Our likelihood of knowing someone directly affected by the crisis and any resulting interest in enacting policy to alleviate its consequences are shaped by persistent residential segregation.
The lack of minority representation among federal policymakers also reflects our segregated society and diminishes the import of minority concerns—such as the foreclosure crisis—within national policy debates.
During the Great Depression—the last time there was a comparable housing market crisis—the federal government dramatically altered the practice of mortgage lending.
The response to the contemporary foreclosure crisis has been “Too Little, Too Late, and Too Timid.” Recent research by Isaac William Martin and Christopher Niedt shows that despite the scale and scope of the Great Recession, the segregation of neighborhoods and social networks and the concentration of foreclosures in largely minority areas has meant that exposure to the experience of foreclosure is extremely isolated in much of the country.
There is just no reason to allow dangerous products on the market and to let individuals sort them out for themselves Instead, we should work to create more inclusive economic and social systems, which foster opportunity and prevent predatory corporate practices.
Racial Isolation Essay
Deconcentrating poverty and reducing racial isolation have been shown, time and again, to pay enormous dividends for the poor, without consequence for the non-poor.The segmented mortgage market, which was fostered by segregation and led to the Great Recession, provided a tragic example of this dynamic.Racial equality in any arena is impossible without a serious effort to desegregate neighborhoods, cities, and regions.The geography of subprime lending holds an obvious connection to the historic, government-supported, and racist practice of redlining, which funneled affordable mortgages (and massive amounts of wealth) into white suburbs and helped trap poor people of color in ghettos for generations.Segregation was not only implicated in the causes of the Great Recession, but in the anemic federal policy response.Thirdly, and most importantly, an acceptance of financial education as the primary solution to economic disparities also represents an acceptance of a system that permits the exploitation of individuals who lack knowledge or information.“Caveat emptor” regimes have been tried and have failed.Again, although increasing the amount of information available to consumers (and researchers) could create a fairer marketplace, financial education on its own is likely insufficient to prevent economic crises and the inequality-widening effects those crises have.Fostering integrated communities will do far more to create economic opportunity and preempt financial predation.In today’s complex world, people are presented with too many choices and are not able to become experts in every area they need to make a choice in.Plus people—even educated people—are systematically “irrational” when making many important choices.