Systemic Racism in Banking: The Wells Fargo Case

There is a piece in the New York Times today is reporting on their investigation into the explicitly racist practices of Wells Fargo in their subprime mortgage business (Creative Commons License photo credit: TheTruthAbout… , h/t Schiffon Wong). According to the NYTimes,  Wells Fargo created a unit in the mid-Atlantic region to push expensive refinancing loans on black customers, particularly those living in Baltimore, southeast Washington and Prince George’s County, Md.

wells fargoAccording to a former employee of the banking giant quoted in the article, the company viewed the black community as fertile ground for subprime mortgages, as working-class blacks were hungry to be a part of the nation’s home-owning mania. Loan officers, she said, pushed customers who could have qualified for prime loans into subprime mortgages. Another loan officer stated in an affidavit filed last week that employees had referred to blacks as “mud people” and to subprime lending as “ghetto loans.”  The employee, a Ms. Jacobson, who is white and said she was once the bank’s top-producing subprime loan officer nationally, goes on to reveal:

“We just went right after them. Wells Fargo mortgage had an emerging-markets unit that specifically targeted black churches, because it figured church leaders had a lot of influence and could convince congregants to take out subprime loans.”

The NYTimes backs this anecdotal evidence with their own more systematic investigation:

The New York Times, in a recent analysis of mortgage lending in New York City, found that black households making more than $68,000 a year were nearly five times as likely to hold high-interest subprime mortgages as whites of similar or even lower incomes. (The disparity was greater for Wells Fargo borrowers, as 2 percent of whites in that income group hold subprime loans and 16.1 percent of blacks.)

To understand the Wells Fargo case, it’s important to understand the broader context of this banking institutions’ policies as part of a larger pattern.

Sociologists Doug Massey and Nancy Denton in their ASA-award-winning book, American Apartheid, document the systematic pattern of housing discrimination in the U.S., as well as the dire consequences of such enforced segregation.   Part of Massey and Denton’s argument is that segregation in housing leads to “social dislocations” (William J. Wilson’s term) in other areas like high school drop-out rates, increased rates of drug use, delinquency and crime, in other words, “the making of an underclass” (the subtitle of their book).

Massey and Denton’s work was path-breaking for the way that it clearly and painstakingly documents the “construction of the ghetto,” but their findings were not exactly new.  The Kerner Commission Report from 1968 famously concluded:

“What white Americans have never fully understood— but what the Negro can never forget— is that white society is deeply implicated in the ghetto. White institutions created it, white institutions maintain it, and white society condones it.”

The report from today’s NYTimes and the evidence of explicitly racist practices of Wells Fargo do not mean that everyone that worked there agreed with these policies or harbored explicitly racist views.   Indeed, as Eduardo Bonilla-Silva as recounted in his Racism Without Racists, the continued operation of white supremacist system does not require the presence of extreme racists in that system.  In fact, I’m sure that many of the people that worked at Wells Fargo would never consider themselves racists but rather well-meaning and liberal in their views on race.

So, then it becomes necessary to understand Wells Fargo’s banking discrimination — and the housing segregation such discrimination creates — within an even broader context.  For that, it’s important to understand the white racial frame that sustains systemic racism, as Joe has described here and in his important book by the same name.  Note the loan officer mentioned in the NYTimes piece that referred to blacks as “mud people” and to the subprime lending as “ghetto loans.” These statements reflect thinking within the white racial frame and the result is the maintenance of systemic racial segregation in housing and further economic devastation of black families that might otherwise be homeowners.

That’s the real tragedy of this story, to my thinking.  Families that worked hard, tried to buy a home and provide a better life for their kids, are now facing foreclosure – and maybe worse – because of the systematic racism in Wells Fargo’s banking practices.    The question really becomes then if we, as a nation, are so “tragically bound to that starless midnight of racism,” as Dr. King said, that we can never move beyond it.    It’s time, I think, to begin holding institutions accountable for racist practices like these.


  1. There’s no question that we as a nation can put a stop to this. But a few of us benefit financially and even more of us benefit in other, less tangible, ways.

    And what gets me about it is in the midst of this, you have nuts with the endorsement of MSM arguing that now, it’s white males who’re suffering racism and sexism. That’s not counting all the racism apologists and deniers. Those who would argue that what matters is what’s in the heart; or, racism doesn’t have a significant impact on the lives of people of color; or, that blacks are being overly-sensitive.

    Think about it. Remember that chia-Obama? Think of all the people who see nothing racist about that. Do you really think they’d say something about “mud people”? After all, what do you put plants in if not mud?

  2. I think this blog is providing the venue for some very insightful comments on the tacit nature of racism. Most important is the idea that the acts of racism don’t have to be framed in terms of the social extremes in behavior. If one considers racial dominance as a set of techniques designed to deny or reduce the acquisition of benefits from one’s resources, then racism can be viewed in a more technical and modern framework of endeavors. When viewed from a perspective of critical cultural analysis, the racist is a person who has been trained to use the normal institutions and routines of a society in ways that advantage one group and disallow, or discount, that same advantage to another group. The technical knowledge base in which racist behavior is grounded widely available to those wishing to know the techniques of action. The racist use of the knowledge is characterized by exercising the technology in a way that minimizes the benefits of using the technology for an individual or group whose characteristics are evaluated under a culture specific norm that triggers a cognitive distinction which supports a suboptimal application of the technology on behalf of the persons with the culturally devalued characteristics. In this model, there needs to be a universal standard of optimal, or normal, or valued application of the technology, i.e., when given a choice of behavior under the guiding technology, which one does the technologist choose? I vote for the one specified in most cultures on the planet, i.e., do unto others as you you would have other do unto you. With this standard the racist could be identified by testing their decisions with the standard of self application.

    The challenge with white racism is not one defined by violations of present day norm, but rather it is one which asks the question, “how do you change the “social facts” of a person’s life who has been inculcated with the norms of a time quickly passing? Can we specify the technical specifics of cultural change, like we do in Afghanistan and Iraq, in terms of American society. How do we deal with the racial terrorists who continue to inflict deep harm on innocent populations whose only crime is being black?

  3. Randy B.

    People of Color, and Blacks specifically, were targeted for sub-prime loans because they fail to have the same privilege of wealth afforded whites in American society today. Historically, white Americans have been able to obtain home mortgages because they had some sort of wealth that could be use as collateral. This wealth is usually wealth that has been acquired through properties or monies that had been handed down from generation to generation. For people of color, who have not had the benefit of property ownership a third as long as white people in America, usually never inherit the wealth afforded to whites. Because of this, standard loans were not available to people of color with low incomes or bad credit. The sub-prime mortgages were the government’s answer to this issue. Changes in lending practices were made by members of Congress, under pressure from mortgages lenders and minority interest groups, to allow more people of color to become qualified for home ownership. Once home ownership was established, residents applied for and received home equality loans to pay other bills. When the home values dropped people quickly found themselves underwater, with no way to pay. Like dominoes, as one house in the neighborhood fell to foreclosure, the others houses in the neighbor lose value. Soon the number of houses that start to lose value increase until everyone in the neighborhood is being foreclosed on. Blacks, and poor people in general fell victim to the subprime mortgage scheme, not because they were stupid, it is because they believed the fabrication, the homeownership is a level playing field where everyone is treated the same.


  1. Monday Blogaround « The Gender Blender Blog
  2. Well’s Fargo and reverse redlining | Betwixt and Between
  3. The Plight of African America - Page 14 - Political Forum
  4. Bernie Sanders Imported His Blind Spot on Race from Scandinavia, Continued | Paul Blest

Leave a Reply