Is this racist? You can bank on it.


Part of the challenge of incorporating anti-racism into mainstream skepticism is that skepticism has been primarily focused on developing techniques of inquiry honed in material sciences (by which I mean the study of physical systems like cosmology, biology, and physics – not materials science which is an entirely different thing). Ask most mainstream skeptics, and they’ll display an admirable grasp on at least the basics of astronomy, evolution, mechanics, some quantum physics, and if you’re lucky a bit of biochemistry to go with it. Many questions that atheistic skeptics have had to learn to answer are focussed on the origins of the universe and of life, necessitating this basic ‘toolkit’ of scientific knowledge.

We have not yet, and I mean yet, turned our eye toward the study of human sociopolitical systems (although I am enthused to note that most people have a fair-to-middling grasp on some core psychology, which builds part of the foundation). I am certainly not exempt from these educational blind spots, despite my impression of myself as a skeptic who is more interested in sociology than average. Without the same basic knowledge of methods of sociological inquiry (which surely extend to history, literary analysis, and other things that aren’t, in the strictest sense, ‘sciences’), it becomes very difficult to parse the often labyrinthine mechanisms of cause and effect in human organizations, especially in a way that satisfies the more ‘tactile’ minds among us.

Luckily, every now and then racism expresses itself so clearly and unequivocally that it transcends the need for rigorous study to unravel the mechanism behind the effect:

Wells Fargo, the nation’s largest home mortgage lender, has agreed to pay at least $175 million to settle accusations that its independent brokers discriminated against black and Hispanic borrowers during the housing boom, the Justice Department announced on Thursday. If approved by a federal judge, it would be the second-largest residential fair-lending settlement in the department’s history.

An investigation by the department’s civil rights division found that mortgage brokers working with Wells Fargo had charged higher fees and rates to more than 30,000 minority borrowers across the country than they had to white borrowers who posed the same credit risk, according to a complaint filed on Thursday along with the proposed settlement.

Wells Fargo brokers also steered more than 4,000 minority borrowers into costlier subprime mortgages when white borrowers with similar credit risk profiles had received regular loans, a Justice Department complaint found. The deal covers the subprime bubble years of 2004 to 2009.

Thomas Perez, the assistant attorney general for the civil rights division, said the practices amounted to a “racial surtax,” adding: “All too frequently, Wells Fargo’s African-American and Latino borrowers had no idea they could have gotten a better deal — no idea that white borrowers with similar credit would pay less.”

(snip)

Lending data showed, for example, that in 2007 customers in the Chicago area who borrowed $300,000 from Wells Fargo through an independent broker had paid an average of $2,937 more in broker fees if African-American, and $2,187 more if Hispanic, compared with white borrowers with a similar credit risk, the complaint said.

Similarly, it said, the data showed that nationwide, an African-American borrower who had qualified for a regular loan was 2.9 times more likely to be steered into a subprime loan, and a Hispanic borrower was 1.8 times more likely, than were similarly creditworthy white borrowers. Subprime loans, which are intended for riskier borrowers, carry higher interest rates.

This has been a point that has been repeatedly invoked by people discussing the racial component of the economic collapse – banking institutions acted in a ‘predatory’ manner, disproportionately steering lenders of colour toward riskier products. We saw a similar pattern months ago in looking at bankruptcy filings, where simply being black carried a de facto economic penalty that was not faced by white borrowers.

When we typically talk about privilege, we’re almost always referring to an attitude of selective blindness, (usually unwittingly) committed by members of a majority group that simply do not face the same challenges as their minority brethren. However, oftentimes these kinds of racial disparities operate in ways that leave all parties blinded to their effects – a privilege nonetheless, but much harder to detect because nobody knows about it to complain about it. In this case it took intervention by the federal Department of Justice to expose it, and I’m willing to bet most of the lenders of colour who were discriminated against by Wells Fargo still have no idea that they paid a penalty for being the wrong colour.

