STEINER: Right.
DEDRICK ASANTE-MUHAMMAD: It’s like every layer of the system is stacked against you. And so, the question is, how do you create a comprehensive policy that helps changing this kind of whole structure that is just continuing us into this massive racial wealth inequality, homeownership inequality?
MARC STEINER: The struggle continues and we’re not done yet.
DEDRICK ASANTE-MUHAMMAD: Yes, sir.
Dedrick Asante-Muhammad. Thanks so much for joining us here at The Real News.
DEDRICK ASANTE-MUHAMMAD: Thanks for having me.
MARC STEINER: And I’m Marc Steiner here for The Real News Network. Thank you all for joining us. Take care.