I also find perspectives like yours very perplexing. Debt is not charity. It is not charitable to provide debt to someone who cannot afford it. Not for the debtor, nor the lender. I've seen people suffer for years drowning in debt they could not afford. I've seen people with mortgages (variable rates in foreign currency) that went underwater when the rates and currency exchange shifted the wrong way. Bankruptcy is an incredibly painful process to go through as well. Debt is not charity.
Banks also do not just give out big loans (no matter what your credit score is) unless there is collateral. It is clear as day, that the bank valued the collateral to be low or inconsequential (i.e. judged one property at land-value at $1/sqft and $0 for the building). So there was no collateral for those loans, because redevelopment of those properties was expensive, with lots of risk. Why do you think it hasn't happened yet? Why do you think these properties were standing there rotting away? Why didn't anybody take a flyer on those, given how inexpensive these properties probably are? Because there are major risks associated with redevelopment. In our city, a property, seemingly in a prime location, stood abandoned for years .. turns out, the property was cheap, the land was cheap, the environmental cleanup necessary for redevelopment, was not.
>Were that person not black, it would be easier to get funding at a time of need
Says who!? Have you actually tried? Our company was only extended a line of credit years after we were in business, and it was collateralized against purchase orders and revenue (and we had to provide lots of documentation to prove those). Banks do not want to give out loans with even a little bit of risk associated. They are not like venture capital firms and haven't been for a long time.
If this article is correct, then this claim is wrong. Banks may not directly use race as a criteria, but the claim is that they use race as a criteria for property value, and then use property value as a criteria for loans:
> Five of his properties were in a decent state of repair and some had sitting tenants, while three needed a complete refurbishment. ...One bank finally sent someone on location to assess his properties 12 weeks later. They valued the buildings at zero dollars and just over a dollar per square foot for the land only. As the rules for most banks say a property must be valued at a minimum of $50,000 (£39,000) to get a line of credit against it, his case was shut.
Counting a building with active tenants paying rent as being valued at $0 is ridiculous.
You have to do the leg-work to show that Banks have a policy that is in intent racist because every policy you can ever think of will have a differential impact on any group you create - because groups will never be perfectly uniform.
>Counting a building with active tenants paying rent as being valued at $0 is ridiculous.
Not necessarily.
This is why these articles are so terrible. They didn't do investigative journalism. They didn't do the legwork. I can tell you right now, there is a reason why it is valued at $0 - we just didn't get that reason because the journalist is lazy.
Depends on how much rent they are paying, what other large costs repair costs might exist for the building, and whether anyone is buying in that neighbourhood.
No it's not. If they live without running water, no toilet or heating with a leaky roof the tennants don't magically add value to the building.
And this is for policies in the abstract. Debt is an incredibly dangerous tool. It is not charity to give someone a loan they cannot afford - I've personally experienced it and I've personally seen it destroy lives. When I see someone get denied for a loan or a mortgage in my circle of friends - in every case, that was a good thing. It would have killed them.
The idea that racism exists exclusively inside the heads of racists, and that the actual physical material and financial harm it does to disadvantaged groups is unimportant compared to the subjective feelings of the person who is hurting them is so absurdly privileged that it borders on racism itself.
Imagine I burn your house down by pointing big fireworks directly at it. Would you be happy with the excuse "I didn't mean to hurt you, I was just aiming for the house with the least trees to get a better view of the explosion"? Are you suddenly happy with the loss of your house knowing that I targeted you for non-personal reasons?
If you're human you care. There is an extra level of malevolence when there is explicit intent. It makes a difference to people.
> I would otherwise qualify for if not for my name, zip code, alma mater, or my dialect
And where are you getting all that from? Loans are given based on personal attributes, like past ability to pay back debt (i.e. credit score), income, savings and collateral. Nobody gets a loan because of their zip code or dialect. What are you even talking about? Also, business loans are impossible to get for almost anyone. Banks just do not lend money for high-risk ventures like starting a business unless you put up collateral.
