The housing crisis, as seen by blacks and whites

How the country responds or does not respond to the housing crisis could add to the long list of racial grievances. As Senator Barack Obama so effectively argued, race can play a big part in our perception of the world. My sense is that, to a degree, whites and blacks have very different readings of what happened to produce the housing crisis.

Of course, there is a diversity of views among whites and blacks, but in talking with people and reading articles, op-eds and reports, I've noticed certain tendencies. My evidence is anecdotal, so I could be wrong, but I would wager that in this issue, as in so many others, race matters.

The whites I've encountered have tended to be more sympathetic to the tough-love approach espoused by Senator John McCain. They have talked about people who irresponsibly sought to purchase more house than they could afford. Or people who thought their home values would rise forever and used their homes like a machine that printed money. In these narratives, people who are facing foreclosure do not deserve much sympathy. They made their bed and they should lie in it.

The blacks that I've heard from bring a very different perspective to the issue. They think of the history of racial discrimination by the Federal Housing Authority. They also think of the recent findings of racial discrimination in lending from paired-tester studies. When these blacks hear of the disproportionate negative impact of the subprime crisis on people of color, their first suspicion is that once again racial discrimination was at play.

Were borrowers facing foreclosure greedy and irresponsible, or were they exploited by racially-biased predatory lenders looking to bundle and sell loans?

It is very difficult to determine to what extent either of these positions is true. But it is very important that we do find out. If we were to bail out large numbers of greedy and irresponsible borrowers, that would be a bad. On the other hand, if we were to ignore the plight of large numbers of blacks who were taken advantage of by lenders, that would also be bad.

It is good to be aware that people have different perspectives on issues. These perspectives should be heard and understood. But, as difficult a time as the country has had in just acknowledging different perspectives, that acknowledgement is still the easy part of the problem.

The hard part is determining which perspective is right and getting everyone, or at least a majority of both sides, to agree on what is the right answer. Only when there is agreement on the right answer can a policy response be crafted that is seen as fair and appropriate by all and racial conflict avoided.

In the housing meltdown, it is quite possible that both positions are correct. It is possible that some people greedily pursued houses they could not afford. It is also possible that minority borrowers were exploited by lenders.

If we are going to bail out institutions involved in the crisis, the federal government should require that we learn exactly what went wrong. If lenders open their records to researchers at the Federal Reserve or the General Accounting Office, we can learn more about the people who borrowed and the homes they acquired. Were the homes extravagant or were the interest terms exorbitant and the deals shady?

It is clear that blacks were more likely to have subprime mortgages, but as lenders are quick to point out, this fact does not prove discrimination. Blacks tend to have more debt, lower incomes and much less wealth than whites, so it could be that blacks' generally worse credit scores placed them disproportionately in the subprime market. If the federal government commissioned a study with individual credit score data--used confidentially, of course--we could obtain very strong evidence on whether it was race or credit scores that placed so many blacks in the subprime market.

Armed with the findings of this research and with sensitivities to the long history of racial discrimination by financial institutions, the country could then move toward a sensible path to prevent us from ending up in this place again.

Recognizing that blacks and whites may come at issues like the housing crisis from different perspectives is an important insight. These perspectives need to be acknowledged and respected. But we can't end there. We need to figure out how we can get blacks and whites--and everybody else--to agree on a common vision of how we should move forward. That is the hard part.