Economic Troubles For Black And Brown Families Indicate Bank Predation Will Continue, Expand

The maddening thing about Beltway political culture is not its oft-maligned partisan divide, but rather its ever-present consensus that tomorrow will be better, when all evidence points to the contrary. American families have been spiraling in a steady and quickening economic decline for years, a devolution that did not begin with this recession and will not soon end without massive and sustained intervention. That hard truth is as plain as the troubling reality that few in Washington are prepared to face it.

Thursday, the U.S. Census Bureau released data showing record-breaking poverty in 2009: Nearly 44 million Americans lived below the poverty line; that’s more than the Census Bureau has logged in the 51 years it has kept track. This may have been the year’s least surprising headline -- such numbers grow from our political choices just as surely as night follows day. 

Nor is it surprising who fared most poorly in 2009. While the overall poverty rate climbed to 14.3 percent -- one in seven -- more than a quarter of both African Americans and Latinos lived in poverty last year. The data for poor children is the most arresting. Nearly 36 percent of black kids and 33 percent of Latino kids were poor in 2009, as were 38.5 percent of all families headed by single moms. Stop and try to digest this data: More than a third of all black and Latino kids are growing up destitute. With numbers like that, how can we talk meaningfully about a future of any kind, let alone a better one?

It’s a question the whole nation would do well to consider. Because the troubles of black and brown families are better understood as leading indicators than outliers.

The massive job loss between 2008 and 2009 -- a 3.5 percent increase in unemployment -- is surely the largest factor in the immediate poverty increase. But those harrowing months were neither the beginning nor the end of the problem. African Americans have been hit so hard in this recession for many reasons, but chief among them may be that black neighborhoods never emerged from the 2001 recession. Which meant they were the most vulnerable to the housing market predation that pushed the country’s economy off the cliff.

We now know banks wrote bad loans deliberately, and that regulators ignored ample real-time signs that too many of those loans were both fraudulent and likely to fail. This went on with impunity because it was just business as usual. Wall Street’s demand for large, short-term profits informed banks’ irresponsible lending choices long before they gorged themselves on subprime securities. Every family I’ve interviewed in the course of covering the housing crisis was propelled into these dangerous loans by an effort to climb out of huge credit card debt, overwhelming student loans and the many other economic trap doors banks had already built into the economy.

As Congress has worked to close some of these traps, banks and corporations will merely open new ones. They’re searching for new, inventive ways to trick customers into agreeing to huge overdraft fees and they’re exploring ways to broaden the payday lending market. Insurance companies are jacking up rates in advance of reforms and credit card companies are devising ways around new consumer protections. And that’s just the stuff we know about. So with the ranks of those who’ve been out of work for more than six months steadily lengthening, more and more families will be as vulnerable to banks’ predation as black and brown families have long been.

All of which is why the most important job in Washington may be the new consumer financial-protection watchdog created by this year’s Wall Street reform bill.