Discrimination is Running Rampant in Bank Lending

New Orleans        One of the toughest questions I got on my road tour of six countries was essentially, “how does it feel to have to keep fighting to hold on to every victory against constant opposition,” or in other words how do we do the work when every victory involves constant struggle.  My answer, most simply put, was that constant struggle is the nature of the work and relentless opposition to our demands, defines the necessity of building powerful, mass-based organizations.

At the same time the example I often gave was the significant accomplishment over thirty years from the 1977 to 2007 in home ownership in American by lower income families, African-Americans, and Latinos from the passage of the Community Reinvestment Act, joined aggressively by ACORN and many other community organizations, to the housing bubble crash at the leading edge of the Great Recession.  Now most of those home ownership gains have been erased in the last decade of foreclosures and the widening expanse of the credit desert.

It turns out there is even an uglier story underneath that disaster.  Reveal, the online publication of the Center for Investigative Reporting, picked up a task that used to be ACORN’s annual labor for thirty years through 2008 and examined 31 million mortgage records to understand current banking practices in making loans.  They found that the odds of African-Americans and Latinos being denied conventional mortgages compared to whites of equivalent income, loan size, and other factors were worse in sixty-one metropolitan areas.  The list of cities suffering that infamy included Atlanta, Denver, Philadelphia, St. Louis, and San Antonio.  African-Americans bore the worst brunt of discrimination in the South, unsurprisingly, in cities like Mobile, Alabama, Greenville, South Carolina, and Gainesville, Florida.  Latinos took the worst beating in Iowa City, Iowa.

The litany of discrimination by banks and heartbreak for families trying to build citizen wealth is relentless.  Blacks were turned down more often in 48 metro areas, while Latinos experienced the same in 25, Asian-Americans in nine, and native Americans in three.  Take a bet with me that these are areas where each group is significant in the overall population.  In Philly, African-Americans received ten times fewer loans than whites even though their numbers are about equal.  In Washington, D.C, all minority groups faced discrimination compared to whites, so welcome to the nation’s capital where banks discriminate across the board.

Banks have been hiding behind their errors, compounded with multi-billion-dollar settlements, for the last decade, just as they have hidden their discrimination behind the  confidentiality of credit scores, that often have the reliability of lie detector tests.

Can we count on the Federal Reserve to step up as the regulator here?  Not likely.  How about Congress, where campaign contributions are king?  Not likely.

As I answered in Brighton, struggle is constant, and this example is a reminder that the battle needs to be engaged again on the housing front with new tactics and new demands now that banks have reverted to newer and more subtle systems of discrimination.


The Return of Lending Discrimination by Banks

Ohio Savings BankNew Orleans Finally there is some small notice of the fact that banks are abandoning the poor and their neighborhoods.  A report from the FDIC (Federal Deposit Insurance Corporation) found that almost 1000 net branches had been lost in 2010.  Certainly not surprising to anyone is that the loss has been much higher in lower income and minority dominated areas, while branches continue to explode in upper-income areas.  Fingers will inevitably be pointed in all kinds of different directions other than back towards the banks themselves:  the economy, bank closures, blah, blah, blah.

The next shoe to fall is going to hurt more.

A preliminary report I reviewed from A Community Voice, the membership community organization in Louisiana (www.acommunityvoice.com) of the results of their extensive data crunching of HMDA (Home Mortgage Disclosure Act) data on lending for 2009 (the most recent year available) reveal a significant return of racial discrimination in lending across impacting all minority segments.  The A Community Voice should be available in March, so we will see what conclusions they draw, but the early indications are deeply disturbing and were revealed in a hearing before a Department of Justice hearing in the Lower 9th Ward of New Orleans last night. I’m not sure where else the data is being reviewed or released, since this used to be an annual project of ACORN at least when I was there, but we should all keep our eyes out for these numbers.  They will not be pretty.

The much maligned Community Reinvestment Act (CRA) blamed so roundly and falsely by the right and Republicans as a whipping dog for the housing crash and the Great Recession for supposedly moving loans to the poor, was more appropriately characterized in a story in today’s Times.

“The C.R.A. has been a financial Maginot Line – weakly defended and quickly overrun,” said Raymond H. Brescia, a professor at Albany Law School.  What’s more, Mr. Brescia said, while closing branches violates the spirit of the law, if not the letter, he could not recall a single example in which a bank was cited by regulators under the C.R.A. for branch closures in recent years.  “The C.R.A. leaves banks a lot of leeway,” he said, “and regulators have not wielded their power with much force.”

And, frankly, Professor Brescia is guilty of understatement if anything.  Lending discrimination never really left, as he points out, but at least it receded and there were efforts made and lip service spent.

Given the huge setbacks in homeownership by minorities due to the recession, this should be a battleground widely engaged to attempt to recapture this ground, hold and extend the line again, but it will only be so, if we have the capacity and commitment to reengage banks and push back again with whatever weak tools we still are allowed.  If not, no army of “Elizabeth Warrens’ can prevent the implosion of payday lending, predatory financial institutions preying on the poor and moderate income families across the land.