Jump to content
House Price Crash Forum
interestrateripoff

Blacks In Memphis Lose Decades Of Economic Gains

Recommended Posts

http://www.nytimes.com/2010/05/31/business/economy/31memphis.html?ref=business

For two decades, Tyrone Banks was one of many African-Americans who saw his economic prospects brightening in this Mississippi River city.

A single father, he worked for FedEx and also as a custodian, built a handsome brick home, had a retirement account and put his eldest daughter through college.

Then the Great Recession rolled in like a fog bank. He refinanced his mortgage at a rate that adjusted sharply upward, and afterward he lost one of his jobs. Now Mr. Banks faces bankruptcy and foreclosure.

“I’m going to tell you the deal, plain-spoken: I’m a black man from the projects and I clean toilets and mop up for a living,” said Mr. Banks, a trim man who looks at least a decade younger than his 50 years. “I’m proud of what I’ve accomplished. But my whole life is backfiring.”

Not so long ago, Memphis, a city where a majority of the residents are black, was a symbol of a South where racial history no longer tightly constrained the choices of a rising black working and middle class. Now this city epitomizes something more grim: How rising unemployment and growing foreclosures in the recession have combined to destroy black wealth and income and erase two decades of slow progress.

The median income of black homeowners in Memphis rose steadily until five or six years ago. Now it has receded to a level below that of 1990 — and roughly half that of white Memphis homeowners, according to an analysis conducted by Queens College Sociology Department for The New York Times.

Black middle-class neighborhoods are hollowed out, with prices plummeting and homes standing vacant in places like Orange Mound, White Haven and Cordova. As job losses mount — black unemployment here, mirroring national trends, has risen to 16.9 percent from 9 percent two years ago; it stands at 5.3 percent for whites — many blacks speak of draining savings and retirement accounts in an effort to hold onto their homes. The overall local foreclosure rate is roughly twice the national average.

The repercussions will be long-lasting, in Memphis and nationwide. The most acute economic divide in America remains the steadily widening gap between the wealth of black and white families, according to a recent study by the Institute on Assets and Social Policy at Brandeis University. For every dollar of wealth owned by a white family, a black or Latino family owns just 16 cents, according to a recent Federal Reserve study.

The Economic Policy Institute’s forthcoming “The State of Working America” analyzed the recession-driven drop in wealth. As of December 2009, median white wealth dipped 34 percent, to $94,600; median black wealth dropped 77 percent, to $2,100. So the chasm widens, and Memphis is left to deal with the consequences.

“This cancer is metastasizing into an economic crisis for the city,” said Mayor A. C. Wharton Jr. in his riverfront office. “It’s done more to set us back than anything since the beginning of the civil rights movement.”

The mayor and former bank loan officers point a finger of blame at large national banks — in particular, Wells Fargo. During the last decade, they say, these banks singled out blacks in Memphis to sell them risky high-cost mortgages and consumer loans.

The City of Memphis and Shelby County sued Wells Fargo late last year, asserting that the bank’s foreclosure rate in predominantly black neighborhoods was nearly seven times that of the foreclosure rate in predominantly white neighborhoods. Other banks, including Citibank and Countrywide, foreclosed in more equal measure.

In a recent regulatory filing, Wells Fargo hinted that its legal troubles could multiply. “Certain government entities are conducting investigations into the mortgage lending practices of various Wells Fargo affiliated entities, including whether borrowers were steered to more costly mortgage products,” the bank stated.

Wells Fargo officials are not backing down in the face of the legal attacks. They say the bank made more prime loans and has foreclosed on fewer homes than most banks, and that the worst offenders — those banks that handed out bushels of no-money-down, negative-amortization loans — have gone out of business.

“The mistake Memphis officials made is that they picked the lender who was doing the most lending as opposed to the lender who was doing the worst lending,” said Brad Blackwell, executive vice president for Wells Fargo Home Mortgage.

More at the link.

Interesting that people are using there retirement funds to try and stay in their homes, clearly this has major long term implications for them in the fact they won't be able to retire, but has short term consequences for the economy as pension funds will be getting smaller in value as people withdraw their cash. If pension funds have less money who is going to by govt bonds?

There appears to be a growing liquidity crisis, there isn't the money for everyone to liquidate at the same time.

Still it's all contained and the global recovery is locked in.

Share this post


Link to post
Share on other sites

If pension funds have less money who is going to by govt bonds?

I did wonder about how much government debt needs to cashed out in the next 20 years. Surely this is upward pressure on IRs?

Share this post


Link to post
Share on other sites

Interesting that people are using there retirement funds to try and stay in their homes, clearly this has major long term implications for them in the fact they won't be able to retire, but has short term consequences for the economy as pension funds will be getting smaller in value as people withdraw their cash. If pension funds have less money who is going to by govt bonds?

There appears to be a growing liquidity crisis, there isn't the money for everyone to liquidate at the same time.

Still it's all contained and the global recovery is locked in.

How is this interesting or different ? During Chinese famines (of which there have been around 1000 of them since Qin Shihuang) people used to eat their future, i.e. their seeds, it has been dramatised in many chinese plays and films where a drought hits and they are starving to death so they eat their kept back seeds. Usually the wife says we can't eat the seeds if we eat the seeds we will have no future, she usually relents when the husband says if we don't eat them we have no future.

The 1958 to 1961 great leap forward famine was even worse, as Mao both had exaggerated grain yields and the massive $400,000 USD loan to pay back to the USSR, people began swapping each others children and eating them

Share this post


Link to post
Share on other sites

Blacks In Memphis Lose Decades Of Economic Gains

because they bought houses in a property bubble.

Yep.

As I understand it blacks in the 1930s were no worse off than before, the grinding poverty just continued. If you're on the ground it's hard to fall off.

