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Anyone who’s still throwing around the term “post-racial society” doesn’t know anything about Americans and money. For every dollar a typical white family has, a black family now has just 10 cents. How the recession is turning the wealth gap into a deepening canyon.
The chips are in.
Every three years, the Federal Reserve, in its Survey of Consumer Finances, takes a look at how households in the United States are doing and reports on our assets and liabilities. The euphoria of our gambling spree is over. In the harsh glare of morning, the hangover’s tough. And the data are from 2007, so they don’t even capture the worst of the decline.
The net worth of the average American family is less than it was in 2001. We borrowed more for that trip to Vegas than we brought home. Everyone knows this now.
But here’s something that is being talked about much less: The gap between the wealth of white Americans and African Americans has grown. According to the Fed’s data, for every dollar of wealth owned by the typical white family, the African American family has only one thin dime. In 2004, it had 12 cents.
This is not just a gap. It’s a deepening canyon.
The overhyped political term “post-racial society” is patently absurd when looking at these economic numbers. This week, experts on asset building in communities of color are meeting with members of Congress to talk about closing the racial wealth gap. While the government is rescuing failing financial institutions as a short-term measure, those at the two-day Color of Wealth Policy Summit will make the case that the nation's long-term economic future depends on the inclusion of all Ameicans to build wealth.
Why such a big gap? The biggest predictor of the future economic status of a child is the net worth of the child’s parents. Even modest inheritances or gifts within a parent’s lifetime—paying for college tuition or the down payment on a home—can give a child a lift up the economic ladder. Historically, white families have enjoyed more government support and tax-paid subsidies for their asset-building activities.
Let’s look at the rules of the game, for example, in homeownership.
During the Depression, the Home Owners’ Loan Corporation was formed to rescue families whose homes were in foreclosure. Not a single loan went to a family of color. The black section of Detroit was simply excluded. After World War II, GIs received government-subsidized home mortgages, but there was no oversight to ensure that soldiers of color got their fair share. Of the 67,000 mortgages issued under the GI Bill in New York and northern New Jersey, 66,900 went to white veterans, as documented in Ira Katznelson’s When Affirmative Action Was White
Recently, there have been other sins of both omission and commission. White families are five times as likely as a family of color to have a bank account and access to responsible loan terms. Because of the lack of federally insured and regulated financial institutions on reservations and in inner cities, rural areas, barrios and Chinatowns, payday lenders and other shady financial dealers operating without government oversight have preyed on people of color, fueling the economic and foreclosure crises. African Americans and other people of color were more than three times as likely as white borrowers to be steered to a high-interest loan, even when they qualified for a prime loan. A Harvard University study showed that in Massachusetts, a high-income African American was more likely than a low-income white borrower to get a subprime loan. And many more such studies abound.
Additionally, rules in our tax code have strengthened the hand of those who already have assets. You can get a tax deduction for the interest paid on home mortgages of up to a million dollars—a nice break for those who hardly need it. But if you own a home and make too little to itemize, the Home Mortgage Interest Deduction (HMID) doesn’t help you at all.
So what can we do? We need a Financial Product Safety Commission, to act against discriminatory lending policies and to stop the marketing of dangerous loans like exploding adjustable rate mortgages. We also should cap the HMID and make it refundable so low-income homeowners are able to benefit. And mandating that new schools and transportation and commercial projects that are supported by federal dollars be located only in areas with racially inclusive zoning policies would do much to create and grow neighborhoods of opportunity.
Building wealth is essential to the American promise of opportunity for economic mobility and security regardless of the accident of one’s birth. In the 21st century global marketplace, the diversity of our population is an asset—if we play our cards right.
The chips on the table reflect the fact that the game was fixed. It’s time to start an honest game with a new deck. All of our futures depend on it.
Meizhu Lui is director of the Closing the Racial Wealth Gap Initiative at the Insight Center for Community Economic Development in Oakland, Calif. The center is organizing the Color of Wealth 2009 Policy Summit, to be held in Washington on March 23 and 24.
