The finding against Bancorp South by the Consumer Financial Protection Bureau (CFPB) was published on June 29th of this year.
The fact that this news slipped by is unsettling. The only local news outlet that picked up the story is this stub from the Memphis Daily News. That’s pretty pathetic news people.
In its report, the CFPB detailed how it used forensic accounting and a “mystery shopper” technique to find a pattern of disparate lending practices against African American borrowers. The Mystery Shoppers, some white, and some black, sought out home loans in similar areas with similar credit backgrounds, but were offered very different loan packages based on race.
This practice is known as redlining.
Redlining: the practice of denying services, either directly or through selectively raising prices, to residents of certain areas based on the racial or ethnic makeups of those areas.
This isn’t the first time Memphis has been faced with a financial institution seeking to load up black borrowers with high cost debt products. As recently as 2009, the City of Memphis and Shelby County sued and reached a settlement with Wells Fargo Bank for similar practices in the run up to the mortgage crisis that tanked the whole damn economy and devastated Memphis’ tax base for years.
In researching the settlement, I found the original 2009 complaint, that lays out the City and County’s claims against the bank. I also discovered this complaint, made by the Los Angeles School District in 2014.
One interesting tidbit buried on page 47 of the document, was the Bank’s policy of using African American churches to promote “wealth building” with the specific purpose of delivering sub-prime loans to these congregations of color. In short, the bank went to places of trust in the African American community, to use it as a means to illegally profit.
For decades there has been a practice of redlining in Memphis…and that practice isn’t just about purchasing homes.
Redlining can include the removal of critical services like banks, supermarkets, healthcare and more from minority areas of the city. Often times the removal of these community anchors are justified as “business decisions”, but based on Memphis’ long and complicated history of depriving African Americans equality on so many levels (from education, to healthcare, to economic opportunity), it is difficult to look at the prevalence of food deserts, banking deserts, and healthcare deserts, and not conclude that this is more than a coincidence.
In the absence of these institutions, other businesses, like check cashing establishments, have taken over the landscape, often charging huge fees for fairly mundane financial transactions.
The additional fees these business charge would not make it in the marketplace but for the absence of more reputable financial service providers. They use this scarcity to capture large percentages of working poor wages in high and unnecessary fees while returning little, if anything of value to the community at large.
Bancorp South paid a pittance ($10m) and accepted no blame for their role in passing off high-cost loans to black customers who qualified for better deals. The fine amounts to less than .1% of the bank’s total assets and just over 1% of their annual revenue. The company’s stock dropped on the news, but has since recovered and then some.
I applaud the efforts of the CFPB, but I also recognize that their finding is just the tip of the iceberg…and the fine they imposed is but a fraction of the economic damage to black loan-seekers that has been inflicted.
I’m not foolish enough to believe that Bancorp South is the only bad actor here. Businesses adopt business practices out of imitation, not innovation.
That imitation is easy to see from the scores of closed bank branches in traditionally black communities to the food deserts that leave neighborhoods with options that cost both more and provide less. And all of that is the definition of redlining.
Memphis can’t live like this. We can’t build up our neighborhoods without these kind of community anchors. We can’t expect people to thrive when they’re expected to do more with fewer options…most of which cost more.
City, County and State government have a direct interest in maintaining community anchors. Their loss means lost revenue in the form of property, business and sales taxes. But aside from talk, neither the City, County, nor State government has done anything of any substance to reverse the trend over the past 30 years. If anything, through sprawl inducing land-use policies and blind-eye rubber-stamping, all have made the problem worse.
So while the fine against Bancorp South is a small victory, there’s still a lot of war on many fronts left to be fought. Because while businesses may get busted every once in a while for adopting racist policies, our local and state governments have been been complicit. That complicity has appeared in the loss of businesses, schools, parks and other anchors that are vital to the vitality of neighborhoods. Their loss represents a kind of government sanctioned redlining that often flies under the radar and sometimes takes decades to notice.
The current ploy is to defund or delay the implementation of the Affordable Care act in exchange for avoiding a government shutdown.
