Many of us wonder how the subprime crisis and the current recession we are in transpired. What led us to this point? How has this crisis affected different groups, particularly those that were already relatively disadvantaged?
On October 5, Milano and the Center for New York City Affairs presented a lecture on “Race and the Subprime Crisis: The Future of Minority Neighborhoods” featuring Hon. Maxine Waters, U.S. Representative (D-Calif.). This program also included a discussion with James Carr, COO, National Community Reinvestment Coalition, Sarah Ludwig, Executive Director, Neighborhood Economic Development Advocacy Project (NEDAP), Edward Wright, CFO, City National Bank, and was moderated by our own Darrick Hamilton, Assistant Professor, Milano The New School for Management and Urban Policy.
For a full two hours the lecture and discussion captured the audience’s full attention. Waters presented a compelling, lucid narrative of the events leading up to the current situation. You could feel the energy in the room, as the audience heard sobering statistics of the racial wealth disparity in the United States. Here are a few of the statistics presented regarding race and the wealth gap in the United States:
- Blacks and Latinos would have to save 100% of their income for 3 years in order to close the wealth gap.
- For every $1 a white person earns, Blacks earn a dime.
- 1 out of 4 homeowners owe more on their homes than their homes are worth.
So why is there such a gap between wealth and why are minorities so affected by this subprime crisis? We discussed the history leading up to the crisis and the related discriminatory policies. Among the determinants was the fact that, homeownership is the primary source of wealth for most Americans, but even though whites are considerably more likely than blacks to own their home, among blacks with positive net worth that share of black wealth attributable to housing is nearly twice as large as the white share. Therefore the loss of home equity hits blacks harder than it does whites. That however, is only part of the problem. Please read the engaging remarks by Congresswoman Waters and Professor Darrick Hamilton, which offer a thorough explanation of what went wrong.
It was a sobering discussion, and as I mentioned to all the evening, perhaps the clearest explanation we’ve had, so far about the crisis and what implications it has for hundreds of thousands of homeowners and communities.
Be well-
Lisa
P.S. One of the places I like to go to stay updated on issues related to the financial crisis is NPR’s Planet Money podcast. Check it out.