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I worked for the Comptroller of the Currency Division of the U.S. Treasury, Compliance Department. I was my job to answer complaints of discrimination by financial institutions, notify the Auditing Section, and notify the effected citizen that action was being taken. Sometimes it was the buyer, sometimes the seller complaining. It was not necessary to SEE anyone. ALL cities and towns have coded maps, showing areas of affluence, poverty, those scheduled for upgrade, those scheduled for lowered assessment, etc. You may visit your City Clerk's Office and/or Housing Office for the information. When the banks decide not to loan money to someone to remodel or build a home, it has already checked to see who lives in the areas. The practice is called "Redlining." It has been in practice at least since 1944.
When Mr Johnson, of Johnson Publishing (Ebony, Essence, Jet) went to the bank for a business loan to start his business, a bank he had trusted with his funds for at least ten years, he was denied. Two weeks later, he returned and ask for the same amount to use for a vacation. The loan was granted.
In the '60s, when many southern cities were going from white to black, many whites were punished by "Relining" because they were among the first or last to sell. The banks refused to mortgage their homes at value because it would "bring down the value of surrounding homes, or the surrounding homes where selling below the value of the home.
In this country you cannot hurt one race without hurting all the others. Nor can you help one without helping all the others. This has been proven by Affirmative Action. It states that you must use demographics. So, If 20% of jobs go to women; 10% to Hispanics; 3% blacks; and 1% to others of color;: then 66% is reserved for white men. Yet, Affirmative Action is supposed to be the worse thing Richard Nixon ever did.
Of course we always use percentages. We never use actual numbers. If we did we could never criticize the peoples of color because there would always be more whites in any category under discussion, good or bad. So we use the percentage of the race to show it's good or bad side.
I love my country. My family has shed a lot of blood to make it a wonderful place to live. I just wish we cared enough for each other to be honest. The most hurtful thing for me is that 3,000,000 Jewish people died in concentration camps. My father saw them and told me how horribly they were treated and left. Therefore, the Jewish People have told the world "Never Again." Now the world says "Never Again" and the U.S. says if anyone tries it again, they'll have to come through us. But, I have ancestors who were tortured and killed by Americans, in America, and if I mention it, you say, "That was a long time ago, and it wasn't us, it was our ancestors, so "FORGET ABOUT IT." I don't want an apology. I want my country to be honest enough to admit it's past history. I shouldn't have a month each year to teach my decendents their history. It should be in every American History Book, in detail. If this happened, there would be less for blacks to complain about. You can't ignore a person and acknowledge them at the same time.
Heaven Help Us All. Our current trials are heavy no matter what your race. If we don't begin to pull together, we'll pull ourselves apart.
Some of the claims in this article made me laugh. Not because they're not true, but because the author seems to be making connections where none exist. I worked in the lending industry for four and a half years; I spent one year in loan origination and the remaining time in customer service. Unless you walk into your personal bank to ask for a loan of any sort, you will never, ever, ever actually see the person from whom you are trying to obtain credit. The vast majority of lending now takes place from call centers around the nation. For example, Sallie Mae (student lending), Ditech (mortgage lending), AmeriCredit (auto lending), and USAA (military lending) all lend exclusively through electronic means (phone, fax, or electronic signature via internet). These are not the exceptions; this is the new industry standard! It's faster, cheaper, and more efficient for both the customer and the company.
When I was working in loan origination and I had to pull someone's credit, their approval, conditional approval (meaning they needed a co-signer/co-borrower), or flat out denial was based on their credit score. The interest rate that they were assigned was based solely on their credit score. The *only* time income played a role was if their credit was marginal (within so many points of the minimum cut off); then, they needed to provide proof of income which we would then compare with their total monthly obligations (again, obtained from their credit report), and if their obligations made up more than a certain percentage of their income, they'd be conditionally approved.
Credit 101:
Most people have no idea how much impact a credit report can have on their lives. You can be denied a *job* because of your credit! You can have a low income so long as you satisfy ALL your obligations ON TIME EVERY MONTH. And if you have poor credit, don't even bother with a credit "repair" agency. They're just going to do the same thing you can do yourself: call your creditors, try to work out a lower interest rate (sometimes it helps to tell them you'll have to file bankruptcy if you can't reduce your interest rate to at least [fill in the blank] percent), and begin practicing good credit habits. Once you begin to do this, it'll take SEVEN TO TEN years to fix your credit score. Yep, seven to ten. That's how long a creditor is legally allowed to keep a bad debt (or a court allowed to leave a bankruptcy) on your credit report. If you have a loan you have no hope of every paying off, and you're close to that mark, you may be better off just letting it fall off your report (if you begin to pay on it, that starts the seven year clock over again, plus, in most cases, it actually drops your credit score even more because of the way credit is calculated. It's not fair, I know.). However, you should still begin to practice good credit with your other bills so that when it does fall off, your score will shoot through the roof. Another big, unfair score killer is divorce; it can drop your score up to 100 points.
