In September, the Federal Reserve released a study that found 52.8 percent of African-Americans got a high-cost home loan when they refinanced in 2006, compared to 37.7 percent of Latinos and just 25.7 percent of whites in the same year.What happens is a self-fulfilling prophecy: blacks get higher priced loans because "they are a greater risk" (translated: they are more likely to live in bad neighborhoods), which means that blacks are more likely to default on a mortgage, which means more abandoned homes, which leads to more crime, lower tax revenues and property values.
A similar study by the Association of Community Organizations for Reform Now, known by its acronym ACORN, in September found the same pattern even when income was equal.
According to ACORN, upper-income blacks were 3.3 times, and Latinos 3 times, more likely than upper-income whites to have a high-cost loan when purchasing a home in 2006.
"I keep hoping one day I'll do a study where race doesn't play a part," said Liz Wolff, author of the ACORN study.
"But clearly, there is a racial bias," she added.
In other words, blacks are more likely to live in bad neighborhoods because they are more likely to live in bad neighborhoods.
This wouldn't be such a big problem if blacks had an out, to move to neighborhoods that weren't so "bad"...in other words, the barrier to moving to a nicer neighborhood weren't set so high.
See, what this mortgage default story really is about is segregation: the inability of American society to assimilate people of colour, despite five decades of fatally flawed affirmative action programs.
I say "fatally flawed," because the results clearly don't match up with the intent, which means the process itself was flawed.
It's clear that in order for American society to become a level playing field for everyone, it has to make the field level: that levelling isn't going to happen on its own, nor will it happen because of "market forces," because market forces don't take fairness, equity, or equality into account, as this mortgage story demonstrates.
Market forces are designed to supress weaker economic competitors in order to bolster the stronger (think of it as a transfer of funds upward). Nothing wrong with that in terms of business competition: if your company is being hammered in the market, then you're doing something wrong.
To apply market forces to social problems-- like segregation, like global climate change-- may fix some aspects of the problem, but these solutions are window-dressing. They are not comprehensive solutions.
The implementation of social welfare programs, most notably Lyndon Johnson's "Great Society", were quickly throttled during the 70s and 80s by the proto-neoconservative movement.
And we see how they offered no alternative solutions that have worked at all. Even to this day, even forty years after recapturing the White House, conservatives ideologues have been unable to find workable non-governmental solutions to problems that are way too big for anything but government to solve, despite having had five separate Presidents take a crack at them, as well as more than fifteen years of dominance in Congress.
It is idiotic that, more than forty years after LBJ's initiatives, we're still talking about how to give the poorest and most downtrodden among us a leg up to compete on equal footing with the rest of the country.