This is why it’s important to stop pretending that we live in a society in which race is no longer relevant, and instead devote the energy otherwise spent in shocked denial toward developing and honing our ability to parse the racial component in our everyday interactions. Skeptics, a group who spend a considerable amount of time learning how to find, expose, and overcome patterns of bad thinking and lazy argumentation, are supremely well-poised to make a real contribution to this effort.

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Comments

  1. says

    Yeah, that happened.

    This is where I show how little of the mortgage-lending business I know: did the brokers make a conscious decision to gouge black and Latin@ borrowers, or was it a case-by-case, subconscious discrimination?

    Not that it’s less reprehensible if it was a case of, “Oh, gee, I don’t know WHY all my minority customers get the lousy deals, but how is it my fault if they all seem unreliable?”; if anything, that’s the type of racism that’s more important to be aware of because it’s more difficult to call out.

  2. hotshoe says

    Since the minority buyers paid higher fees and higher interest, they had greater risk of defaulting on the loans – when they otherwise might have been able to keep up payments, if they had been given the same favorable fees and rates as white buyers. Then, when black and Hispanic buyers end up defaulting more – because of the systemic injustice – bigots use it as “evidence” that minorities can’t “manage money’ or “should have known better than to buy a house they couldn’t afford” (yes, I heard that one from a former friend) or even “they caused the mortgage crisis by getting the Feds to force bankers to loan them money when they weren’t qualified buyers”.

    I’m glad I’ve never been a Wells Fargo customer. It would make me feel dirty just to think I had been associated with them, even by that little. But now I wonder who else is/has been profiting from similar racism. And how will we ever find out ?

  3. maddog1129 says

    “We saw a similar pattern months ago in looking at bankruptcy filings, where simply being black carried a de facto economic penalty that was not faced by white lenders .”

    I think you mean “borrowers”?

  4. says

    I’m not sure what pisses me off more. That fact so many people in Wells Fargo have been hired with such lazy thinking strategies, or that so many people got screwed over because of it.

  5. scotlyn says

    If a risk assessor simply applies a subjective filter that includes “how trustworthy this person looks to me,” then it is very likely to result in a racially biased outcome. Thus does racial profiling, conscious or unconscious, work its harm through attitudes deeply ingrained in us all, and dispensed with only through hard “consciousness-raising” work.

    It could even lead to a reverse Turing test. Is it possible to find a human risk assessor whose assessments would be indistinguishable from those made by a computer supplied with all the relevant parameters.

  6. Pierce R. Butler says

    Alyson Miers @ # 1: … did the brokers make a conscious decision to gouge black and Latin@ borrowers…?

    A former Wells Fargo loan officer said, under oath –

    … he heard loan officers “refer to subprime loans made in minority communities as ‘ghetto loans’ and minority customers as ‘those people have bad credit,’ ‘those people don’t pay their bills’ and ‘mud people’.”

    There really isn’t much point in giving corporate America the benefit of the doubt any more.

  7. 'Tis Himself says

    Racial profiling for mortgages has been known about for years (NY Times article from 2007).

    Consider two neighborhoods in the Detroit area. One, located in the working-class suburb of Plymouth, is 97 percent white with a median income of $51,000 in 2000. To the east, a census tract in Detroit just inside Eight Mile Road has a very similar median income, $49,000, but the population there is 97 percent black.

    Last year, about 70 percent of the loans made in the Detroit neighborhood carried a high interest rate — defined as 3 percentage points more than the yield on a comparable Treasury note — while in Plymouth just 17 percent did.

  8. Etienne says

    Just… wow. Those numbers really drive the point home. Racism is often hard for me to understand (grew up in a 99% white and culturally homogeneous suburb, now living in a different, but still 99% white and culturally homogeneous suburb), and that’s the kind of post that really helps me see there really *is* a problem, and a serious one at that. Thanks Crommunist.

  9. smrnda says

    I think this is adequate proof that ‘racism’ isn’t just some impersonal, systematic *disadvantage* but a conscious and deliberate action taken by individuals and businesses just to piss and shit on minorities.

  10. Yellow Thursday says

    As a mortgage lender, this horrifies me. You look at the borrowers’ income, payment history, debt load, etc. Things that are relevant to their ability to repay the loan. Race shouldn’t be a factor.

