Regarding the FHA's role
Although he revels in the eternal burden of slavery, he has a more recent and popular villain: bankers. In particular, he resents the Federal Housing Administration (FHA)–established in 1934–which guarantees mortgage loans for poor people but allegedly made it impossible for blacks to qualify. Along with segregation and restrictive covenants, this kept blacks in misery and set them up for the sub-prime lending crisis. This, believe it or not, is Mr. Coates’ central argument, so let’s take a closer look.
What the FHA did, of course, was set underwriting rules. It didn’t want to guarantee loans for people who would default. It put some “low-income and minority” areas in some cities off limits for guarantees. This is sound banking. It is perfectly logical to avoid lending in dodgy neighborhoods, even if a particular borrower in that neighborhood is a good risk. If the borrower does default, it’s hard to resell a house in a bad area.
How did FHA loans actually work? Were there white people who couldn’t get one because of where they lived? How many blacks would have been turned down no matter where they lived because they had bad credit records? Mr. Coates has no time for questions like these; for him, the FHA was a racist plot.
Since banks wouldn’t lend to blacks, the only people who would were sharks:
Blacks were herded into the sights of unscrupulous lenders who took them for money and for sport. ‘It was like people who like to go out and shoot lions in Africa. It was the same thrill,’ a housing attorney told the historian Beryl Satter in her 2009 book, Family Properties. ‘The thrill of the chase and the kill.’
Setting aside what this says about the intelligence of blacks who can be “herded” and “shot” like game animals, here is yet another version of the myth that refuses to die: that bankers are demented, twisted people who will walk away from a profitable deal with a credit-worthy customer just because he is black. People who sell shoes or cars or funeral insurance do business with blacks, but bankers won’t.
There is an easy test for this theory. If blacks are being held to higher credit standards than whites, their default rates should be lower. In fact, the reverse is true. Studies from the 1990s–and probably from other periods as well–show that blacks stiff their lenders at about three times the white rate