COLUMN LEFT : Racism Is the Bottom Line in Home Loans : After rejection by banks, blacks and Latinos are driven to private lenders who charge 30%, using the same bank capital.
The hopes of millions of Americans are being trampled by criminals. Lives are ruined; dreams are crushed; homes are lost in a continuing crime wave. The perpetuators target the affluent and the middle class alike. The Federal Reserve has just reported that this criminal activity extends across the country. Yet not a peep has been heard from the law-and-order crowd in the White House or Congress.
The silence relates to the nature of the crimes. The Federal Reserve confirms what we have known for decades: Banks routinely and systematically discriminate against African-Americans and Latinos in making mortgage loans. The discrimination extends across income levels. Whether minority applicants are workers, managers or professionals, they are rejected for home mortgages two to four times more often than whites at similar income levels. Minority entrepreneurs face similar discrimination when they seek capital for their businesses.
This is a crime wave with devastating effects. The very minorities who do the right thing--the hard-working people who get ahead against the odds--find their way blocked when they seek a mortgage for a home or a loan for a small business. Their access to capital is constricted by this illegal discrimination. Capital in this economy is like blood to the human body. Constrict its flow and vitality is lost. Subtract capital from capitalism and all that’s left is the “ism.” You can believe, but you cannot achieve.
The discrimination against blacks and Latinos is not confined to a few communities. It is pervasive. In 1989, a Boston Fed study examined 48,000 real-estate deals in 60 communities and found systematic red-lining. Banks simply refused loans to applicants from black neighborhoods, across levels of income and wealth.
What happens to the rejected? Their needs and dreams do not vanish when the banks deny them credit. They become easy prey for loan sharks offering to lend money at 20% and 30% interest. The Wall Street Journal reported on Sterling Saunders, a Boston homeowner, who needed a home-repair loan. He had a steady job, equity in his house and little debt, but two of New England’s largest banks, Shawmut and the Bank of Boston, turned him down.
In desperation--not wanting his house to deteriorate for want of repairs--he arranged a two-year loan from a private lender, Resource Equity, at 34.09% interest. When Resource wouldn’t refinance his loan, Saunders fell deeper into debt to even worse sharks. Now the 42-year-old city employee, his wife and three daughters face eviction from their home of 16 years.
Where did Resource Equity get the money to lend to Saunders? From multimillion-dollar credit lines at mainstream banks, including Shawmut. As Andrew Fischer, a Boston attorney, concluded: “The mortgage hustlers can write mortgages at 18% or 22% because the banks aren’t out there lending at 10% or 12%. But it’s usually bank money anyway.”
Rep. Henry Gonzalez (D-Tex.), the chairman of the House Banking Committee, has called for President Bush to hold a White House summit to map out strategies for ending this destructive crime wave.
He is unlikely to get much satisfaction. Despite his recent, begrudging retreat on the civil-rights bill, President Bush is likely to continue to use race as a political weapon. As the recession continues and unemployment grows, Republican strategists are likely to intensify the “Willie Horton” race-bait politics that David Duke is using to great effect in Louisiana.
As the old Woody Guthrie song goes, some will rob you with a gun, and some with a fountain pen. The Federal Reserve study has confirmed what any African-American or Latino could tell you. Racial discrimination is still routine and destructive in this society, experienced by the affluent and the poor alike. What we need is a law-and-order campaign to stamp out the lawlessness that scars so many lives.
