Donate Today!



 

Sign-Up for Newsletter!

 

Popular content

Inequality Has Rigged Our Economy and It Is Time to Change the Rules

The economic crisis is built on the country’s long history of racial discrimination.

by Seth Wessler

President Obama’s recent announcement to reappoint Federal Reserve Chair Ben S. Bernanke came on the heels of Bernanke’s meeting with world bankers who declared the global economy to be back on track to normal. But for most, “normal” is not something to look forward to.

Earlier this year I traveled the country researching race and the recession. From Detroit to Tucson, Providence to San Antonio, I met people for whom the recovery could mean very little if it fails to address the structures of racial inequity in the economy. And just as these disparities are hazardous to people of color, these structures are some of the same that helped push us all into recession.

In Detroit, I met Leila* who recently lost her job as a teacher’s assistant, supporting her four children alone. She was laid off late last year because of state budget cuts. Her unemployment benefit ran out and she applied for government cash assistance. A month later, her welfare checks were also cut off and she was suddenly without any income.

Leila fell behind on her mortgage payments on the house she had just moved into. She realizes now she was sold an adjustable rate subprime loan. Her house went into foreclosure. Without any other wealth to fall back on, she’s not sure what will happen.

People of color have been hardest hit by the recession. In July, Blacks experienced rates of unemployment 70 percent higher than whites and Latinos almost 50 percent higher. Strikingly, even before the downturn, Black, Latino, Asian and American Indian communities had faced recession-like levels of unemployment for decades. Moreover, people of color are paid less, often 60 cents to every dollar of white family income, and they hold pennies to every dollar of white wealth. They are segregated into low-wage jobs and face barriers to equal opportunity including discrimination and lack of workplace protections.

This is the economy of normal; the economy that pushed us into recession.

Meanwhile, foreclosures are still pummeling American families. And because people of color were disproportionately saddled with predatory loans, they’ve been stripped of much of the wealth they had carefully accumulated over the years. The recession has deepened the racial divide.

That Blacks, Latinos, Asians and American Indians face higher rates of foreclosure is no coincidence. Until the 1970s, people of color were broadly excluded from owning homes as a result of practices of racial redlining and racially restrictive neighborhood agreements. Then Congress passed the Community Reinvestment Act (CRA) to end discrimination in lending. Suddenly redlining and racial exclusion were made illegal and people of color slowly began to access prime loans. 

But in the late 1990s Congress deregulated the mortgage industry along with Wall Street, opening the space for industry to circumvent the CRA. These were the same anti-regulatory maneuvers that made the subprime securitization possible. As the CRA was weakened and incentives to sell subprime loans grew, neighborhoods of color provided fertile ground for the sale of these faulty products. Since neighborhoods like Leila’s were largely devoid of prime lenders as a result of the history of redlining, there was little competition and the credit vacuum created conditions for the predatory sale of high-cost loans to communities of color. 

The streets of central Brooklyn and Detroit filled with predatory lenders, millions of these mortgages were sold, and they ultimately burst, flooding the economy with toxic assets and submerging all of us in an economic storm. 

The economic crisis is built on the country’s long history of racial discrimination.

As we move forward, we must set a new foundation. Only by tackling racial inequity in the economy can we ensure a stable recovery. This will require that we emphasize racial justice.

An immediate moratorium on foreclosures and modernization of the Community Reinvestment Act will help. Rigorous enforcement of anti-discrimination laws and labor protections for undocumented workers and people with past criminal records are necessary to ensure everyone has an opportunity to work. Fixing the broken healthcare system, which is responsible for more than half of personal bankruptcies, and the cultivation of a new green workforce that trains people of color in skills for a better economy should be prioritized.

Recovery will not mean much if we return to the normal economy. Let’s demand an economy that is good for all of us.

*Name changed.

Comments are closed

46 Comments so far

Show All