You should pull a copy of your credit (freecreditreport.com for example), so you can see exactly what's on it. You may be being penalized for something that's untrue. If so, you need to contact the creditor reporting the untrue information, ask them to update the appropriate credit reporting agency, and get them to send you a letter stating that the information they originally reported was incorrect and that they have updated the credit reporting agency. This letter is very important; sometimes customer requests fall through the cracks, and you need hard copy proof to send to the appropriate agency if your request is one of them.
Another common problem is bad credit card debt, which is usually easier to deal with than installment loans (mortgages, student loans, etc). Credit cards aren't secure (meaning if you default, companies rarely have any recourse to obtain their money), plus credit card companies tend to charge ridiculous interest rates. . . and they know it. If you owe them a payable amount (especially since it's tax season right now), call them and tell them you'd like to pay off what you owe them if and only if they will retract the negative reporting to your credit. You will likely have to speak to a manager of some sort (they don't like to do this); if the first supervisor you speak to doesn't tell you what you want to hear, keep going up the ladder. If they agree, get it in writing first, then pay them off, then get that all important letter (hard copy proof) stating that the original reporting was in error. As much as they really don't like to do this, with the economy in the toilet, more and more lenders are willing to work with you to recoup whatever they can!
The worst type of loan to default on is a student loan. If it was obtained through a private lender, the loan company has up to 20 years, in most cases, to sue you for repayment of that loan (keep in mind, it's accruing interest the entire time). If it was a federally obtained loan, the government can garnish your income, even if that income is nothing more than a monthly social security check. Either way, it cannot be discharged in a bankruptcy (except in very special circumstances), and if your career requires a license to practice (say a medical license), the lender can have your license revoked.
Anyway, the point I'm trying to make is this: how can you discriminate based on someone's skin color if you have no idea what their skin color is? You can't. The idea that your interest rate is based on your race is ridiculous at best, and misleading at worst; it revolves entirely around the holy trinity of credit reporting agencies: Equifax, Experian, and TransUnion. Satisfy these deities of credit, and you will be blessed with good interest rates.
Some of the claims in this article made me laugh. Not because they're not true, but because the author seems to be making connections where none exist. I worked in the lending industry for four and a half years; I spent one year in loan origination and the remaining time in customer service. Unless you walk into your personal bank to ask for a loan of any sort, you will never, ever, ever actually see the person from whom you are trying to obtain credit. The vast majority of lending now takes place from call centers around the nation. For example, Sallie Mae (student lending), Ditech (mortgage lending), AmeriCredit (auto lending), and USAA (military lending) all lend exclusively through electronic means (phone, fax, or electronic signature via internet). These are not the exceptions; this is the new industry standard! It's faster, cheaper, and more efficient for both the customer and the company.
When I was working in loan origination and I had to pull someone's credit, their approval, conditional approval (meaning they needed a co-signer/co-borrower), or flat out denial was based on their credit score. The interest rate that they were assigned was based solely on their credit score. The *only* time income played a role was if their credit was marginal (within so many points of the minimum cut off); then, they needed to provide proof of income which we would then compare with their total monthly obligations (again, obtained from their credit report), and if their obligations made up more than a certain percentage of their income, they'd be conditionally approved.