This, of course, is a non-starter with the President and the US Senate…which means that if no bill is passed through the House without a defunding or delay of the landmark healthcare law, non-essential portions of the government will shutdown until one is passed.
How long that would take is anyone’s guess.
Apparently, Republicans are more interested in playing politics than governing…a fact that should have been obvious in the 40 odd previous votes to repeal the law and the statement by House Speaker John Boehner that “Congress ought to be judged by how many laws they repeal”, which, by the way is zero. You can decide whether that is a good or bad thing.
In the wake of the 1995 and ’96 government shutdowns, the political cost for the majority party at the time was the loss of seats, though not their majority. But economic conditions were very different. Unemployment was lower, and growth was higher.
This time, we’re not in as strong a position, and the economic impact will hurt more if the government does shutdown.
The reality of a shutdown, even a short one, is the loss of a lot of growth, and tens, if not hundreds of thousands of people losing income. These are mostly regular people, doing regular jobs, that just happen to work for the Federal Government. They are, in effect, being punished for serving their country…a reality completely lost on the GOP majority. A reality they don’t seem to care about at all.
Current GOP orthodoxy holds that all workers should be thankful that the ownership class has allowed them to make any kind of income, whether in the private or public sectors. This is where that whole “makers and takers” rhetoric from the last Presidential election cycle naturally leads.
Understanding this, makes it easy to see why both damaging the economy at large, and potentially causing financial ruin for people who made the mistake of wanting to serve their country are no big deal to GOP v.2013.
The long-term impact of both this ideological position and policy decision to artificially constrain economic growth through inaction is founded in the politics of damaging a President more than representation of constituents…or anything else.
History has not been kind to people who put political self-interest over the needs of a nation.
So it seems that we’re in for at least two big fights (budget and debt ceiling) that don’t need to be fights except for the purposes of political expedience. These fights will include things that don’t need to be included (primarily the Affordable Care Act) and will be framed as a means to curb deficit spending, which is down at its lowest level since the previous administration.
A prolonged shutdown, due to both issues will cause a lot of harm to both the economy by creating unnecessary uncertainty. The uncertainty thus far has hurt markets…which are more a measure of sentiment than the overall economy, by taking some 200 points from the Dow Jones Industrial Average, in the past 5 days alone (a loss of 1.2%).
It would seem even GOP paymasters understand that a shutdown isn’t good for them in the real world.
But according to the current GOP, all that matters is an ever increasing list of pie in the sky conditions that help the mighty few and hurt the many, to make a President look like he’s not doing anything…which is actually what the House leadership is doing.
It is the definition of madness.
I’ve been working on a series of special projects over the past week that are likely to continue for some time to come, so blogging will likely be light over here for a while. However, there are several things that have attracted my attention that need to be dealt with, so, here goes.
Bill Moyers with his observations on politics in the US. Pretty strong indictment of the status quo if you ask me, but not entirely surprising.
If you really want to know just how corrupt the system is, why not ask one of the guys that gamed it better than most. Another strong indictment.
One thing that I think Democrats need to do better is connect the dots on things. Many issues facing the US are so big that its hard for folks to get their heads wrapped around issues. I think this post is a really good example of connecting the dots without getting so bogged down in details that it turns people off. On page 2 of the article are 11 things that led to the financial crisis we’re still digging out of. You don’t have to understand all the issues involved to understand how this house of cards went down.
Now for something with a little more local flavor.
The unemployment rate in Tennessee stands at 9.8%. As you can see from the chart above, unemployment shot up at an alarming rate from a low of 4.5% in May of 2007 to a high of 10.8% just over a year ago. We’ve been hanging around 10% unemployment for right at 30 months.
So for 52 months we’ve either seen increasing or very high unemployment in this state.
52 months, that’s almost 4 1/2 years.