Also, debt is an incredibly dangerous tool. Do not treat it like charity. I've seen debt destroy people and here everyone is treating it like it is a human right. I get the sentiment behind it (everyone should get screwed with debt equally), but the actual mechanism (i.e. debt) is terrible.
>Can I pay the rent with the banker's "good intentions"?
You don't need anybody's good intentions to pay rent. What are you talking about? Who is preventing anybody from paying rent?
>The idea that racism exists exclusively inside the heads of racists
Where else would it live? This distortion of a simple concept does not advance anything. It makes everyone confused.
>Imagine I burn your house down by pointing big fireworks directly at it.
Oh stop with these idiotic hypotheticals. Nothing about what we're talking about is like arson.
Nobody cares about racist intentions. Despite what fox news tells you, antiracists are not interested in prosecuting thoughtcrime. Have racist thoughts all you want, nobody gives a fuck. The problem that antiracism and all other egalitarian movements are interested in solving is racist/sexist/homophobic/whatever EFFECTS. Intent doesn't matter. Actual material harm matters.
Come on. Nobody believes that. It is a practically a religious tenant that racism is hiding in the brains of people unbeknownst to even them even ready to strike at any moment and therefore you need to root it out! Where do you think the idea of 'implicit bias' and 'implicit bias training' comes from?
>The problem that antiracism and all other egalitarian movements are interested in solving is racist/sexist/homophobic/whatever EFFECTS.
No. The problem with antiracism all related movements is the same problem as with all ideologies. Everything is framed as either stemming from racism, or being racist. It's like a conspiracy theorist that sees everything as the work of the illuminati. Or a Marxist that sees everything as a class struggle. Or a Libertarian that sees everything as a collectivism vs individualism. Or a Feminist that sees everything as a result of patriarchy. Ideologies are blunt instruments that are occasionally useful but are disastrous when applied universally. There is never any reflection on false positive identification of racism. There is never reflection on whether some policy (for example, differential mortgage approvals) is the result of racism or other factors (hint: it's always racism) - maybe racism comprises 5% of the differential mortgage approvals and the rest is dominated by other factors? There is never any nuance. There is no evidentiary support for vast majority of claims, and counter-evidence is ignored or disparaged (for example 'implicit bias' and associated training has been discredited for a long time now, but no matter!).
That's convenient for the people it doesn't affect. Not only do you not have to worry about the policies: by choosing not to be racist, you absolve yourself of blame or privilege for benefiting from them.
It also depends on you being able to infer another person's intentions. Intentional racists have always been in favour of covert racism in the form palatable policies that indirectly harm the groups they dislike and have always benefited from the unintentional bias of others.
Models are models, not a representation of reality. As long as the model is close enough to the local maximum that the providers keep making money, it keeps existing. And history suggests lenders are not perfect at calculating diversified risk.
The only assumption that OP made is that cheap credit makes it easier to make money, and that makes it easier to get cheap credit. That's not especially controversial.
It's not convenient because it allows for conspiracy theories like yours to take hold.
Tell me, how do you decide that a policy which makes no reference to race, and is implemented in a regulated environment that makes racist policies illegal, is actually racist?
To me, it seems like the only yard stick you have is if the policy has differential impact on some group. That is as low a bar as you can have and it completely dismisses personal attributes that are actually used to qualify for loan. It's also lazy, and malicious.
>The only assumption that OP made is that cheap credit makes it easier to make money, and that makes it easier to get cheap credit. That's not especially controversial.
Yes it is controversial. It's also idiotic and dangerous. Interest rates are low now, max out your HELOC and go make money with it - see how easy it is ... alternatively, try getting a business loan without collateral and see how fast you're rejected. Nobody is going to care that you are in a 'privileged' class.
Every policy has a differential impact, that doesn't mean we chose not to address them when we see them.
The question is begging an easy answer to a structural problem. But note that, when a pandemic unfairly makes it expensive for businesses with disproportionately white shareholders to lend, the taxpayer spends trillions to make it cheaper.
