August 01, 2011
Wealth Gaps Between Whites and Minorities at Record Levels
by Robert Kropp
A new study from the Pew Research Center confirms that the recession has had a far greater impact
on Blacks and Hispanics than on Whites.
Even before the US housing bubble burst and the world's economies sank into recession, it was well
established that predatory lenders had targeted minority customers for subprime mortgage loans, the
terms of which were effectively designed to ensure foreclosure. As early as 2005, the National Housing
Institute (NHI) stated, "After decades of redlining practices that starved many urban
communities for credit and denied loans to racial minorities, today a growing number of financial
institutions are flooding these same markets with exploitative loan products that drain residents
of their wealth."
published last week by the Pew Research
Center demonstrates just how discriminatory the effects of the recession has been. According to
the report, "From 2005 to 2009, inflation-adjusted median wealth fell by 66% among Hispanic
households and 53% among black households, compared with just 16% among white households."
"In 2005, both the stock and housing markets were still rising," the report continued. "Thus,
had the base year for these measurements of wealth been closer to the top of these markets in 2006
or 2007, the recorded declines are likely to have been even steeper."
The report utilizes
data compiled in the Survey of Income and Program Participation (SIPP) by the US Census Bureau.
Between 2005 and 2009, median wealth fell by 66% among Hispanic households, 53% among
black households, and 16% among white households. In 2009, the average black household had $5,677
in wealth and the Hispanic household had $6,325. The wealth of the average white household?
The primary cause for loss of wealth among Hispanics was home equity. Between
2005 and 2009, the median level of home equity held by Hispanic homeowners declined from $99,983 to
$49,145. "A disproportionate share of Hispanics live in California, Florida, Nevada and Arizona,"
the report observed, states that have been among those experiencing the steepest declines in
The report comes at a time when the mortgage industry is apparently
pushing back against some of the restrictions imposed upon it by Dodd-Frank. According to Gretchen
Morgenstern in yesterday's
New York Times, "David Stevens, the president of the Mortgage Bankers Association, warned that
the requirements on down payments and debt-to-income ratios were 'unnecessary and not worth the
societal costs of excluding far too many qualified borrowers from the most affordable mortgage
loans to achieve homeownership.'"
"We are still tallying the bills" resulting from
predatory mortgage lending, Morgenstern observed. "To date, taxpayers have funneled $154 billion to
Fannie Mae and Freddie Mac. Investors have suffered even greater damage."
sustainable investors have been in the vanguard of those seeking to correct the excesses of
predatory lending, ever since members of the Interfaith Center on Corporate Responsibility (ICCR) began filing
shareowner resolutions on the issue, way back in the 1990s. Pew's report, as well as news of
renewed intransigence from the mortgage industry, suggests that the work of activist investors is,
unfortunately, far from over.