In that time I’ve seen lots of friends laid off. Some of them have been fortunate enough to find jobs in a very difficult employment environment. Most of those folks that have found jobs are making less than they were before they got laid off. Yet through all of this, their expenses aren’t appreciably lower. Rent is still rent. Utilities are still utilities. Gas is still gas, and food is still food. In fact, many of these items, particularly gas (which has increased $.56/gal over the past year (Source)) have a huge impact on other prices like food (Ag is heavily dependent on fuel, and transportation of food is also).
So with all those things in mind, it should be refreshing to note that Ron Ramsey thinks unemployment is a lifestyle choice, and that the unemployed should no longer be lavished with the meager $275/wk (that’s the maximum, btw, not the average) the state gives to help those who have found themselves in the unemployment line.
Folks who have fallen victim to unemployment have many different stories. We see headline after headline of job fairs where hundreds, if not thousands of folks line up to get the few jobs that are available. Tennessee blogger GinerSnaps has a very personal account of standing in one of those lines.
Despite these, and many more accounts, the Lt. Gov. has this perception that the unemployed just magically decided on slackerdom sometime around May of 2007 and need a kick in the hiney from one of his custom made, Tennessee State Seal emblazoned, gift from a friend, boots.
Nothing like a little perspective right?
If the Lt. Gov. needs some real perspective from someone that’s been through the unemployment rigamarole, he need look no further than his very own press secretary who was laid off in March of 2010, and remained unemployed for 11 months.
But ultimately neither Ramsey’s statement, nor his intentions are rooted in any kind of reality. Ramsey is engaged in the art of opinion shaping. By seeking to demonize the people who have, through no fault of their own, been caught up in the economic downturn, and related unemployment that’s been with us for the past 52 months, not to mention the “jobless recovery” that came before it, Ramsey is deflecting blame from the people who are sitting on over $2t in cash, but not hiring.
Which brings us back around to that Bill Moyers link again.
Nothing like a little ray of sunshine in the morning, huh?
See also: Out of the Blue
The fallout of this crisis has been the broad expansion of people living in dire straits. This morning the NY Times published a report about poverty in suburban America. Once seen as a safe haven from many of society’s problems, it seems suburbia has found itself in the same situation that the rest of the country has.
It’s easy to feel a certain level of sympathy for folks that have found themselves caught in the crossfire of the Masters of the Universe’s failed experiment in laissez-faire capitalism. The dismantling of the protections brought by Glass-Stegall in the wake of the first Great Depression as well as the weak enforcement of regulations by the Bush Administration led the way to this nightmare of deregulation that has ultimately hurt everyone worldwide.
So while Congress passed some regulatory reform, it still can’t seem to get its head out of its hind-quarters on the actual root of the problem, (money men run amuck), the nation, and other industrialized countries worldwide, not to mention those who rely on our consumption to stay afloat, continue to suffer.
But there’s suffering and then there’s suffering. While the majority of the country has been suffering from increasing income inequality since the late 1960’s, some have figured out a way to game the system to produce quick, if not sustainable wealth. Today the Wall Street Journal chronicled one of those stories.
Meet the Siegel family. The once proud time-share magnate now finds their life in shambles, trying to make ends meet while owning a home of a mere 26,000 square feet after losing the 90,000 square foot home they were building that they appropriately called “Versailles”. They lost their private jet, and now have to suffer the indignity of flying First Class. I’m sure their personal struggles are far more dire than anything I could possibly imagine.
While its unfortunate that these folks have been caught up in the financial crisis, the fact that they are managing to survive in a home that is some 17 times the size of my humble abode (which again, is more than many Americans have and I’m incredibly thankful for it) is insult to injury. These folks don’t need pity, they need to be slapped back into reality. The world they live in is not Disneyworld, but Disneyworld on a drug induced, debt fueled, PCP like mania that is the very definition of what is wrong with the way our economy has “grown”.
As noted in the article:
It wasn’t always this way. For decades after World War II, the top-one-percenters were the most steady line on the income and wealth charts. They gained less during good times and lost less during contractions than the rest of America.
