Criticism of gentrification is the new criticism of segregation--that is, the space for moral arguments against white-enforced separation now includes both moral and economic arguments against the radical pushing up of value for the kinds of properties that exclude poor and minority residents.
In the past, this blog has featured analysis of what big banks have done, quite disgustingly, to the City of Baltimore. JP Morgan-Chase, Bank of America, Barclays, Citi-Bank, and Deutsche Bank manipulated interest rates and financially crippled Baltimore and other cities and states in the process. The subprime mortgage crisis devastated homeowners, particularly people of color, in the city, and tanked the economy as a whole. But things appear to be getting even worse for black residents of Baltimore.
The report released this week by the National Community Reinvestment Coalition (NCRC), a group dedicated to increasing "the flow of private capital into traditionally underserved communities," demonstrates that banks are prohibitive in their mortgages to black residents in the city. Banks' lending practices are continuing the cycle of devastation experienced by poor blacks in the city."
Using data from 2011, 2012, and 2013, the report, "Home Mortgage and Small Business Lending in Baltimore and Surrounding Areas," concludes that:
· There are very different patterns of lending in Baltimore City and the surrounding counties, with disinvestment in most of the city and affluence in the suburbs.
· In Baltimore City, race matters most in mortgage lending. Lending is greater in neighborhoods with larger white than African American populations, and there are tremendous disparities in home lending for African American and white residents.
· In the surrounding suburban counties, economic factors are the most useful in predicting home purchase lending activity.
· It is very difficult for borrowers of any income to be approved for mortgage loans in Baltimore City, where low- to moderate-income (LMI) census tracts are the majority. An LMI applicant is more likely to receive a mortgage loan in wealthier neighborhoods in Baltimore County.
The 2013 data, in particular, is jaw-dropping: 797 loans for Baltimore's 400,000 black residents, and 2,000 for Baltimore's 175,000 white residents. Many banks also believe that people of color living in a neighborhood might keep property values low--the best example of self-fulfilling prophesy I've seen in years. Because of this, there was a 16 percentage point gap in lending to higher-income borrowers between neighborhoods with minority populations of 10 percent and 80 percent--presumably reflecting a relatively steady rise in denials the more minority residents there were.
At the heart of this report is the role of race in Baltimore. NCRC’s analysis clearly shows that while majority white neighborhoods are sites of robust lending activity, majority black neighborhoods are consistently excluded from lending activity. This sets Baltimore apart from the surrounding areas, and keeps it mired in poverty while surrounded by healthy, vibrant communities. As Professor Elvin Wyly notes, this leaves areas of disinvestment, such as West Baltimore, as “islands of decay in a sea of renewal.”
Their conclusion is the same conclusion as the Public Banking Institute and allied groups: "When home loans, small business credit, and community services are absent, as they are in much of Baltimore, the results are concentrated poverty, lack of opportunity, and growing frustration."
I found a telling difference in the respective approaches taken to this study by the New York Times and Black Agenda Report. The NYT's Peter Eavis seems concerned about giving the banks a fair shake: He mentions that data on borrowers and applicants is largely unavailable, he repeats the familiar argument that the government is making it too hard for banks to lend to some people (the other side of the argument that the government was earlier at fault for making banks lend to too many people), and makes the predictable speculation that there is a substantial difference in credit scores between whites and blacks (the difference in credit-related mortgage denials is actually 7.5%, and the NCRC report suggests many more nefarious factors at work). Judging from his writing at both NYT and The Street, though, Eavis is a writer far more interested in the lives of private bankers and their banks than the plights of poor neighborhoods or cities. Still, Eavis accurately represents the overwhelming list of damning conclusions of the report, and its importance.
Black Agenda Report's Glenn Ford takes a far different approach, even taking NCRC to task for assuming the banks aren't aware of the implications of their practices.
The implications are quite clear, but the National Community Reinvestment Coalition, which seeks to draw public and private investment into the cities, and which commissioned the study, doesn’t seem to get it. They issued a statement, warning that failure to provide credit to prospective inner city homeowners will cause their neighborhoods to “continue to deteriorate” – as if the banks don’t know that! The bankers are perfectly aware of the consequences of their lending policies. Some neighborhoods will live, and some will die, to be born again as gentrified communities valued at many times the previous worth of the land and buildings. When Black neighborhoods are killed, the banks make a killing. The banks have other plans for Baltimore’s remaining white low income neighborhoods.
That kind of righteous anger may turn off some people, but supporters of public banking have been equally suspicious of big banks for other reasons, and it's not a stretch to say that Wall Street's attitude towards gentrification probably hangs somewhere in between complacency and outright insensitivity. And history, including recent history, is certainly full of examples of financial powers seeking to re-segregate sections of society.
Of course, the other issue with the NCRC is that their solution is the leveraging of private investment. In contrast, public banking seeks to channel public investment, under the theory that it's our money in the first place. The Bank of North Dakota, pursuant to legislative authorization in 2011, offers "origination of conventional residential mortgage loans if private sector mortgage loan services are not readily available." While it's true that BND utilizes private banks' mortgage criteria, a public bank in the City of Baltimore could focus its lending criteria with an eye towards correction of existing disparities, and in any event, BND helps community banks in the state, and community banks tend to have more flexible lending criteria than Wall Street banks. But if the conclusions of the NCRC are (as I suspect) correct that at least some banks are outright racist in their distribution of mortgages in Baltimore, the transparency, public mandate, and lack of shareholders of a public bank would eliminate racism-in-lending outright. There are also public mortgage banks in Germany (I described that country's elaborate network of public banks in a recent post), and I suspect that their lending criteria is proactively inclusive--or at least, more importantly, subject to public scrutiny.
The last time I wrote about Baltimore on this blog I concluded:
In the end, any solution that leaves big, Wall Street banks and private financiers in the driver’s seat guarantees more impoverished cities, more police brutality, more angry uprisings, and no long-term fiscal solutions. Those big private entities are materially responsible for the ruin, alienation, violence and hopelessness in Baltimore. We may not be able to bring them to conventional justice, but we can and must bypass and neutralize their influence as we rebuild what has been lost.
The NCRC report gives us still another reason why this is such an imperative. But the answer is not more reliance on the good graces of the monied classes. The answer is democratization and community control of finance.
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