Baltimore is not the only community that disproportionately
gives high-cost loans to minority borrowers. George Washington University
Professor and Woodstock Institute board member Gregory Squires pointed this out
in his testimony last month to Congress’ Joint
Economic Committee. Dr. Squires made the case that persistent segregation
and worsening economic inequality laid the groundwork for the subprime mortgage
crisis.

 

The testimony found that highly segregated communities of
color are far more likely to receive high-priced loans than integrated
communities, even after controlling for other factors such as credit rating and
education. It also found that the problem of segregation is not going away
anytime soon—in large metropolitan areas where the majority of
African-Americans live, the black/white index of dissimilarity continues to
hover around .80. The index of dissimilarity measures how evenly two groups are
distributed across a certain geographic area; high levels of segregation are
considered to be above .60.  

 

While financial industry reforms are necessary and important
steps on the way to financial equity, changes must also be made to address the
broader structure of discrimination and inequality. To see Dr. Squires’ full
testimony and policy recommendations, click here.