By Lyneva Mottley
It’s hard to believe that it’s been 46 years since August 11, 1965, the day the Watts uprising began. I’ll never forget the fear that I felt watching the chaos unfold. I was shocked but not surprised: you could feel the anger and frustration building up during that hot summer. The booming California economy was providing little opportunity for people of color. Public policy was benefiting the already fortunate and was leaving behind those who were already disadvantaged. In California, as in the rest of the country, African American and Latino families were reaching a boiling point that could not be contained any longer. Over the following two years there were a number of additional riots in Chicago, Newark, Detroit and elsewhere.
Today in Watts and across California people are feeling that familiar angry bubbling stirring up as the gap between rich and poor grows ever wider. During this time it is important that we recall the lessons from that turbulent period in our nation’s past.
Two years after the riots broke out, President Lyndon Johnson established The Kerner Commission to try to understand what happened and what could be done to prevent further occurrences.
The resulting document, known as the Kerner Report, recommended that people from all walks of life have more equal access in four major areas: jobs, education, housing and services. Unfortunately, the inequality of 46 years ago is all too familiar today.
To be sure, there have been areas of progress. The Community Reinvestment Act of 1977 outlawed discriminatory banking practices and redlining. This helped give millions of minority families like mine the opportunity to fulfill the American Dream through homeownership.
I knew something was wrong a decade ago when my mailbox began to get filled on a daily basis with offers that seemed too good to be true. The pamphlets were from realtors, brokers and lenders that were selling predatory loans. These subprime loans were designed to be more expensive products for high risk borrowers, but turned out to be a chance for loan sharks to make a buck by pushing them on my elderly and minority neighbors, whether they needed them or not. One Wells Fargo loan officer recently testified publicly to the widespread practice of steering subprime loans, cynically referred to as “ghetto loans,” to borrowers with good credit.
Wall Street securitized these loans and packaged them as good investments until the market’s inevitable collapse. According to a recent report, “Homewreckers,” the loss to homeowners, the property tax base, and local governments amounts to at least $650 billion. Meanwhile, bank CEOs continue to be absurdly compensated, with Chase’s Jamie Dimon earning $20.7 million and Wells Fargo’s John Stumpf earning $17.5 million in 2010.
Of course, African American and Latino families have not fared nearly as well. A new report from the Pew Research Center finds that median household wealth in African American households declined 53% between 2005 and 2009 from $12,124 to $5,677. Wealth among Latinos fell even more dramatically during the period, from $18,359 to $6,325, a 66% decline.[4]
Many of us feel as frustrated today as we did in 1965. Yet, as was the case 46 years ago, there is an opportunity for elected officials and Wall Street to address the problems. Key among them is the growing number of mortgage holders who now owe more than their houses are worth. Today, 23% of homeowners are underwater, including as many as 35% of African American homeowners and 41% of Hispanic homeowners.
It is a problem we can solve if we have the will to do so. We can actually fix the foreclosure crisis in California by writing down all underwater mortgages (2.1 million in the state) to market value. This would pump an annual $19.9 billion into the state economy and create 295,000 new jobs annually for 30 years. It would save Californians an average of $790 a month on mortgage payments and would dramatically reverse the loss of wealth in minority communities.
I still believe in the American Dream. That’s why Bank CEOs and elected officials owe a solution to devastated black and Latino families in Watts and everywhere who believe we all deserve a fair chance to pursue our dreams.
Lyneva Mottley grew up in Watts and has lived there for over 50 years. A homeowner, she is retired from a career in factory work and home health care. She is the acting chair of the Watts chapter of the Alliance of Californians for Community Empowerment (ACCE). For more information about ACCE, visit www.calorganize.org
Can you say: ‘De-Regulation’ ?
De-regulation of the banking industry resulted in sn end of oversight of any of their antics
It also allowed mergers and consolidation of the banking and other industries
Look at all the good it’s done for the media, grocery stores, retail, energy…..
