7) FINANCIAL MELTDOWN: SUB-PRIME MORTGAGE LOAN CRISIS, FORECLOSURES AND TARP – On the homeownership front, the 2000s initially appeared promising. In 2002, President George W. Bush seemed on the right track with the Minority Homeownership Initiative meant to increase homeownership among African Americans and Latinos by offering downpayment assistance and other services. Predatory lenders, however, swooped in with sub-prime mortgages aimed for borrowers with poor credit scores. By the time the bubble completely burst in 2008, African Americans were on the losing end yet again. Reports revealed that even when African Americans should have qualified for traditional loans with fixed interest rates, lenders steered them towards sub-prime products that got them in homes with low monthly payments that later ballooned as interest rates skyrocketed.
As early as 2006, an article in The New York Times predicted that one in every five subprime loans issued would end in foreclosure. Reports are still pouring in regarding entire neighborhoods in New York, Philadelphia, Las Vegas, Chicago, Atlanta and other urban areas almost completely gutted by foreclosure. Estimates for loss of African American wealth, which had been on the rise at the end of the 1990s, range from $71 to $122 billion as a direct result of the crisis. Republicans in Michigan even attempted to use foreclosure as a means for blocking voters, potentially affecting African Americans at disproportionate numbers. Agencies have stepped forward to slow the hemorrhaging but lobbying for more federal intervention hasn’t been ruled out. Early in 2009, the NAACP filed suit against leading banks such as Wells Fargo, charging that they encouraged subprime lending to African Americans.
Worsening matters, free market economics was thrown out the window in 2008 when the government approved the controversial Troubled Assets Relief Program (TARP), dispensing $700 billion to “bailout” presumably “for profit” companies that included AIG, Goldman Sachs, JP Morgan Chase, Capital One, Citigroup, Morgan Stanley, among others, essentially nationalizing them and creating a form of corporate welfare. Many TARP recipients also engaged in global outsourcing, actively shipping jobs overseas as American unemployment rates continued to rise. The National Urban League, in a December 2009 letter to President Obama, urged TARP repayment in favor of the creation of jobs for African Americans, whose unemployment rates stood at double digits, and other Americans. For many African Americans, the government bailout reinforced the unholy alliance between government and big business.