This time it's different.

Better to have never had than to have lost?

Share this post


Link to post
Share on other sites

That New York Times article has 3 pages.

For years, Mr. Banks was assiduous about paying down his debt: he stayed two months ahead on his mortgage, and he helped pay off his mother's mortgage. Two years ago, his doorbell rang, and two men from Wells Fargo offered to consolidate his consumer loans into a low-cost mortgage.

He is 50 years old. How much was his original mortgage? His mother should have been able to clear her own mortgage. If he was so concerned about holding onto his own home with the 60 approaching, he wouldn't have used it as vehicle for extra spending or debt consolidation.

On page 2 why are we supposed to feel sorry for the 56 year old 'middle-class' man who had his own home and took pride in having bought two more homes? Black, white or yellow if you continue borrowing with your home as security then be prepared keep the repayments going for what you owe. The people in this piece are all responsible for their own problems. None of them are even youngsters who over borrowed having only known very high house prices.

Share this post


Link to post
Share on other sites

Just goes to show just how much damage, financial and social, the property bubble has caused.

We need politicians to recognise this fact and set in motion policies to never allow it to happen again.

Tax property speculation in homes and tax it hard.

Share this post


Link to post
Share on other sites

Just goes to show just how much damage, financial and social, the property bubble has caused.

We need politicians to recognise this fact and set in motion policies to never allow it to happen again.

Tax property speculation in homes and tax it hard.

I agree RB. It's unlikely they'll tackle the source of the problem though - easy money - so I think they should slap a 10% tax on home purchases. That should do it.

EDIT

Or better still add VAT to the price of home purchases. Much fairer.

Edited by Minos

Share this post


Link to post
Share on other sites

There's two things in that piece that I think are really important.

“The banks and Wall Street have taken the middle class and shredded us,” he says.

When you start to hit the middle-class, or people who believe they are middle class, you risk huge political crisis. They operate the engine room of a society and an economy, and when you push them so far, to the point where they have nothing to lose or face losing everything, they will bite back and create moments of extreme political change.

And "you knew those were African-American neighborhoods,” she recalled. “We were told, ‘Oh, they aren’t so savvy.’ ”

I do believe that a lot of the property boom in the UK and US has been largely supported through a basic misunderstanding of personal finance across huge swathes of the population (and I do blame the media here for perpetuating idiocies). What the boom worked on instead was "folk knowledge" or "common wisdom": that a thing is so because it happened that way to someone else (usually in very different circumstances), or that it is so because someone off the TV said it.

What Memphis citizens needed, and still need more than anything, is a state-wide programme of personal financial education that is straight, unbiased and teaches the basics of money, work and finance that is taught in community and state colleges and schools. We also need something like that here in the UK.

Sometimes I find it very odd that people have deskilled themselves when it comes to planning and organising for their well-being in the future. We've probably got less foresight and rigor in this regard than our neolithic ancestors.

Share this post


Link to post
Share on other sites
Then the Great Recession rolled in like a fog bank. He refinanced his mortgage at a rate that adjusted sharply upward, and afterward he lost one of his jobs. Now Mr. Banks faces bankruptcy and foreclosure.

"I'm going to tell you the deal, plain-spoken: I'm a black man from the projects and I clean toilets and mop up for a living," said Mr. Banks, a trim man who looks at least a decade younger than his 50 years. "I'm proud of what I've accomplished. But my whole life is backfiring."

He was a janitor and custodian for Fed Ex. That looks like a lot of house, with nice fittings and newish looking Mercedes[?] SUV on the driveway. Along with too many other older people he seems to have pushed his luck too far with the borrowing for the lifestyle he desired.

http://www.nytimes.c...tml?ref=economy

Share this post


Link to post
Share on other sites

That New York Times article has 3 pages.

He is 50 years old. How much was his original mortgage? His mother should have been able to clear her own mortgage. If he was so concerned about holding onto his own home with the 60 approaching, he wouldn't have used it as vehicle for extra spending or debt consolidation.

On page 2 why are we supposed to feel sorry for the 56 year old 'middle-class' man who had his own home and took pride in having bought two more homes? Black, white or yellow if you continue borrowing with your home as security then be prepared keep the repayments going for what you owe. The people in this piece are all responsible for their own problems. None of them are even youngsters who over borrowed having only known very high house prices.

Agree 100%. I browse the NY Times almost every day and read most of these economic/foreclosure tales of woe. In the vast majority of the individual stories they highlight, the person either (1) was too daft to know what they were signing and the payment ballooned "unexpectedly" (not my problem), (2) they borrowed way too much initially or MEW'd like there was no tomorrow (again, not my problem) or (3) they became unemployed or had a large drop in income (unlucky and sad, but yet again, not my problem). When people start emptying their retirement funds to pay the mortgage (even when underwater!) rather than simply rent I lose all sympathy. It is not a government's job to keep anybody in their homes when there is so much cheap empty rental property available. But that is where the brainwashing has got us. If you rent you're seen as a failure but society respects you if you're depleting your pension fund to pay the mortgage while hurtling towards bankruptcy.

Share this post


Link to post
Share on other sites

The Economic Policy Institute’s forthcoming “The State of Working America” analyzed the recession-driven drop in wealth. As of December 2009, median white wealth dipped 34 percent, to $94,600; median black wealth dropped 77 percent, to $2,100. So the chasm widens, and Memphis is left to deal with the consequences.

According to their own figures the gap between whites and blacks has narrowed from $134,202 to $92,500 creating a more equal society. Yet still they whine.

How about taking responsibility for their racist voting which elected a Chicago gangster who stole their money and gave it to his campaign donors? Idiots.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 149 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.