Economic Crisis Lands Heaviest on Communities of Color

The economic meltdown has fallen hardest on minority Americans and communities of color in the United States.

As discussed many times on the Corporate Justice Blog previously, unemployment figures while reaching alarming levels in the United States report even more devastating levels in African American and Latino communities. The foreclosure crisis is landing and will land most harshly on African American and Latino homeowners, as statistics of U.S. foreclosures and delinquencies continue to be reported in record numbers.

Studies indicate that predatory lending and "steering" of prime qualified minority borrowers into subprime loans is one of the root causes of these destructive outcomes reported above. African American and Latino borrowers are somewhere between two and nine times more likely than white borrowers to have high cost mortgages. This predatory lending and steering of minority borrowers into high interest loans, of course, is contrary to the "dirty little myth" that circulated widely in the early blame game days of the global crisis (Fall 2008) and that continues to percolate and simmer in many circles today. That dirty little myth is a narrative that seeks to pin blame onto overreaching minority borrowers and the Community Reinvestment Act of 1977 as the primary cause of the global economic collapse.

To the predatory lending and steering issues above, this week the Washington Post reported that an FDIC study shows that "unbanked" and "underbanked" Americans, those who do not or cannot utilize traditional bank services such as checking accounts and savings accounts, and who rather primarily use payday lenders, check cashing services and pawn shops (predatory in their own right), are disproportionately Latino and African American. The Washington Post reported:

"One-quarter of American households -- about 60 million people -- have limited or no access to banks or other traditional financial services, with low-income and black families among the hardest hit, according to a government report released Wednesday [December 2, 2009]."

Laying blame for the global economic meltdown at the feet of minority borrowers is pernicious. Ignoring all of the true causes for the collapse, including securitized subprime loan investment vehicles, credit default swaps, deregulation, failure of personal borrower responsibility, reckless lending, Commodities Futures Modernization Act, avarice and greed, executive compensation, mortgage brokerages, Gramm-Leach-Bliley, ratings agencies, regulatory capture, overleveraging of corporate conglomerates, Private Securities Litigation Reform Act and unregulated over-the-counter derivatives trading (amongst others), in order to create an easy minority scapegoat is unconscionable.