Great Recession leaves Blacks poorer, more vulnerableBy Freddie Allen NNPA Washington Correspondent | Last updated: Apr 29, 2013 - 12:42:29 PM
The report titled, “Making Sure Money Is Available When We Need It,” noted that over the past 30 years, household risk exposure increased for many Americans, following the crash of the saving and loan industry in 1989, the rise and fall of the tech bubble in 2000, and most recently the collapse of the housing market in 2007 that led to the Great Recession.
Households have experienced more wealth volatility since the late 1980s because there has been more risk in the market and be-cause they have been increasingly exposed to those risks, said the re-port.
The Economic Policy Institute’s report “The State of Working America, 12th Edition” stated that: “the median net worth of Black households was $4,900 in 2010, compared with $1,300 for Hispanic households and $97,000 for White households.” The EPI report also noted that a third of Black households (33.9 percent) had zero or negative wealth com-pared to 18.6 percent of White households.
When asked why minorities are at a greater risk, some economist say the conditions that led to record foreclosures and unemployment rates are often beyond their control.
“It’s like coming to New Or-leans after [Hurricane Katrina] and saying, “Well, what could these people have done to avoid being stuck in the water? It’s blaming the victim,” said Bill Spriggs, chief economist at AFL-CIO, and economics professor at Howard University.
For many American families, homeownership had been the key to gaining a strong foothold in the middle class and for many families
in the Black community it’s still one of the safest assets to own. The deluge of subprime mortgages, not an inability to afford a home, changed that.
“African Americans were targeted more for subprime loans they didn’t do anything risky like start buying stocks instead of mutual funds but they wound up holding
what were riskier investments by virtue of the way the housing market works, said Wilhelmina Leigh, a senior research associate at the Joint Center for Political and Economic Studies, a group that works to improve the socioeconomic status of African Americans and other people of color.
In the wake of housing market crash a number of banks, including Wells Fargo, Bank of America and Sun Trust, settled lawsuits that charged that they illegally targeted minority borrowers for subprime loans.
“Communities of color were prime the targets of subprime lenders that offered very high interest rate loans. The loans were not in-tended for sustainable home ownership a lot of these loans were actually designed to fail,” said James Carr, a housing finance and banking consultant and economic fellow for the Insight Center for Community Economic Development.
Even as Wall Street roars back, reaching record highs this year, the last economic crisis has left minorities more vulnerable to the next one.
The 2013 “State of the Dream” report by United for a Fair Economy found that, “Black and Latino families came out of the Great Re-cession much more highly lever-aged (holding more debt relative to their net assets) than White families. White families on aver-age have a debt burden equal to just 17% of their net worth, while Black and Latino families owe 53% and 58%, respectively.”
Ms. Leigh said that policymakers must also address predatory lending practices outside the housing market including car loans, payday loans and the refund anticipation loans that are popular during the tax season.
Blacks also need to support the Consumer Financial Protection Agency, said Ms. Leigh. The Consumer Financial Protection Agency was designed by the Obama Administration to rein in companies that often exploit unsuspecting consumers for profit.