Banks in general — and investment bankers in particular — continued to profit by betting against these “subprime” borrowers’ ability to pay. By creating complicated credit swaps, options and derivatives, the corporate investors hedged their bets and made money even when average people were experiencing the horror of losing their homes.
And this is where the corporate greed of Wall Street met the economic malaise of Main Street. “This is a case about real people — African American and Latino — who suffered real harm,” Perez told the Washington Post. As part of the settlement, Wells Fargo has agreed to direct $50 million to seven major metropolitan areas and to help minority borrowers afford down payments for new homes.
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.