The blame game for the $700 billion mortgage bailout is shifting into high gear, with Congressional hearings conducting a show trial with the CEO’s of Lehman and AIG. All of these folks have high-priced attorneys and lobbyists protecting their interests, and in many instances the golden parachutes they took with them. Who will represent the homeowners?
As the story goes, the government began pressuring Fannie Mae, Freddie Mac, and banks to increase loans to low-income borrowers, including minorities. These entities acted as a conduit by packaging pools of these loans to large institutional investors, underwritten by large Wall Street investment banks like Bear Stearns, Merrill Lynch, Goldman Sachs, and Lehman. Since many low-income borrowers didn’t have the cash to make a deposit or the income to make the mortgage payments, these loans were obviously riskier. To underwrite the increased risk, insurance giant AIG jumped in by protecting the investors against defaults.

Everybody made huge profits because of one factor - leverage. They were able to package, sell, and insure billions of dollars of these loans with minimal amounts of collateral, which translated into enormous returns on investment. But leverage is a two-way street. If real estate values increase, profits will be large. If they don’t rise, and defaults increase, the losses would be substantial. Because the real estate market was strong, competition to invest in subprime loans became over-heated, and lenders did not increase pricing or tighten underwriting standards to compensate for the increased risk.
It is clear that many loans were made to people who couldn’t afford them. But who is to blame for that? Lenders, investors, investment banks, or insurance companies who were making obscene profits and taking huge risks, or honest Americans, many of whom are people of color, trying to live the American dream. I fear Wall Street will turn the homeowners into scapegoats, and claim more than their fair share of the bailout funds.

Aging Americans, like other age groups, are feeling the effects of the declining real estate and stock markets, as well as soaring fuel and food prices. Seniors’ economic security will only increase in importance as the U.S. population ages. The nation’s health and social services resources will face unprecedented demand as 75 million people in the baby boomer generation reach retirement age—some with eroded savings and retirement accounts.

Fighting elderly poverty

Between 1959 and 1974, the elderly poverty rate fell from 35 percent to 15 percent. This was largely attributable to a set of increases in Social Security benefits. The elderly poverty rate has continued to decline in subsequent decades, reaching 9.4 percent in 2006. Social Security and Supplemental Security Income benefits continue to play a key role in reducing elderly poverty, especially among women and people of color. If Social Security benefits did not exist, an estimated 44 percent of the elderly would be poor today, assuming no changes in behavior.

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BEVERLY HILLS, Calif. - A black professor at Columbia University tells Soledad O’Brien that he instructs his 11-year-old son to fear the police.

“When you are stopped, whether you have done something or not, you cower. I want you to cower because I want you to live,” he says.

The CNN special-projects anchor says black parents from all social and economic classes told her the same thing.

“It was stunning and disturbing,” she said in an interview last week. “What is the impact of that on the psyche of these young children? What does it say about our society?

“And what’s interesting to me about that is white people do not have those conversations with their children, but every black person does,” she adds. “And the gap between those two things is where our story lies. What is happening in America? Why is that difference there?”

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The subprime mortgage fiasco is sending tremors through Wall Street and has brought the U.S. economy near (if not into) recession. For African Americans and Latinos — the primary victims of the debacle — the mortgage meltdown may widen the considerable gap in wealth that already exists between whites and people of color. Even worse, some proposals to fix the problem of limited access to credit may end up doing more harm than good.

“We estimate the total loss of wealth for people of color to be between $164 billion and $213 billion for subprime loans taken during the past eight years. We believe this represents the greatest loss of wealth for people of color in modern U.S. history,” the Boston-based organization United for a Fair Economy noted in its report “Foreclosed: State of the Dream 2008.”

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Editor’s Note: The current economic downturn could lead to the greatest loss of assets for communities of color that’s ever happened, says Alan Fisher, executive director of the California Reinvestment Coalition since 1992, which advocates for the right of low-income communities and communities of color to have fair and equal access to banking and other financial services. Alan Fisher was interviewed by NAM Editor and host of UpFront, Sandip Roy.

Whether we call it a recession or not, what’s the effect of what’s happening in the economy on the low-income communities who are part of your coalition?

I think low-income people and people of color have been struggling for many years now. The “recovery” has not helped them. Recent reports say that income levels for families are the same dollar-wise as they were in 2000, which means they are worth much less now. Food prices are going up, gas prices are going up and we have a huge housing crisis.

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As we spend this month celebrating the achievements of African Americans, I’m saddened by a report that concludes that the subprime mortgage crisis has caused the largest loss of wealth for black and Latino homeowners in modern U.S. history.

The erosion of wealth is staggering.

Subprime borrowers of color will lose between $164 billion and $213 billion for loans taken in the past eight years, according to United for a Fair Economy, a nonprofit, nonpartisan organization. For the past five years, the group has examined the racial wealth divide in this country.

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CLEVELAND - They had small means and big hopes of owning a house. But African-Americans snared in the US mortgage crisis have seen the American dream turn into a nightmare many call “financial apartheid.”The storm triggered by risky “subprime” loans has left many in ruins, forced out of their modest homes and furious at falling victim to financial dealings that have taken a particular toll on minority families.

“People of color are more than three times more likely to have subprime loans,” concluded the organization United for a Fair Economy in a recent report which estimated that minorities have seen between 163 billion and 278 billion dollars of their equity go up in smoke since 2000.

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WASHINGTON — The first-of-its-kind poll on race relations between blacks, Latinos and Asians, released yesterday in Washington, D.C., revealed that while ugly stereotypes still hold strong between groups, a majority of those in each group said they should put aside their differences to work toward building better communities.

All groups polled said overwhelmingly that racial tensions in the nation are a very important problem.

The poll shows that high levels of segregation still exist which underlie and support negative stereotypes. More than 75 percent of blacks and Latinos attend religious services with their own kind. More than 65 percent of blacks and Latinos went to school with those of the same ethnicity or race. More than 50 percent of all three groups say most of their friends are of the same race.

Latinos (44 percent) and Asians (47 percent) said they are generally “afraid of blacks because they are responsible for most of the crime.” Blacks (51 percent) and Asians (34 percent) said Latino immigrants are taking away jobs, housing and political power from the black community. Latinos (46 percent) and blacks (53 percent) said Asian business owners do not treat them with respect.

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Rev. Jesse Jackson and other U.S. civil rights leaders converged on Wall Street on Monday to demand the government and the financial community step up aid to stem a home-loan foreclosure crisis.

At a rally in lower Manhattan, activists said homeowners needed more help to restructure their loans and avoid losing their houses.

“We’re standing to stop an economic tsunami,” Jackson told a crowd of more than 200 people. “Our government has an obligation, not only to borrowers but to the economy itself.”

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LOS ANGELES (Reuters) - In May, Alvin Clavon received a foreclosure notice on the simple, Spanish-style house in South Los Angeles that he shares with his wife and three boys.

Clavon bought the place in 2003 with a fixed-rate loan. They painted the walls, fixed the yard and made friends with the neighbors, who let the Clavon boys pick their basil.

In 2005, he worked with a mortgage broker to refinance his home with another fixed-rate loan. But on the night before signing, the family was offered an interest-only, adjustable-rate mortgage.

Clavon, a 35-year-old executive assistant at a bank, said he felt stuck. The ball was rolling, he trusted his broker and so the next day, he signed the loan.

“Turned out to be the worst thing I could have done,” said Clavon, who like so many others in danger of losing their home to the U.S. housing crisis, is African American.

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