On Wednesday, November 18th, the Kirwan Institute, along with the Poverty & Race Research Action Council, the National Community Reinvestment Coalition, the National Fair Housing Alliance, the Center for Responsible Lending, and the National Council of La Raza, co-hosted a policy meeting around fair credit and fair housing in the wake of the subprime lending and foreclosure crisis (with funding from the W.K. Kellogg Foundation). The turnout was so good we had to add a table. The conversation was intense, engaging. Even the food was good. Yet I left incensed. Why?
Because in presentation after presentation, we learned just how badly the American people are getting fleeced. Not by the ‘usual suspects’—we all do love to rail at the IRS—but by the financial institutions that supposedly help us all build wealth and prosperity. I entered the room thinking there were two credit markets—one that offered sustainable, wealth-building asset and credit tools at fair and transparent terms to one group of folks, and one that offered crappier options (high fees, pre-payment penalties, exploding things, tiny print) to another group of folks—poor white people, people in black or Latino neighborhoods, Native Americans, military families, immigrants, rural people…in other words, a good majority of us. That was bad enough, but now I’m convinced that not only are there two credit markets, but one actually functions to extract wealth from the other. The crowbar of extraction, if you will, was the subprime lending and foreclosure fiasco that pulled about a quarter of a trillion dollars of housing wealth out of communities of color, and in some places predominantly from their widowed grandmas, and put it in the pockets of the financial elite. When those elites got into trouble for their poor choices, the government, aided by former Goldman Sachs’ head Henry Paulson’s eye-of-Sauron-like ability to survey the devastated financial landscape, hurriedly borrowed taxpayer dollars to re-line those tailored pockets. Besides kittens in trees and baby prams rolling down courthouse steps, nothing stirs us to action like the thought of a CEO of a flailing company who can’t pay himself a gajillion dollars. It puts all those people who make $6,000 shower curtains and $75,000 toilets out of business. (No offense to the toilet designer, by the way; it’s real pretty.)
But there are other extractive mechanisms as well, including ridiculous debit card overdraft fees (billions of our gram and gramps’ social security dollars goes to those fees every year). La Raza held focus groups with young Latinos and found that their negative experiences with credit cards often resulted in them withdrawing from the credit market altogether. The focus groups also reported that the young adults felt strongly that credit cards should be reserved for emergencies—which they then defined as diapers and utility bills, what many of us would term daily needs. The Appleseed network has been working diligently to bring transparency and fairness to the remittance market after working immigrants were assaulted, and sometimes killed, for the cash they intended to send home to their families. And Chris Peterson and Steven Graves have shown that payday lenders “aggressively target American military personnel, irrespective of most forms of legal regulation.”
Why are the rich stealing from the poor? Because they can; because it’s there; because it’s largely legal; and when it isn’t, the criminal abuses aren’t prosecuted. Let your elected representatives know that the law has to change to prevent deceptive and abusive practices, and that existing laws need to be enforced. Start with the passage of a robust CFPA. And take your banking and loan business to a responsible institution. Tune In, Turn On, and Opt-Out!