Suddenly, in 1982, the wealthiest broke away from the rest of the economy and formed their own virtual country. Their incomes began soaring higher during good times. The top 1% of earners more than doubled their share of national income, to 20% as of 2008. Looking at another measure, the richest 1% increased their share of wealth from just over 20% to more than 33%.
Those surges were often accompanied by mini-crashes, even though the direction over time was always up. A top 1% that had once been models of financial sobriety set off on a wild ride of economic binges.
Economic binges. Maybe comparing what’s going on in our country’s economy to a PCP high isn’t that far off the mark.
Over the past 30 years that I’ve been aware enough of what’s going on in this country to form an opinion, I’ve seen the idolization of obscene wealth take a nasty turn from building the country to building a series of feifdoms on a foundation of toothpicks and bubblegum. This is the problem, not middle class people who didn’t adjust fast enough to divest of their only asset (their home) before the latest in a series of bubbles burst. We have created a shadow economy that is in no way tied to real economic growth. In fact, the article notes that the “leveraging” these individuals engaged in was some 20 times more volatile than economic growth.
For the better part of the last 3 decades we’ve seen companies profit margins expand exponentially while median incomes have been largely flat. The standard of living for regular Americans hasn’t gotten better. If anything, its gotten worse, despite promises of the grand outcomes that would come with deregulation. Yet somehow, the American public just doesn’t see the connection.
This has to stop. It’s time to take a good hard look at ourselves and ask if this is what we want to be: burnt out and used up well before our prime, or something a bit more sustainable that will benefit not only the most ambitious, but also the people who get the stuff done day after day that no one else wants to do.
We’re sick, and its time we realize it. We need a 12 step program.
The first step is realizing you have a problem. I think the majority of Americans realize it, but realization alone doesn’t end addiction, action does. To end this addiction, we have to be more honest with ourselves than we might normally be comfortable with.
Failing this, we’ll likely be lulled to distraction like we were during the past 30 years, and find ourselves on the wrong side of a bubble once again. If we want the era of Bubblenomics to end, we’re going to have to stay vigilant, and not buy-in to the next quick fix that these so-called “financial experts” want to sell us.
Believe me, they’re always selling, but we don’t have to keep buying. In fact, if we don’t, the very law of supply and demand that guides these “Masters of the Universe” will force them to find something more sustainable to sell.
Its time for us to force their hand.
Until you’ve lived in and around poverty, until you’ve actually experienced it first hand, you really can’t have any understanding of what it means, what it looks like, and the problems associated with getting out of poverty.
For as long as I can remember I’ve heard people of all political stripes opine about ways to effectively fight poverty. Some of these prescriptions border on the ridiculous, others are not only ridiculous, but insulting and judgmental.
If there were an easy answer to solving the problems of poverty, it would have already been done. But rather than seeking answers to addressing the problem of poverty, we’ve chosen to double down on making the problem worse. The evidence is striking, as is the manner in which we’ve chosen to ignore that very same evidence.
Even though addressing poverty is hard, that doesn’t mean it’s outside our ability. It is within our grasp if we would just reach out for it, rather than making value judgements against the poor, which is what I see time and time again in our community.
Poverty has been with us since man began organizing into tribes. Even the Old Testament addresses poverty, and commands us to help the poor.
For the poor shall never cease out of the land: therefore I command thee, saying, Thou shalt open thine hand wide unto thy brother, to thy poor, and to thy needy, in thy land.
– Deuteronomy 15:11
Despite this commandment, not only does poverty persist, it is expanding in our community.
On Friday the CA revealed a Census report that names Memphis the most impoverished MSA in the US. For those of us who have been studying the devastating impact of the current financial crisis, and the policies that helped create it, this comes as no surprise. Students of history could have probably predicted this event, based on past policies that led to the Great Depression, had they not been in denial that such a thing could happen in America. It has happened, and it is directly related to choices we’ve made over the past 40 years.
But while the current economic conditions have made poverty more widespread, the reality is poverty has been a consistent problem in our community since the founding of our County. Indeed, as I noted in this post, even the city’s own history page details the impact of poverty over the nearly 200 year history of Memphis and Shelby County.