Edit: Isn't that exactly what JP Morgan Chase are talking about doing about in the link?
Why wouldn't anyone want to get rich off of lending to minorities? Pecunia non olet, I'm sure even a committed racist would be quite happy to make 10% by lending to African Americans instead of 5% by lending to WASPs in a highly competitive market. They may not want to deal with them personally, but that wouldn't stop them. It's even more astonishing that rich Black people wouldn't do it, so I believe it requires a bit more of an explanation.
> But note that, when a pandemic unfairly makes it expensive for businesses with disproportionately white shareholders to lend, the taxpayer spends trillions to make it cheaper.
Are the shareholders mostly white? It's my understanding that most large investors are pension funds, insurance companies and the like, not individuals. We've supposedly saved the banks in pretty much every country because we'd wipe out those institutions, not because of some private individuals with giant investments.
B) Markets aren't perfect
C) You have to fight against, or change the influence of (through, say, commentary in the media), the government's funding and regulation.
>Are the shareholders mostly white? It's my understanding that most large investors are pension funds, insurance companies and the like, not individuals.
Who owns and benefits from the funds?
> Who owns and benefits from the funds?
Everybody that gets any kind of pension or has any kind of insurance. Is your point that the majority of those may be white and therefore they should've let them crash?
See C
>Is your point that the majority of those may be white and therefore they should've let them crash?
If you truly think that's what I'm saying, we're on very different pages. The pensions have greater political power than the people in black areas. Both of them have the same problem - an unfair pressure that drives costs of lending up - but when it affects the majority rich and white investors, spending money to fix it is much more palatable.
What do you mean? If every policy has a differential impact, then your contention is that therefore we must address every differential impact?
If, let's say, bank has a policy that you need 20% down payment to qualify for a mortgage, and let's say this has a differential impact on some group, how do you go about addressing this?
You look to see why that's the case, and if it happens to be that those people have been recently (relative to society) emancipated slaves who've barely had 4 generations in a society that still systemically kills them via law enforcement, then you do whatever you can to change that.
This sounds reasonable, but this is not how US Federal law works.
One key concept is strict scrutiny [1] -- when a regulation that infringes fundamental constitutional rights (such as equal protection under the law), or when a law pertains to a "protected class" like race or national origin, the standard is much higher.
In particular, in such cases, you do not have to prove, for example, racist intent to strike the law down. See the link for more. The obvious reason is that it's very hard to prove intent.
The current administration did manage to be blatant enough in its attempt to add a question to the census to suppress counting of people it does not like, that it did indeed reveal intent. [2]
[1] https://en.wikipedia.org/wiki/Strict_scrutiny
[2] https://www.aclu.org/blog/voting-rights/trump-administration...
That's similar to saying a soap dispenser doesn't use race a criteria, that doesn't change the fact that the thing discriminated PoC.
The core problem is biased data in the model - in this case ethnic composition of neighborhoods, in the case of the soap dispenser a lack of testing staff with non-white skin leading to misadjusted sensitivity for the photosensor - not being adequately filtered out. Banks and auto insurances absolutely do take account the neighborhood in their calculations and models.
Intent matters. Every policy you can ever create will always have differential impact on any group you create. That's just a fact of reality. If you set a policy that you can only get a mortgage if you have 20% down, that could impact some ethnic group more than another - but that differential impact does NOT mean it is a racist policy.
> in the case of the soap dispenser a lack of testing staff with non-white skin leading to misadjusted sensitivity for the photosensor - not being adequately filtered out.
On a side note ... the criminally under-appreciated show, Better off Ted, did a bit about this: https://www.youtube.com/watch?v=XyXNmiTIupg
Oh it does. This unintentional racism is still racism, structural racism in this case as a decently diverse QA could have prevented this outcome.
A PoC unable to get soap doesn't care why the soap dispenser refuses to disperse soap, all he cares about is that he's getting racially discriminated based on his skin color.
