There is a piece in the New York Times today is reporting on their investigation into the explicitly racist practices of Wells Fargo in their subprime mortgage business (Creative Commons License photo credit: TheTruthAbout… , h/t Schiffon Wong). According to the NYTimes,  Wells Fargo created a unit in the mid-Atlantic region to push expensive refinancing loans on black customers, particularly those living in Baltimore, southeast Washington and Prince George’s County, Md.

wells fargoAccording to a former employee of the banking giant quoted in the article, the company viewed the black community as fertile ground for subprime mortgages, as working-class blacks were hungry to be a part of the nation’s home-owning mania. Loan officers, she said, pushed customers who could have qualified for prime loans into subprime mortgages. Another loan officer stated in an affidavit filed last week that employees had referred to blacks as “mud people” and to subprime lending as “ghetto loans.”  The employee, a Ms. Jacobson, who is white and said she was once the bank’s top-producing subprime loan officer nationally, goes on to reveal:

“We just went right after them. Wells Fargo mortgage had an emerging-markets unit that specifically targeted black churches, because it figured church leaders had a lot of influence and could convince congregants to take out subprime loans.”

The NYTimes backs this anecdotal evidence with their own more systematic investigation:

The New York Times, in a recent analysis of mortgage lending in New York City, found that black households making more than $68,000 a year were nearly five times as likely to hold high-interest subprime mortgages as whites of similar or even lower incomes. (The disparity was greater for Wells Fargo borrowers, as 2 percent of whites in that income group hold subprime loans and 16.1 percent of blacks.)

To understand the Wells Fargo case, it’s important to understand the broader context of this banking institutions’ policies as part of a larger pattern.

Sociologists Doug Massey and Nancy Denton in their ASA-award-winning book, American Apartheid, document the systematic pattern of housing discrimination in the U.S., as well as the dire consequences of such enforced segregation.   Part of Massey and Denton’s argument is that segregation in housing leads to “social dislocations” (William J. Wilson’s term) in other areas like high school drop-out rates, increased rates of drug use, delinquency and crime, in other words, “the making of an underclass” (the subtitle of their book).

Massey and Denton’s work was path-breaking for the way that it clearly and painstakingly documents the “construction of the ghetto,” but their findings were not exactly new.  The Kerner Commission Report from 1968 famously concluded:

“What white Americans have never fully understood— but what the Negro can never forget— is that white society is deeply implicated in the ghetto. White institutions created it, white institutions maintain it, and white society condones it.”

The report from today’s NYTimes and the evidence of explicitly racist practices of Wells Fargo do not mean that everyone that worked there agreed with these policies or harbored explicitly racist views.   Indeed, as Eduardo Bonilla-Silva as recounted in his Racism Without Racists, the continued operation of white supremacist system does not require the presence of extreme racists in that system.  In fact, I’m sure that many of the people that worked at Wells Fargo would never consider themselves racists but rather well-meaning and liberal in their views on race.

So, then it becomes necessary to understand Wells Fargo’s banking discrimination — and the housing segregation such discrimination creates — within an even broader context.  For that, it’s important to understand the white racial frame that sustains systemic racism, as Joe has described here and in his important book by the same name.  Note the loan officer mentioned in the NYTimes piece that referred to blacks as “mud people” and to the subprime lending as “ghetto loans.” These statements reflect thinking within the white racial frame and the result is the maintenance of systemic racial segregation in housing and further economic devastation of black families that might otherwise be homeowners.

That’s the real tragedy of this story, to my thinking.  Families that worked hard, tried to buy a home and provide a better life for their kids, are now facing foreclosure – and maybe worse – because of the systematic racism in Wells Fargo’s banking practices.    The question really becomes then if we, as a nation, are so “tragically bound to that starless midnight of racism,” as Dr. King said, that we can never move beyond it.    It’s time, I think, to begin holding institutions accountable for racist practices like these.

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In these tough economic times, Americans from all kinds of backgrounds are hurting financially. There seems to be depression reports in the news almost every day. Reports in the media have also focused a lot of attention on layoffs at large corporations, many of whom are shedding employees by the thousands. With that in mind, it may lead many of us to presume that middle class Whites are getting hit the hardest in this recession.

Certainly, many middle class Whites and their families are feeling the brunt of the recession and many find themselves struggling to make ends meet for the first time in their lives. However, as MSNBC reports, the data shows that on the aggregate level, it’s actually Blacks and Latinos that are being hit the hardest by the current recession:

Last hired, first fired: This generations-old cliche rings bitterly true for millions of Latinos and blacks who are losing jobs at a faster rate than the general population during this punishing recession. Much of the disparity is due to a concentration of Latinos and blacks in construction, blue-collar or service-industry jobs that have been decimated by the economic meltdown. . . .