There is no “silver bullet” to end poverty, but there are a series of policy decisions that can be made across all levels of government to reduce it. Enacting those policy decisions across the various levels of government that have a direct impact on people here in Shelby County is a bit like herding cats, but it is precisely what must be done.
But before those policies can be enacted we have to change the way we think about and act toward those who suffer from poverty. This is not a “bootstraps” problem, as some on the ideological right would characterize it. The notion that people should somehow “just work harder” to elevate themselves from the grips of poverty is an inherently ignorant position. By framing poverty as “someone else’s problem” as is so often the case, we ignore the commandment from God quoted above, and pass judgment on individuals whose circumstances we cannot even imagine. Considering the prevalence of this misguided and judgmental position, its no wonder we’re not making greater gains against poverty.
Saturday the Commercial Appeal published an editorial on the poverty situation in Memphis. As of this writing, the majority of comments on that editorial are informed by the very same ignorant position I mentioned above. Unfortunately, this ignorance is not due to the lack of experience with poverty, certainly you can hardly turn your head in this community and not see it, but rather a blind self-interest that seeks nothing more than to defer responsibility from the choices we as a community make, to the people who suffer most from those very policies. This “blame the victim” position causes me to seriously question the humanity of the people who espouse it.
Since the founding of our nation, we as a country have taken on big things, and largely succeeded. It is in this success that we built the first real sustainable middle class. But while we built it, based primarily on key investments in education, infrastructure and research, among other things, over the past 40 years we have effectively departed from this recipe for success, instead choosing to reduce the level of investment, at the expense of the middle class and the poor, and to the benefit of those who need the least. We were told that this would lead to prosperity for all. We were told this again and again, and despite these assurances it hasn’t happened. Despite this reality, many of us hold on to this position as if it were a savior, even though it has led to a series of devastating outcomes for a huge segment of the population.At the Federal level, income inequality has expanded exponentially, with the top 20% making huge gains while the rest of the population experiences wage stagnation. There are a lot of reasons for this, but the majority of it comes from shifting the burden of funding the government from the top income earners to the middle class. This policy, which saw statutory income tax rates for the highest earners cut by 50%, and effective rates cut by 66% has not only placed undue burdens on the middle and working class, but also negatively impacted our ability to make investments in the very things that made America the global innovation and economic leader that we once were.
Of course, this reality is easily drowned out by persistent cries that our problem is spending. This position is not only ridiculous, but also ignores history. Government investment in infrastructure, education, research, and more has been the key economic driver of progress. Without these investments we wouldn’t have been able to expand from our original 13 states, across this great nation, from sea to shining sea. Of course, history is easy enough to ignore.
Increases in blight, poverty, infant mortality, homelessness, and decreases in educational attainment and income are the fruits of the decisions we’ve made over the past 40 years. We’ve chosen to divest our financial resources from the people who stand to benefit most to the people who need it least, the “job creators” who are now sitting on nearly $1,000,000,000,000 ($1 trillion) in cash rather than investing it in the future. A large chunk of that money can be found right here in Tennessee.
There are, of course, a multitude of policies at the Federal and State levels that negatively impact our ability to fight poverty locally. Correcting the vast majority of those policies are out of our reach at this moment, due to issues that are too numerous to mention. Despite these policies, there are things we can do on a local level to not only combat poverty, but the conditions that sustain it. Some of those policies are underway, others have yet to be implemented.
Over the past few years, the Wharton Administration has sought to fight the conditions that sustain poverty. These programs, from the campaign to end blight, and homelessness, to more recent efforts to help lift people out of poverty. I understand there are many who feel these efforts are half-hearted or inadequate. Some feel these initiatives are offset by other actions of the administration. I get it. However, no matter your position on how much or little the City should or could do, these efforts are more than what was happening before. From that perspective, they should be not only supported, but we should seek ways to expand them.
