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The Great Recession has been a financial catastrophe for millions of American households but that likelihood soars for Blacks and Hispanic households when compared to White households.  

Wealth gap widens: Whites' net worth is 20 times that of blacks'

The wealth gap between whites on one hand and blacks and Hispanics on the other stretched during the Great Recession to its widest level in a quarter-century, according to a new analysis of Census data. All racial groups saw their net worth shrink during the downturn, but that of whites shriveled much less, with the result that their median net worth is now about 20 times that of blacks and 18 times that of Hispanics.

This is horrifying to see 25 years of gains in equality for Black and Brown people erased by a violent economic spasm of unfettered capitalism.  

From 2005 to 2009, median wealth fell by 66 percent among Hispanic households and 53 percent among blacks, compared with 16 percent among whites. The losses left Hispanic and black wealth at their lowest levels in at least 25 years.
The housing crash that began in 2006 reduced home values for most American homeowners, but it hit minority families particularly hard because more of their wealth is tied to their homes.

“For nonwealthy people in the US, the huge preponderance of the wealth they have is in home equity,” says Thomas Shapiro, a law and social policy professor who directs the Institute on Assets and Social Policy at Brandeis University in Waltham, Mass.

Among Hispanics, about two-thirds of their household wealth in 2005 derived from their homes. When the housing bubble burst, their median level of home equity declined by about half – from $99,983 to $49,145 – taking much of their wealth with it. Home equity for blacks – which accounted for about 59 percent of their household net worth in 2005 – fell by 23 percent, from $76,910 then to $59,000 in 2009.

A major reason many Hispanics were hit so hard by the housing downturn is where their houses are located – disproportionately in California, Florida, Nevada, and Arizona. In those states during the housing bubble of the 1990s and early 2000s, many Hispanics worked construction jobs and bought homes. Since the housing crash, construction jobs have evaporated and home prices in those states have seen the steepest declines.

The Christian Science Monitor  article notes that unemployment rates for Blacks and Hispanics is much higher that it is for Whites. I wouldn't be surprised if racist practices by mortgage lenders who routinely steered Blacks and Hispanics into costlier subprime mortgages had more than a little to do with this shameful finding.

Subprime Loan Sharks

Steering & Targeting

Brokers and lenders frequently overcharge through ‘interest rate steering’ – setting rates on the basis of perceived financial sophistication rather than risk. Elderly, minority, and low-income homeowners are prime targets. Vulnerable borrowers may be subjected to aggressive sales tactics and sometimes outright fraud. Fannie Mae has estimated that up to half of borrowers with subprime mortgages could have qualified for loans with better terms.

The Department of Housing and Urban Development (HUD) points out that predatory lenders also sometimes make loans without regard to the borrower’s ability to repay. This involves lending based upon a borrower’s home equity, where the borrower clearly did not have the capacity to repay the loan. In the extreme, sometimes elderly people living on fixed incomes had monthly payments that equaled or exceeded their monthly incomes, which quickly leads borrowers into default and foreclosure.

The Great Recession has been a very different experience for many Hispanic and Black households than his has for the vast majority of White households. A racially stratified economy is not going to work for much longer for a country heading toward having a majority minority citizenry.  

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Comment Preferences

  •  US must change as it becomes majority minority (8+ / 0-)

    Plutocracy too long tolerated leaves democracy on the auction block, subject to the highest bidder ~ Bill Moyers

    by Lefty Coaster on Tue Jul 26, 2011 at 06:37:40 PM PDT

    •  Should, But Not "Must." (1+ / 0-)
      Recommended by:
      Lefty Coaster

      We've been methodically marching toward a permanent ruling white rightwing minority for half a century.

      We're now upping it to double-time.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Tue Jul 26, 2011 at 07:13:01 PM PDT

      [ Parent ]

  •  And our first black President... (3+ / 0-)

    continues to cite quotations from the man who purposefully made it worse.

    I just don't get it.

    •  I'll never forget when Reagan pulled money from... (3+ / 0-)

      ...federal programs that funded a home for adults with learning disabilities in my hometown here in Florida (while increasing funding for things like Military Bands and obsolete battleships).  I can still picture these people being given their suitcases and lead to the door and told: "You can't stay here anymore."  It was incredibly sad.

      As a post script, my Wife and I helped raise enough money to keep at least this one center going for awhile and they brought the people back.

      The point is...Reagan's policies were HEARTLESS then and they need to be recognized as such now.

  •  This is a great subject and so timely. (4+ / 0-)

    This is so very true.   We cannot call ourselves a great and compassionate country if we ignore the fact that huge swaths of our population are being frozen out of economic success to a greater extent every day.  It is a crime to let young children of color languish in poor neighborhoods with no hope to get out, no hope to get an education, and no hope for future financial freedom.  I live in Florida and a large part of my practice is representing the poor and disadvantaged.  Many of my clients have hardly any money to eat.  They rarely have air conditioning (this is a big deal now with 100 degree temperatures common).  Their adorable kids have no all.

    Where is the compassion for these people?  Where is the outcry for these children?  How can we give a Trillion Dollars to millionaires and billionaires and not even shovel a few scraps to these poor kids.

    This is an outrage.

  •  Historical data; always happens in economic crisis (3+ / 0-)
    Recommended by:
    David Kroning II, BlueDragon, sberel

    Studied this a bit as part of my economic concentration in undergrad.  The historical data is just amazing.  The middle class and the poor always suffer the worst in an economic downturns.  In the GD, the middle class was almost entirely eliminated.  The wealthy usually maintain or better their position.  

    Trust-Fund Kids of America Unite... save the Bush tax cuts!

    by JCPOK on Tue Jul 26, 2011 at 06:57:11 PM PDT

  •  The class make-up of a seminar (3+ / 0-)

    attended by executives of a high-powered tech firm was pretty eye-opening.  (I am a program coordinator - not very glamorous but pays the bills).  Thirty-five participants, 5 women, 1 Indian and the rest looked like they all came from an exclusive male, whites only country club.  

  •  Its all about the property ownership (0+ / 0-)

    I fear, hence all the drama about fanny may and mac, and how really egregious the explanations for the financial crisis in 08 actually were.

    Words can sometimes, in moments of grace, attain the quality of deeds. --Elie Wiesel

    by a gilas girl on Wed Jul 27, 2011 at 12:42:55 PM PDT

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