Mortgage Bias: Economic Jim Crow

Wells Fargo's $175 million settlement might be too little, too late for many blacks and Latinos.

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People forced into subprime loans will receive about $15,000, and between $1,000 and $3,000 is allotted for those charged high closing fees. Residents of Chicago, Cleveland, an area east of Los Angeles, New York City, Philadelphia and the Oakland-San Francisco area will benefit. And in Baltimore, Wells Fargo is required to provide $4.5 million for community-improvement projects and $3 million for local housing and foreclosure programs.

But is this enough to make a real difference? At the heart of the case remains age-old racial injustice, which has precipitated disproportionate levels of poverty, unemployment, scarcity and want -- particularly in black communities.

The Black Middle Class Under Attack

In the case against Wells Fargo, Baltimore officials argued that because many of the mortgages were essentially designed to fail -- fail they did. As the national economy contracted and people lost jobs, the inflated costs of their housing became unbearable. When families were forced out of their homes, the communities experienced a domino effect. In inner-city Baltimore, the increased number of vacant homes sent property-tax revenues plummeting, reducing home values exponentially and increasing the costs of public services, like police and firefighters.

The result? The city -- now reeling from budget woes -- was forced to cut public workers, firing police officers and closing fire stations, further exacerbating the community's problems and helping to destroy its African-American middle class.

This pattern has been replicated across America and contributes to the disproportionately high unemployment rate of 14.4 percent for blacks and 11 percent for Latinos, while white Americans continue to experience an unemployment rate of 7.4 percent -- nearly a full percentage point less than the national average. But the damage -- which is systemic and now affects access to future credit because of lower credit scores -- will have a negative impact on generations of African Americans in the same way that slavery, legalized discrimination and the war on drugs continue to plague our communities.

Thomas Perez echoed the concerns of economists and civil rights activists when he addressed the effect of poor credit ratings on minorities. "The impacts of lending discrimination and the harm to a person's credit can be far-reaching -- inhibiting a range of opportunities that affect a person's ability to find housing, good employment or access to higher education," Perez told the Washington Post.

Herein lie the reasons that the race-based generational wealth disparity persists. Losing your home leads to a bad credit rating; a stalled economy and institutional discrimination make you less likely to find employment; and you need good credit for most private student loans and many middle-class jobs -- thus limiting nearly all of your options. As a result, far too many African Americans and Latinos become trapped in a cycle of poverty. These circumstances are particularly disturbing given that the banks profited and received bailouts funded by tax dollars paid to the government by the very workers their discrimination affected.

President Barack Obama and Attorney General Eric Holder have been committed to uprooting these destructive practices, but it seems that the system is too thoroughly corrupt. Just to place Wells Fargo's $175 million settlement in perspective, it represents only 4 percent of the bank's latest $4.2 billion quarterly profits. And banking bonuses in 2011 were at an all-time high. This means that as unemployment steadily rises in minority communities and the effects of racial discrimination continue to be felt, the people who caused the crisis enjoy the fruits of their ill-conceived labor.

As the presidential campaign is being waged, President Obama's Republican challenger, Mitt Romney, boldly promotes a platform of deregulation -- promising to dismantle the Consumer Financial Protection Bureau and to repeal Dodd-Frank banking regulations. Such acts would serve only to further promote a plutocratic economic elite who feed off the malaise of the black, the brown and the poor.