Forget Gates-gate: You may be funding discrimination of a much higher order
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A few days ago, we got word that at least nine U.S. banks had issued bonuses to the tune of $32.6 billion in 2008, having meanwhile received $175 billion in bail-out money at the taxpayer’s expense.
New York Attorney General Andrew Cuomo put it quite nicely:
“When the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well,” Cuomo’s office said in the 22-page report. “When the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well. Bonuses and overall compensation did not vary significantly as profits diminished.”
via Banks Paid $32.6 Billion in Bonuses Amid U.S. Bailout (Update4) – Bloomberg.com.
Awesome show, great job, U.S.A.
But did you know, O beloved, indignant reader, that your tax dollars may have indirectly paid for what amounts to state-sponsored discrimination as well?
One among the nine banks mentioned above is Wells Fargo, which, you may recall, got a sound media thrashing for planning a 12-night Vegas junket after receiving $25 billion in TARP money — a junket the company finally scrapped in February under public pressure. Now, it seems, the company is embroiled in another scandal, this time involving allegations of racially discriminatory lending practices, right in the home state of our country’s first African-American president:
The state of Illinois is suing one of the nation’s largest mortgage lenders for allegedly discriminating against black and Latino homeowners.
Attorney General Lisa Madigan filed the lawsuit against Wells Fargo Friday in Cook County Circuit Court.
The suit alleges that Wells Fargo sold the minorities high-cost subprime mortgage loans while white borrowers with similar incomes received lower-cost loans.
Madigan says in a release that the practice helped transform black and Latino neighborhoods into “ground zero” for subprime lending.
via Wells Fargo Sued By Illinois For Discriminatory Lending.
What this means is that billions of your tax dollars have gone directly toward funding a company that may have made its money and paid its bonuses thanks to discriminatory lending practices, passing the bill along to us when they over-extended themselves.
Forget Gates-gate. By definition, this is state-sponsored discrimination of the highest order — a brand of discrimination whose repercussions we will feel for generations, in the form of segregated neighborhoods (by race and class), stratified wealth, disproportionate poverty rates, failed schools and every kind of commercial and cultural blight imaginable. That’s what discrimination does best.
My feeling is that this sort of thing is much more common than we realize, or are able to prosecute. Technically, any time a real estate agent characterizes a school, for example, as “good” or “bad” based on its racial make-up to a prospective buyer, this constitutes “racial steering,” and violates the basic tenets of the Fair Housing Act. Clearly, discriminatory lending and housing practices can be very subtle and difficult to trace. It’s exactly the kind of thing one hears people talk about often around my hometown of Indianapolis, for example — though, to my knowledge no major suits have been brought against any of the local banks or developers in connection with the sub-prime lending boom. Who knows how much of this form of state-sponsored racism we fund every day via other bailed-out financial institutions? To say nothing of every ATM fee we pay.
If proven, this would be far worse than whatever happened in Cambridge — though my guess is you’ll hear very little about it. That’s to say, don’t expect anything like a beer summit countdown ticker on your 24-hour news channel of choice.
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Subtle discrimination in real estate, pervasive in the 60s, sadly remains. Just more subtle.
Hi, Fran, thanks for the comments. I suspect you’re right: the problem is that so much of it is really a wink-wink-nod-nod phenomenon today, so clouded by euphemisms like “urban” or “diverse,” that it’s difficult to trace.
While doing some research for this post, I read (but couldn’t totally confirm) something which pointed out that, unlike with other issues like workplace discrimination and school segregation, there had been no major, landmark court decisions with the potential to affect millions over “racial steering” — just one-off decisions here and there involving individual companies. I’m not sure yet how far the Illinois Attorney General’s case extends, but the wider the net, the better.
In response to another comment. See in context »Good piece Austin. I see these issues as intimately related. As the investment banks decapitalize the nation, vacuuming up the wealth that until now helped so many Americans realize middle class life, the foment of class/ racial/ ethnic tension only serves to help them divide and conquer. Also thanks for drawing attention away from the Gates Red-Herring story. This is what America should be focusing on. Its future literally depends on it.
Good piece Austin, and spot on.