De-Regulation was pushed by the ‘Democratic Leadership Committee’ (sic) in the 70’s
A group of worthies that included Jimmie Carter, Bill Clinton, ‘Lying Al’ Gore, Joe Lieberman, Henry ‘Scoop’ JAckson (D-Boeing), ad nauseum…
The Democratic Party SOLD US OUT with De-Regulation
as well as ‘Free Trade’ and NAFTA
Our current ‘leadership’ Obama, Biden, Feinstein, Brown doesn’t seem much better
What is to be done ?
Put our trust in the Democratic Party ??
Support unelectable Ralph Nader ??
Wish I knew
We don’t seem to have a practical alternative to the Democratic Party
“We can actually fix the foreclosure crisis in California by writing down all underwater mortgages (2.1 million in the state) to market value. This would pump an annual $19.9 billion into the state economy and create 295,000 new jobs annually for 30 years. It would save Californians an average of $790 a month on mortgage payments and would dramatically reverse the loss of wealth in minority communities.”
So you bailout the imprudent borrowers and TOTALLY screw over the prudent savers by keeping home values artificially inflated. All the while further benefiting “The Rich” by keeping up the value of their rentals allowing them to keep rents higher than a balanced market would support.
This is the most basic of economics… You want to decrease the supply of for sale homes by bailing out the imprudent which drives affordability downward, while at the same time railing against income inequality.
You must see the cognitive dissonance here…
Let’s face a few facts: some “homeowners” were railroaded into higher risk, subprime loans. These loans have exploded in cost (typically Option ARMs with payments that both reset [have higher interest rates] and recast [become fully amortizing]). Most subprime borrowers can’t make the new payment. Thus, the problem.
However, that group is exceeded in size by the plain irresponsible. Especially here in California, people bought into the lie hook-line-and-sinker that “real estate always goes up.” This was in spite of the provably false nature of the statement: SoCal real estate prices declined from 1990-1996.
The correct solution to this problem is for “underwater” homeowners to walk away from the loan. There is nothing immoral about this and it doesn’t require direct government intervention. The loss is transferred to the bank (or, ultimately, the taxpayers). In exchange, the current owner can obtain equivalent shelter (renting) at a much lower monthly costs.
There is no “right” to own a home. As a society we’ve over-emphasized homeownership to the point of causing a fiscal meltdown. Going forward, our policies should be own/rent agnostic.
So what can government to do “fix” housing:
1 – Realize that keeping home values at prices above their natural equilibrium is (i) bad policy and (ii) not going to work in the long run. The crazy $8,000 tax credit fail should have provided more than enough evidence that you can’t stop the true trajectory of home values (down as of July 2011).
2 – Force banks to mark assets to market. By allowing banks to lie about the valuation of loans (a loan is an asset on banks’ books), they can “stall” the foreclosure until they have enough earnings to take the hit. This slow bleed occurred with Japan’s zombie banks in 1990-2000, creating a lost decade for Japan. We are following the exact script so far.
3 – End all policies that favor owning over renting, such as a mortgage tax deduction. Other countries (Canada, for example) don’t have a mortgage tax deduction and find similar rates of home-ownership
4 – Stop being a pawn to the real estate/finance industries.
So on business travel to a midwest state. You know the ones that complain about how expensive California is.
The thing is anything in a store is about the same price – be it food, electronics, etc.
Where the price differences are gasoline, real-estate, and taxes.
So that leads to the big question: Corporations are obviously not gouging Californians alone if people in this state are charged the same. Now I know Californians on average make more money too – so it looks like we really benefit on the consumer side.
But here is the kicker on the rich and poor gap. I know liberals mean well but lets face it, its the wealthier liberal elite that sets the left’s agenda and I don’t think they realize THEY are contributing to the wealth gap.
How so, you ask? Well start with gasoline taxes. Its an admirable push at energy diversification. But renewables are expensive. Wealthy lefties (especially the DINKS) can afford it. Young working class families not all.
Next lets hit real estate. Who is driving up those costs over the past few years? environmental regulations, permits, and the likes that make business difficult make housing accessible to the wealth not the working class.
We can go on and on – but my point is the left always thinks that regulation is the answer. But big business can always absorb regulations because they are big. but its the small businesses and the working class people that do get hurt whenever the left tries to up the cost and regulations.