Since the recession began in December 2007, Latino unemployment has risen 4.7 percentage points, to 10.9%, according to the Bureau of Labor Statistics. Black unemployment has risen 4.5 points, to 13.4%. White unemployment has risen 2.9 points, to 7.3%. . . .

William Darity, a Duke University professor, said that “blacks and Latinos are relative latecomers to the professional world … so they are necessarily the most vulnerable.” . . .

“Not saying that it’s racism,” [an executive search consultant] said, “but if a manager or a senior executive is looking at a slate of individuals and has to let one of them go, chances are he or she will not let the person go that they spend a lot of time with at the country club or similar places.”

My point is not to play the “Oppression Olympics” and to argue that this group is much better off than another group, or one group is more oppressed than another. Instead, I would like to place these findings in a larger sociological context.

Many Americans feel that our society, while still not a perfect meritocracy, offers Americans from all backgrounds the best opportunities for success and achieving the American dream than at any time in our history — that the playing field is more level and equal now than it’s ever been.

I would agree that the opportunities for socioeconomic success are the most equal that they’ve ever been in American history. But that does not mean that everybody is on an equal playing field. Instead, what this MSNBC article and other sociological studies have shown is that Blacks and Latinos continue to experience particular institutional disadvantages in their efforts to achieve economic equality with Whites.

Specifically, as the article points out, Blacks and Latinos tend to be disproportionately located in service and manual labor industries. Beyond the fact that these industries tend to pay lower wages in general, they are also highly vulnerable in times of economic recession and we’re seeing this play out right now. As such, Blacks and Latinos experience their first disadvantage.

Their second disadvantage is that even for Blacks and Latinos who have professional occupations that normally are well-paying, again as the article points out, they are relative newcomers to such occupations and as such, when layoffs come, they are more likely to lose their jobs due to the “last hired, first fired” principle.

The third point of disadvantage is that due to the legacy of systematic discrimination in the past, Blacks and Latinos have been unable to accumulate the same level of family wealth compared to Whites. This is even despite the fact that while the income gap between Whites and Blacks and Latinos has declined, the wealth gap has actually increased in the past several decades.

This wealth gap is important because it provides a cushion or barrier to soften loss of employment and other financial difficulties. Therefore, because Blacks and Latinos have less accumulated wealth than Whites, they have a much smaller cushion to fall back on and therefore, are more susceptible to financial catastrophes.

Ultimately, these institutional disadvantages play a large part in why Blacks and Latinos seem to struggle more than Whites or Asian Americans when it comes to achieving economic success. They may be well-educated, motivated, and hard-working, but they also have to overcome more structural inequalities and barriers that make them more financially vulnerable in times of recession.

For some time now, I’ve written about how, on the international stage, countries such as China and India are emerging as economic, political, and cultural superpowers in the 21st century and domestically, how American society is becoming more and more diverse and globalized as a result. So what does the future hold for the U.S. as these trends become more institutionalized?

That’s the question that CBS News asks in a very interesting article entitled “Coming Soon: A Post-American World:
With The Rise Of China And Other Economies, The ‘Golden Age’ Of American Influence May Be Coming To An End.” Some excerpts:

“We can model the economy and show that by 2035, it will be as big, if not bigger than the United States’ economy will be at that time, and by the middle of the century it will be twice the size of the U.S. economy at that time,” [China expert Albert] Keidel said. . . .

In case you missed that – within the next 50 years China’s economy will double the size of the United States’ economy. Fareed Zakaria, editor of Newsweek International, said, “What’s happening right now is, the world is moving beyond America. The future is, in many ways, being shaped in distant places by foreign people.” . . .

“That’s a big shift from a world in which America was at the center economically, financially, culturally, militarily, politically, to a world in which there are more centers and many forces, from India to China to Brazil to South Africa that have to be taken into account,” Zakaria said. . . .

“This is not happening because America is failing or declining,” Zakaria said. “It’s happening because the rest are rising, and it’s happening because the natives have gotten good at capitalism.”

The article goes on to discuss what the U.S. can do to retain its economic and political superiority in the face of these momentous changes:

[Alan Wolff, former U.S. trade negotiator:] “We need to change our tax policies, change our immigration policy. We made the U.S. a magnet, an attractive place for the best and the brightest in the world, and we frustrate that by saying, ‘You get a Ph.D. here and that doesn’t matter. Right now, we’re throwing you out.’ That’s very self-destructive behavior.”

“We save too little, we consume too much, we borrow too much from the rest of the world, we use energy in a profligate and wasteful fashion,” said Zakaria.

So is the decline of the American economic empire inevitable? That’s a very complicated question and one that I will continue to explore in this blog, but for now, I would love to hear from you, my readers, on what you think the future holds for the U.S. in terms of keeping its status as the most powerful nation in the world.

Feel free to add your comments and let me know what you think.