The City government cannot embark on this project alone. Without the active participation of the County and State governments, any effort made by the city will be hamstrung by a lack of resources. Indeed, this is one of the many reasons I support the Metro Charter effort last year. From my perspective, merging City and County governments puts us in a better position to fight poverty and other conditions associated with poverty by removing the continual finger-pointing that exists between the two governments. This, of course, didn’t happen for a lot of reasons including but not limited to short-term self-interest and a belief that policy and outcome are somehow disconnected, both of which are ultimately misguided.
Despite this, the County has a role to play in working to fight poverty and the conditions that maintain poverty in our county beyond merely maintaining property they own. The Shelby County environmental court should seek to step up efforts to help those who lack the resources to maintain their property and hold those accountable who do, but choose not to.
The hard truth is a great deal of blight in poverty stricken areas of this community comes not from individuals who have been foreclosed or who are too poor to take care of their property, but from individuals of greater means, who have the money, and reap the financial rewards of renting out their property yet choose not to maintain it. I drive all over Shelby County, and what’s amazing is when you see a decrepit or blighted home and look up who owns the property, more often than not, that individual owns many other properties in the area. Connecting those dots and enforcing current code is key to not only addressing the problem, but also treating the individuals who are unfortunate enough to have fallen prey to these slum lords with the dignity that they deserve.
How does tackling blight impact poverty? By repairing or removing these nuisances, the living conditions of those who have the misfortune of living around this blight improves. Crime decreases as harbors for criminal activity are removed, which in turn lowers the cost to taxpayers in having to incarcerate these individuals, and increases revenues as property values increase. It is a long-term investment, but one that has to be made if we want to increase prosperity in our community and decrease the social ills that we all complain about.
Education is another issue that must be addressed to decrease poverty. As the child of educators, I’ve seen the transformative impact that education can have on people. Were it not for the educational opportunities afforded my mother, who grew up in a household that was anything but financially secure, she most likely would have never been able to attend college, which means the chances of my parents ever meeting would have been virtually nil. Needless to say, without these educational opportunities, I might have never been born. So yeah, this means a lot to me.
But rather than evaluating and changing the way we educate our children to reflect the new realities of our economy, we’ve doubled down on a kind of testing that does anything but prepare our children for their future. We’ve monetized this “progress” through performance bonuses that rely on teachers focusing on teaching the test rather than preparing our children for their future, and in doing so we’ve opened the door to fraud which does nothing but further hamper our children’s progress.
Here’s Sir Kenneth Robinson on schools, I’ve posted it before, but it bears repeating.The takeaway from all of this is simple: When we, as a nation, stopped investing in our people, infrastructure and innovation, we started suffering. Those who complain that “out of control spending” is our problem are effectively waging war against those investments and the prosperity they brought to millions of Americans.
Did that investment eradicate poverty? No. Poverty will never be eradicated any more than the common cold or any number of problems that face us as human beings. However, it did limit the reach of poverty. It did lift millions of people out of poverty. It did increase the standard of living for people.
How much of this can we do locally? While there are limits to what City and County governments can do from a strictly budgetary standpoint, there’s plenty that local government can do that rests primarily on, you know, enforcing laws and codes, punish property owners that are taking abusing the Section 8 voucher program, and reaching out to those who have fallen victim to these individuals to ensure public funds are actually doing what they’re supposed to be doing, providing a launch pad for people to find success.
It’s not rocket science, it just requires a consistently determined and focused effort. It also doesn’t mean we can’t or shouldn’t do the things we’re doing now to redevelop areas, but we should look at how that redevelopment will impact the 25% of our population that suffers from poverty. We should look at the infrastructure investments required for that development, and decide if they make sense in the long term.
If we want to fight poverty, and raise the standard of living for our people, we have to stop trying so hard to forget that they’re here by pushing them out of sight, out of mind. We have to move forward with them in mind, and stop ignoring the impact our actions have.
We’ll never be able to grow or build or attract people to this city until we work to help those in poverty lift themselves up. The longer we act like it’s someone else’s problem, the less likely that any resolution will come. It is ultimately in all our interests that we have more success stories in our city. To build that success, we all have to get in the game instead of ignoring the problem.