Thanks, Brian.
In response to another comment. See in context »Hmm. I’m not sure about this. Let’s not forgot the easiest way to get a “sub prime” mortgage and is to have “sub prime” credit. This article presupposes that race – singlehandedly – played a factor in paying higher interest rates. Is that the really the case? I’m missing something.
Fellow Hoosierman, you’re comment about sub-prime credit is right on. But regarding your broader point, I have to say I disagree: I don’t think that the post, in any place, presupposes that “race — singlehandedly — played a factor in paying higher interest rates.” I think the piece assumes, rather, is be that race may have played a role in some cases, but certainly not all of them.
Unless your point is that it seems incredible that race would have been the only factor in any single case at all. To that, I can only respond that, though it does seem incredible, I would wager that the Illinois State Attorney General wouldn’t file something this high-profile without a pretty strong case. The court hasn’t decided yet, which is why my post is sprinkled with conditionals like “may have” or “could have” or “if proven.” But when the state goes to court like this — as opposed to, say, some small-time civil suit — I can’t help but feel that there’s likely some fire under that smoke.
In response to another comment. See in context »The idea is that instead of denying loans on the basis of race when all other factors were presumably equal, it’s that the loans were given out but were rated differently based on race when all other factors were presumably equal. That’s the greater subtlety Fran Johns is talking about.
In response to another comment. See in context »I don’t dispute the news reports, such as this one: http://online.wsj.com/article/SB119662974358911035.html which says that 61% of “sub prime” borrowers in 2006 were actually folks who could have gotten traditional loans, but instead chose the “sub prime” option because they could get bigger houses with lower monthly payments.
Until the interest rates went up. Which is why government needs to protect people from these things. It’s really sad how so many people profited from a system of selling risky mortgages to financially illiterate home owners. In the end, we all lose, because of the socialized losses.
In response to another comment. See in context »Is anyone truly surprised to read that the mostly white boys (not all of them are white but most are) have paid themselves astronomical sums for their poor performance while leaving mostly minorities in ruination, reducing them to the homeless and jobless? Now those in the lower caste, (created by the system that so highly values and pays the mostly white financiers), are back where they belong. . .now they will take any low-level job the whites need done (not all whites are like this but enough are and are in high positions to keep these minorities (including women of all races and ethnicites) down. I recall that, about 40 years ago, I moved from my beloved South (and I deeply love it but am not proud of its history regarding race) that had been the poster child to symbolize racism (and rightly so) to find that way out west – in California – realtors would not sell or rent to American Indians, latinos or blacks, if they could get around it. I was shocked because I thought, as many believed then and now, stuff like that only went on in my neck of the woods. What really goes on in this country is that the wealthy play a game – pitch the poor whites (numerous) and the blacks (many many are poor) and other minorities, against each other and keep reaping the benefits. And that is what is going on to this day. The so-called integrated schools have been bypassed by most wealthy whites by sending their children to private schools. The inner city schools really are mainly segregated with few whites in attendance and most whites there are, not surprisingly, poor. The tax base of cities heavily populated with minorities is erased by white flight, so the schools, many of them, are underfunded institutions of violence and frustration. And now this huge theft of wealth to spread it among the same people who have benefitted for centuries. These relatively few break the system for their own personal gain and the advantage of having a perpetual lower class at their mercy. I wish more people of all minorities read TrueSlant and other worthy news outlets so they would see the light, get really involved and speak out against the corruption of the good ole boy system that has flourished in every corner of our nation. If all the minorities were not pitched against one another and instead unified, they would make a powerful, potential majority but those in high places prevent such an alliance. It would be too potent and would most likely end this sick, evil cycle. Power to the People is a good phrase but should include all of those who are taken advantage of and treated as lesser than and less worthy and continually manipulated by the group advantaged mainly by little more than birthright. Why are African American politicians, including President O’Bama, not fervantly and forcefully raising this most important issue to the forefront? Fear. They are afraid of consequences that a discriminatory, vengeful majority can put upon them. Until all people who fall into any category, other than the top 1% or 2%, unite, we will continue to sink into the quicksand of poverty, racism, and fear.