I absolutely disagree with that statement. A uniform standard for all is the opposite of racist. It is literally what was fought for by every civil rights movement. We used to live in a world where certain groups had racist barriers placed with intent to bar them from those institutions. A Jewish teenager had to get through harder entrance exams and/or a quota to get into a university. The way to fix that was to provide a universal standard. If you meet these criteria, then you're in. A policy that requires 20% down payment for a mortgage is NOT a racist policy, even if it has differential impact. It just sets a bar for every individual because math doesn't care about race. People intrinsically understand fairness like this.
It is why Rosa Parks' refusal to sit at the back of the bus as a protest was so powerful - because everyone understood, even the racists, that it is unfair for the color of your skin to dictate your bus seat. And it was clearly a malevolent policy. And this is where the modern approaches to solve 'systemic' racism really worry me. A modern (satirical but not far from reality) spin on that racist bus policy would have white people sitting at the back of the bus in order to make up for past racism ... but in that case, you still cannot get away from intuitive notions of fairness. The fact remains, the idea that skin color dictates bus seat is unfair, even if you try to claim that you need to do it to make up for systemic racism and the races are reversed.
Sorry for the rant. You and I have fundamental disagreement on this point.
>A PoC unable to get soap doesn't care why the soap dispenser refuses to disperse soap
This has nothing to do with anything. It is a silly example. Yes, the soap dispenser company effed up (not maliciously, just ignorantly) and should be embarrassed about it, and it will cost them to replace those dispensers, and I can guarantee you they will learn their lesson. It isn't the end of the world, and we're all on the side here, even the good people at the soap dispenser company.
Like you pointed out, that would lock us into a positive feedback loop where people are being denied loans based on "statistical, race-blind models based only on data", but the data only looks that way because of existing racism, which is now being further enshrined and legitimized.
But the thorniest issue is that the model reflects an actual, true, relationship in the world, so asking banks to ignore it would be asking them to leave money on the table until such a time as society has eliminated the structural inequalities that cause those correlations. How do we get them to do that, instead of just engaging in more and more sophisticated data laundering like above? Would we have to create an approved list of features that can be used for loan approval, which provably cannot be used to discover race? How would we even know that such a rule was working?
But to fix this is "simple" - lend to those higher risk businesses at a higher rate. If those businesses are actually _not_ in reality more likely to fail, then the lender makes more money.
As lenders are able to make more money, there should be more competition to lend to those risky-seeming businesses which isn't actually risky. And competition would then drive the rates back down. Therefore, leading to an equilibrium rate.
I have no clue about how prevalent racism is in the lending institutions that serve that geography. But I'd expect at least one of them to have looked at this carefully, in order to maximize the value of their portfolios.
> He had enough cash to buy eight buildings, all around 100 years old, in his majority black neighbourhood of Ensley, but he needed a banking loan to redevelop them. He thought it would be just a formality.
Why did he not buy 4 building instead not needing the loan ? Something is fishy here.
Why didn't GM simply not go bankrupt?
I suggested that if you can't get a loan you should tune down your ambitions a bit. There are many white people who can't get a loan too, tune it down with the racist us vs them thinking. It's not like all white people gain from that one person getting more leverage.
I was talking about doing this to remove the statistics that cause the apparent racism, while you want to keep perpetuating the same mentality. Wake up or keep wondering why you are still losing.
>I suggested that if you can't get a loan you should tune down your ambitions a bit.
This is not about the ambitions of the individial in the link, it's an issue of structurally unequal differences that make it harder for black areas to see investment.
>tune it down with the racist us vs them thinking. It's not like all white people gain from that one person getting more leverage.
>I was talking about doing this to remove the statistics that cause the apparent racism, while you want to keep perpetuating the same mentality. Wake up or keep wondering why you are still losing.
Please stop telling me what I'm thinking.
Sure, but since he had cash to pay for 8 I assume that he would not need a loan if he bought 4 instead.
