The editorial board of the Virginian-Pilot finds it a matter for “concern” that African-Americans are denied mortgage loan applications in the Hampton Roads region at a higher rate than whites. “In Hampton Roads,” writes the Pilot, black applicants during the study’s period — 2015 and 2016 — were 2.4 times more likely to be denied mortgages than white applicants.
As I began reading this editorial, I braced myself for the usual insinuations that the disparity is due to discrimination, white privilege, institutional racism, or whatever. But I was pleasantly surprised. The editorial writers acknowledged that the study by the Center for Investigative Reporting from which they drew their data did not account for the credit scores of borrowers (or loan-to-asset ratios, for that matter). Indeed, they went so far as to aver, “There is no evidence that the gap is a direct result of discrimination.”
Still, they find the disparity troubling, and they suggest that “something more than economic trends might be a factor.” The report should prompt a “serious review” of lending practices to ensure that there’s “no subtle discrimination at play, no policies or actions that could — even unintentionally — lead to racial discrimination.”
I applaud the Pilot editorial writers for breaking free of the simple-minded institutional-racism narrative. But they don’t go nearly far enough. They remain so ensnared by progressive assumptions that they can’t imagine any other explanation for the disparity than a subtle, as-yet-undetected bias — even though, as they acknowledge, mortgage lenders say it wouldn’t make financial sense to deny a loan to any qualified candidate.
I would refer the editorialists to a December 2017 commentary by Alfred Edmond Jr. in Black Enterprise. Edmond addresses a fact, celebrated in other contexts, that African-Americans were estimated in 2016 to wield some $1.2 trillion in consumer buying power. Buying power is not the same as wealth, he cautions.
Addressing other blacks, Edmond writes:
The ability to build wealth depends on the degree we control our spending, so that after we pay income and other taxes, and for necessities such as housing, food, and transportation, we have something left over to not just spend, but to earmark for emergency savings, retirement savings, an investment portfolio, buying real estate (beginning with our own homes), financing businesses, and acquiring other assets.
Right now, while black income has grown rapidly over the past 70 years, our spending has grown even faster, which means we are spending every penny we make and then some (which is the case for most Americans). And what allows us to spend more than we make? Easy access to credit, of course. …
The truth is that money is in our garage, in our homes, and on our bodies, in the form of consumer goods, such as cars, clothes, electronics, and experiences (such as that daily, gourmet coffee-dessert) that we’re convinced we deserve and can’t live without, or even defer long enough to save, rather than borrow at interest, to have. And far too much of our money is going toward interest payments on the debt we took on (much of it via credit cards) to make these purchases.
Blacks can pursue one of two paths, he says:
A poverty-creation lifestyle. Spend more than you make, regardless of income, and borrow, paying interest and fees, to cover the difference. After providing for basic necessities (and often instead of doing so) you spend all of your income on high-priced, low-value, depreciating assets, such as clothes, cars, jewelry, etc.
A wealth-creation lifestyle. Spend less than you make, regardless of income, and save and invest the difference, earning interest, dividends and capital gains. Invest as much as possible in sensibly priced, appreciating assets, such as stocks, bonds, mutual funds, real estate, etc.
What Edmond writes, of course, is true for everyone, not just African-Americans. Personal thrift and saving were long considered virtues in the United States. But with the general disparagement of “bourgeois virtues” and the rise of hyper-consumerism, the willingness to defer gratification has gone out of style. Savings rates in the U.S. are half of what they were in the 1960s, 70s, and 80s. (See the chart atop this post.) For whatever historical or cultural reason — perhaps attributable to past discrimination and a desire to enjoy the material blessings that other Americans take for granted — African-Americans spend more (thus accounting for their punching above their weight in consumer spending), save less, accumulate more debt, and have worse credit scores. Which means they get turned down more frequently when they apply for mortgages.
Rather than engaging in wild goose chases, seeking auras and penumbras of discrimination in the banking industry, society should be encouraging African-Americans to embrace the virtue of thrift. Resources devoted to underwriting deeply flawed and deceptive “investigative” reporting such as the Center for Investigative Reporting study (see my take-down here) would be far better deployed to teaching financial literacy to African-Americans — indeed, to all Americans, for financial illiteracy and irresponsible spending know no ethnic or racial bounds. Meanwhile, the editorial writers of the Virginian-Pilot would be well advised to broaden their reading list. Black Enterprise might be a good place to start.