    Still, I have had managers ask me, if I went to get a second opinion, “what’s your gut feeling?” and “would you be comfortable collecting from this person if they were late on a payment?” Those are questions whose answers could, consciously or un-, be influenced by racism.

    And I’ve seen questionable loans pushed through because the borrower was friends with senior management. The “good ol’ boys” club helps each other out even when it doesn’t make good business sense.

  11. Pen says

    So, is it going to take penalties like this to get a sufficient number of people to recognise their legal and professional responsibilities? The conclusion I have come to is that a person or organisation who ‘isn’t racist*’ and who has aspirations to being considered professional and law-abiding has conscious ideas about how race may intersect with the job, some kind of methodology in place for avoiding discrimination and monitoring their success at doing so, and a willingness to actively stay current with and promote the development of ideas on the subject in their profession. It’s easy to feel that these big social forces are outside our control but this is something that everyone can implement.

    *or sexist, or ableist, or…

  12. says

    Your observation about hard-science driven skeptical mind is the whole crux of the intersection of privileges that movement atheism seems to be now (finally) grappling with. It’s not just race, either — as the elevatorgate blog-wars has (rightly) forced a segment of our own movement to confront male privilege.

    The comparison has been made already to the transformation that Anonymous experienced when it was politicized by the so-called “moralfags” of 4chan/b/. I don’t see how this elevation of awareness of our latent social privileges could possibly be construed as a bad thing by anyone but those who enjoy their privileges and want to keep them, too.

  13. says

    The point with which you open is exceptionally well-made and, in my view, very important. Developing one’s ability to be skeptical in the sociological sphere is key, and very often we miss this in the community, partly because traditionally this simply hasn’t been the area of expertise of many big movement figures. Thanks for spurring some valuable thoughts on the topic!

  14. says

    Thanks for highlighting this. I shouldn’t be so surprised by bias like this at my age, I really shouldn’t – because my misanthropic guts keep nudging me with sharp reminders that such well documented examples are almost certainly just the tip of the iceberg.

  15. left0ver1under says

    It’s not a matter of what you did or didn’t know, it’s the fact that the rightwing media (aka the “liberal media”) ignored the story. The subject of bad loans to non-whites has been discussed many times before on progressive political blogs (e.g. Crooks and Liars). You weren’t ignorant, you were simply not informed because the fourth estate no longer exists.

  16. Anonymous says

    Why are the people reviewing such applications even given the necessary information to racially profile? Surely any identifying information or information irrelevant to financial status and/or competence should be removed from the version of the application which is reviewed. For instance, the reviewer should not have access to the applicant’s race, gender, or even name (which could reveal race, gender, or any of a variety of other personal affiliations). If the answer wouldn’t affect a computer’s response, I don’t see how it should be able to affect a human reviewer’s response either.

    For that matter, I don’t see why humans are still doing this at all. Surely with all of the available data a well-trained computer should be a much better predictor of credit-worthiness than any human.

  17. says

    At a minimum, single-blinding the bank side of the equation to race, gender, age, and several other factors would certainly be wise. To effectively do this, it’s necessary to hide information that seems harmless but often isn’t. For example, you might not think people would discriminate based upon names, but names can carry clues as to race and gender.

  18. F says

    Oh, yes. I had already read about this particular case at Black Skeptics, so instead of an actual comment, you get proofreading instead. (Lucky you, right?)

    I’m willing to bet most of the lenders of colour who were discriminated against by Wells Fargo

    Might that be borrowers? Unless I’m missing context where this was perpetrated against and through minority-owned financial institutions as well.

Trackbacks

  1. […] It can be difficult to see past our own privilege. Most of us have at least one, and perhaps several. Middle income privilege, ethnic majority privilege, cisgender privilege, male privilege — the list goes on. All of us make so many assumptions in our day-to-day life we don’t even realize some of them simply don’t hold up. We try to act as if we’re color blind thinking that’s the way to avoid being racist, when what we need to do is be more critically aware of how race permeates and influences society. […]

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