Monday, March 26, 2007

African Americans will bear the brunt of the collapsing subprime mortgage market

Institutionalized racism could lead to the greatest plunder of African American wealth in US history
Richard Mellor
AFSCME Local 444 retired

For any attentive observer, the crisis in the subrime mortgage market must be well understood by now. I pointed out in earlier commentaries, (1) the concern the speculators have that this will spread to the wider housing market which is an $8 trillion monster, much of it, like US society in general, held up through debt. The consequences of this are dire as better-paid workers, the middle class and small business will be hit.

The subrime market is mostly poor people, senior citizens, and the disabled; people with weak credit histories. But a major section of this market is African American and other people of color. The effect of this crisis will be devastating for them. In these communities, “…something very nasty is going down.” writes John Gapper in the Financial Times. (2) We should remember that these comments come from a leading commentator of one of the world’s leading journals of big business.

Gapper continues, “Some 52 percent of loans made to black people in 2005 were subprime and 80 percent of these subprime loans were exploding Arms.” (Adjustable Rate Mortgage) Martin Eakes, a credit union CEO claims estimates that 2.2 million families could lose their homes to foreclosure. This catastrophe, claims Eakes, could become “the largest loss of African-American wealth in American history.” (3)

We should shed no tears for the moneylenders and speculators. They earned their fees, took their interest. And in the end they’ll own the asset, someone’s former home. I am compelled to remind folks of how this frenzy was received by Gertrude Johnson, an 89-year-old still working as a health aide. Her mortgage, at more than $3000 was more than she could handle:

"I just wanted to be able to eat and sleep in my house and have a roof over my head", says 89 year old Gertrude Robertson, "Every day at midnight when I go to sleep, I think maybe when I wake in the morning they'll tell me to get out."

(4)The victims of this speculative frenzy are victims because they are poor and unorganized. Most of the poor people in the US are white women and children. This is because they are more numerous, a higher percentage of the population. But due to the legacy of racism in society, a staggering number of poor people are people of color when taken as a percentage of their population. Racism is used to divide us, prevent us from uniting against those who are responsible for this economic crisis. They send their kids to Harvard while they send ours to Iraq.

A social commentator said some time ago that if the conditions that existed in the black community existed in US society as a whole, we would consider ourselves to be in a major social crisis. The same applies today except more and more Americans are being driven in to poverty as wages, pensions, benefits and other protections are being stripped away with the open support of the trade Union Leaders at the highest levels.

If Eakes is anywhere near correct, and over two million black families lose their homes, the effect of this will hit the family hard, especially the aged and the young; possibly as many as 5 million people.

But the market will sort it out say the economists. And indeed it will. The market already provides housing for a huge percentage of the US black population; the prison system. The US has over two million people in prisons, bested only by China.

“…in a world awash with liquidity it has been difficult to make reasonable returns buying anything mainstream.” writes Gillian Tett of the Financial Times (5) As they flee the lending business with the money they sucked out of the likes of Gertrude Robinson and low waged workers, the money men may well invest in something “mainstream” cell space for the likes of her grandchildren and those workers without homes who just couldn’t take any more.

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