Published in Apr 2018

How Banks Targeted African-Americans With Predatory Mortgages

or decades, some banks systematically refused to lend to African-Americans with good credit, forcing them to predatory subprime mortgage lenders. On discovery of this tactic, the government pushed the banks to lend to African-Americans on the same basis as they lent to Whites. After the 2008 Financial Crisis, the banks seized on an opportunity to spin this government initiative as if it encouraged loans to the poor— and thereby have deftly misdirected voters to miss what the banks actually did at the time…

The Government Never Encouraged The Banks To Lend To The Subprime Market

Certainly, no one would quibble with the charge that it’s stupid to encourage banks to lend to people who cannot pay them back. By this allegation of alternative fact, the banker lobby has convinced most of the American people that the government actually did such a stupid thing.

Former New York Mayor Michael Bloomberg can be fairly considered a voice of corporate America. He blames the 2008 crisis on this government encouraging of the banks to lend to the poor. Here are his exact words:

“It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp… They [governments] were the ones that pushed the banks to loan to everybody. And now we want to go vilify the banks because it’s one target, it’s easy to blame them and Congress certainly isn’t going to blame themselves.”

Indeed, many Democrats have accepted that the government contributed to the crisis by encouraging loans to the impoverished masses.

Let me show you the racism that is hidden in this claim.

When asked for proof of this government encouragement, big government critics point to the Community Reinvestment Act (CRA) of 1977. Back in 1934, the Federal Housing Authority (FHA) came up with a most curious credit screening plan. Instead of evaluating prospective borrowers on the universally used and time-tested basis of their personal credit scores, applicants would be first filtered by a group test. If they lived in a certain area, that was it for them. Even if they had the highest credit score possible, too bad. No need to look further.

The FHA had one of its agencies create maps of many cities outlining areas according to “security,” which means an educated guess as to the likelihood of getting repaid, including by seizing and selling the house. The worst area was delineated in red giving birth to the new banker term “redlining.” Banks followed the idea and created their own maps as well.

Read the original article on rantt.


By Jan Weir