Credit 101:
Most people have no idea how much impact a credit report can have on their lives. You can be denied a *job* because of your credit! You can have a low income so long as you satisfy ALL your obligations ON TIME EVERY MONTH. And if you have poor credit, don't even bother with a credit "repair" agency. They're just going to do the same thing you can do yourself: call your creditors, try to work out a lower interest rate (sometimes it helps to tell them you'll have to file bankruptcy if you can't reduce your interest rate to at least [fill in the blank] percent), and begin practicing good credit habits. Once you begin to do this, it'll take SEVEN TO TEN years to fix your credit score. Yep, seven to ten. That's how long a creditor is legally allowed to keep a bad debt (or a court allowed to leave a bankruptcy) on your credit report. If you have a loan you have no hope of every paying off, and you're close to that mark, you may be better off just letting it fall off your report (if you begin to pay on it, that starts the seven year clock over again, plus, in most cases, it actually drops your credit score even more because of the way credit is calculated. It's not fair, I know.). However, you should still begin to practice good credit with your other bills so that when it does fall off, your score will shoot through the roof. Another big, unfair score killer is divorce; it can drop your score up to 100 points.
You should pull a copy of your credit (freecreditreport.com for example), so you can see exactly what's on it. You may be being penalized for something that's untrue. If so, you need to contact the creditor reporting the untrue information, ask them to update the appropriate credit reporting agency, and get them to send you a letter stating that the information they originally reported was incorrect and that they have updated the credit reporting agency. This letter is very important; sometimes customer requests fall through the cracks, and you need hard copy proof to send to the appropriate agency if your request is one of them.
Another common problem is bad credit card debt, which is usually easier to deal with than installment loans (mortgages, student loans, etc). Credit cards aren't secure (meaning if you default, companies rarely have any recourse to obtain their money), plus credit card companies tend to charge ridiculous interest rates. . . and they know it. If you owe them a payable amount (especially since it's tax season right now), call them and tell them you'd like to pay off what you owe them if and only if they will retract the negative reporting to your credit. You will likely have to speak to a manager of some sort (they don't like to do this); if the first supervisor you speak to doesn't tell you what you want to hear, keep going up the ladder. If they agree, get it in writing first, then pay them off, then get that all important letter (hard copy proof) stating that the original reporting was in error. As much as they really don't like to do this, with the economy in the toilet, more and more lenders are willing to work with you to recoup whatever they can!
The worst type of loan to default on is a student loan. If it was obtained through a private lender, the loan company has up to 20 years, in most cases, to sue you for repayment of that loan (keep in mind, it's accruing interest the entire time). If it was a federally obtained loan, the government can garnish your income, even if that income is nothing more than a monthly social security check. Either way, it cannot be discharged in a bankruptcy (except in very special circumstances), and if your career requires a license to practice (say a medical license), the lender can have your license revoked.
Anyway, the point I'm trying to make is this: how can you discriminate based on someone's skin color if you have no idea what their skin color is? You can't. The idea that your interest rate is based on your race is ridiculous at best, and misleading at worst; it revolves entirely around the holy trinity of credit reporting agencies: Equifax, Experian, and TransUnion. Satisfy these deities of credit, and you will be blessed with good interest rates.
Can you point to the source of your claim? It's hard to believe until I see the original source.
"I live in Lexington, KY where the Human Right Comission recently published a report showing that in this city black people with SUPERIOR credit scores were routinely given higher rate loans and subprime morgtages while white people with INFERIOR credit scores were given affordable loans. That screams of some sort of blatant and institutional racism in the financial sector. "
EVERY single time a ROOT colum makes it to the front page of MSN.COM it invites these type of misinformed comments all encompassing blanketed statements which always serve to blame the victim/and or point out how bad some white people have it. Those things don't negate fact.
All I can say to Bill is while I have compassion for your situation, you now know (working three times harder to get a foot in the door) what many people of color have felt now for decades. I urge you to compare your situation as a white person with your condition with that of a black person with the same condition and see if the same resources have been afforded to you? I recently did a report on that very matter and found it was nowhere near equitable.
I live in Lexington, KY where the Human Right Comission recently published a report showing that in this city black people with SUPERIOR credit scores were routinely given higher rate loans and subprime morgtages while white people with INFERIOR credit scores were given affordable loans. That screams of some sort of blatant and institutional racism in the financial sector.
I'm all for the pull yourself up and save more and spend less philosophy...I am a person who has held onto and paid taxes on acres of land that I will probably never live on just to keep some wealth in our family...despite numeous offers from the federal government to buy it for tens of thousands just so they can build some unneccesary road...
However there are still real institutional blocks to equality in our financial sector that can't be ignored just because a few white people think they don't have enough wealth either OR because we know some black folk don't spend their money very well.