> it's an issue of structurally unequal differences that make it harder for black areas to see investment
Yes and I've suggested a way to fix these differences. Stop risking so much and support each other as a community to reduce the rate of bankrupcies.
> Please stop telling me what I'm thinking.
OK, no problem.
Fortunately this isn't actually the chicken and egg problem you think it is.
Suppose that for defunct historical reasons the model is predicting a higher default rate for some population, so it says to approve 85% of their loan applications rather than 95%. Then half of those people get into trouble that getting a second loan would save them from, but because of the model, only 85% rather than 95% are given the other loan.
So then their repayment rate will be 90% rather than 95%, because not as many were saved by the loan, but wait -- 90% is more than 85%, because only half of them needed the second loan. So now the model starts predicting that it should expect a 90% repayment rate for that population, which then increases their actual repayment rate, and so on until it stabilizes at 95%.
If you could identify the exact degree to which the prediction is affecting itself then you could take it all out at once, but doing that is hard. If the evidence shows a lower repayment rate in a particular area, is that just the holdover, or is it because that area still has a present-day higher level of drug use and violent crime which negatively affects repayment? If it's the latter and you give them loans at scale under the assumption that it's just an artifact, the bank is going bust.
So unless you can disentangle it all, the data to do which is often not reasonably available, the only realistic option is waiting for it to filter through.
Because, even if black landowners are say 50% more likely to go bankrupt, they could at the very least, still get some loans. Just maybe not as high a loan. It's not like banks have to say 'yes/no' to customers. They have variously strong variants of 'yes' when someone asks for credit.
I think there are many other cases (e.g. affluent people choosing a public school / area to live in) where this problem is much more prevalent, because the only options in the decision are 'yes / no'. And since there is a correlation between black neighborhoods / public schools and crime / worse results, it makes sense for these people to avoid the mentioned downsides.
Thing is, those correlations aren't causal. It's just that being black is correlated to being poor for historic reasons, being poor causes the downsides. And the above chicken / egg problem exacerbates the problem.
If you're gonna develop properties and the up front investment looks like it will take 10yr to pay off vs 5yr to pay off then that severely constrains the kind of development you can justify doing. You'll have to pick something safer which isn't necessarily the kind of development you want do to do. It's not banks and interest rates that are at fault here. All sorts of local permitting BS, laws about professional certifications, etc, etc, add up and compound each other to create a business environment where two development options are "tear down historic building and build spec luxury condos" or "tear down historic buildings and build a big box store".
And this business environment feeds itself as developers, banks, regulators, construction firms, etc, etc. get well practiced at it making them more hesitant to do business with people who want to do any other kind of development thereby raising costs (supply and demand).
Frankly I think this is all BS that could largely be solved if government got out of (or at least less involved in) the business of infringing on people's property rights.
Banks lend on statistics, just as insurance companies have rates based upon the same. And insurance companies, for the most part, can assign rates based upon average accident rates, for identifiable traits.
Like one's sex. Or where they live (a common way to get statistics without 'race/colour').
So what do I mean by the chicken and the egg, here?
Well, imagine that black landowners go bankrupt more often. And sadly, this could be because black landowners go bankrupt more often!
If a specific statistical classification indicates more bankruptcy, then it becomes true. For example, bank $a is bold enough to lend to someone whom they view as, statistically, more likely to fail. Then.. a few years later?
That person needs a fiscal injection. Were that person not black, it would be easier to get funding at a time of need. However, since that person is?
Well, then they get more denials, go bankrupt, and add to the proof that "statistically, more black people go bankrupt". Or as the banks are likely doing it, "the area where people live in".
In other words, unless you can make EVERYONE, 100% not deny based upon an statistical models? Race/gender/sexual orientation/sex/where they live, etc, etc? Anyone, like bank $a lending outside of those models, will be lending to people less able to find additional assistance when/if the time comes.
Chicken and egg. It's not right, but I view this a little bit like certain regulations, where corporations can't compete against other corporations which 'cut corners', so we have to mandate all corps behave in a certain manner to level the playing field.