Race, Power, and the Subprime/Foreclosure Crisis: A Mesoanalysis

Abstract

Economists' principal explanations of the subprime crisis differ from those developed by noneconomists in that the latter see it as rooted in the US legacy of racial/ethnic inequality, and especially in racial residential segregation, whereas the former ignore race. This paper traces this disjuncture to two sources. What is missing in the social science view is any attention to the market mechanisms involved in subprime lending; and economists, on their side, have drawn too tight a boundary for "the economic," focusing on market mechanisms per se, to the exclusion of the households and community whose resources and outcomes these mechanisms affect. Economists' extensive empirical studies of racial redlining and discrimination in credit markets have, ironically, had the effect of making race analytically invisible. Because of these explanatory lacunae, two defining aspects of the subprime crisis have not been well explained. First, why were borrowers that had previously been excluded from equal access to mortgage credit instead super included in subprime lending? Second, why didn't the flood of mortgage brokers that accompanied the 2000s housing boom reduce the proportion of minority borrowers who were burdened with costly and ultimately unpayable mortgages? This paper develops a mesoanalysis to answer the first of these questions. This analysis traces the coevolution of banking strategies and client communities, shaped by and reinforcing patterns of racial/ethnic inequality. The second question is answered by showing how unequal power relations impacted patterns of subprime lending. Consequences for gender inequality in credit markets are also briefly discussed.

A multidisciplinary survey on discrimination analysis

“…Finally, an interdisciplinary economic-social science study of the emergence of the subprime crisis can be found in Dymski et al . (2011).…”

“…They adopt a two-stage OLS regression model on data obtained from RealtyTrac, the largest provider of foreclosure listings in the United States. Finally, an interdisciplinary economic-social science study of the emergence of the subprime crisis can be found in Dymski et al (2011).…”

Por dentro da bolha imobiliária

“…Hipotecas com taxas excessivas, multas elevadas e altas taxas de juros foram vendidas às famílias poderiam ser oferecidos empréstimos que excediam em 80% o preço das residências, ou mesmo dois novos empréstimosum para arcar com os 80% do valor da residência e outro para dar conta dos 20% restantes. Segundo Dymski (2010a), essa modalidade de empréstimo hipotecário se tornou dominante a partir de 2003, a ponto de o termo "empréstimo subprime" ser usado especificamente para se referir aos empréstimos para compra de residências feito por famílias incapazes de absorver o esquema de pagamento denominado "plain vanilla"ou seja, por um esquema regular antes utilizado pelo mercado, onde o comprador teria que ter uma poupança prévia de 20% do valor da residência para compor o empréstimo e ainda teria que usar mais de 30% de sua renda para pagamento da hipoteca Dymski (2010a). prossegue afirmando que essa dinâmica levou à explosão de preços do mercado de residências dos EUA e ao insustentável alargamento dos limites de liquidez no mercado financeiro.…”