WASHINGTON --Years of deregulation that led to an increase in high-cost loans is indirectly responsible for the quadrupling of the wealth gap between white and black Americans between 1984 and 2007, according to a study by Brandeis University's Institute on Assets and Social Policy released this week.
Measured in 2007 dollars, the disparity in assets increased $75,000 on average, from $20,000 to $95,000 over the 23-year period. At least one in four black households had no assets.
According to the study, such an increase in negative wealth among African-Americans means they depend more frequently on credit and other forms of high cost debt, but many low-income and minority households are subjected to costly lending products as a result of their burgeoning debt.
"Our study shows a broken chain of achievement," said Thomas Shapiro, director of the Institute and co-author of the study. "Even when African Americans do everything right - get an education and work hard at well-paying jobs - they cannot achieve the wealth of their white peers in the workforce, and that translates into very different life chances."
The study found that even as white families saw their financial assets grow from a median value of $22,000 in 1984 to $100,000 in 2007, black families experienced only the slightest growth in wealth during this same period.
This was true even at higher income levels, with middle-income whites seeing their wealth levels increase from $55,000 to $74,000, while high-income African-Americans saw their wealth decrease $7,000 in the same period, to $18,000 in 2007. The study defined middle income as $40,000 to $70,000, in 2007 dollars. In general, wealth produced during this period "accrues primarily to highest income whites."
The authors say this shows higher incomes alone will not lead to increased wealth and security for African Americans, since consumers of color are subjected to "systemic bias that operates in racialized ways" in credit, housing and taxes - dramatically reducing their chances of achieving economic mobility.
One way around this problem, he said, is the establishment of a consumer financial protection agency that would ensure fairness for consumers of all financial products by "equaliz (ing) and regulariz(ing) the terms on which cash-strapped families are borrowing to make ends meet."
Shapiro said while he is in favor of the "general ideas that frame" the provisions for such an agency in the proposed financial reform bill, he hopes the agency would take on more of an advocacy role and have more autonomy than contained in the current proposal. Wealth building policies, he recommends, should carry provisions to "target...families of color."