Black Memphis Sees Wealth Drop: National Trend In The Making
Black unemployment in Memphis, which is at 16.9 percent, is more than three times greater than white unemployment, which is at 5.3 percent. The problems being faced by Memphis residents are part of a larger national trend, in which the wealth gap between blacks and whites has increased over the past several decades. The Institute on Assets and Social Policy at Brandeis University recently released a study stating that the wealth gap between blacks and whites has grown fivefold since 1984. Additionally, a Federal Reserve study states that for every dollar of wealth possessed by white families, a black or Latino family has only 16 cents.
There is more evidence of African-American suffering during the recession. The Economic Policy Institute recently found that during the 2009 recession, black family wealth dropped by more than twice as much as white family wealth. The median white family has $94,600 in wealth, while the median black family has just $2,100.
One of the banks being blamed for the massive foreclosure crisis is Wells Fargo. The company is being sued by a multitude of city and state governments, which are accusing the firm of steering black and brown people toward bad loan products. Even more disturbing is the recent announcement by the NAACP that it dropped its own lawsuit and entered into a financial agreement with the bank, which allows the firm to sponsor several events for the Civil Rights watchdog. When the NAACP was asked to disclose the details of its agreement with Wells Fargo, it refused. This concerns some who feel that the financial arrangement will inhibit the NAACP from pursuing a proper response to the firm's allegedly discriminatory-lending practices.
There are some, however, who argue that the NAACP's partnership with Wells Fargo will give the organization additional oversight in to the activities of the bank, preventing it from engaging in additional predatory lending. My conversations with NAACP President Ben Jealous and some others in the organization led me to conclude that the group believes that by partnering with Wells Fargo, they can manage the firm's behavior more effectively.
I admit that I have yet to understand how the NAACP might be able to secure remedies for those who've already lost their homes to predatory lending. I'd also like to know more about the details of the financial agreement, since it would make no sense to criticize Tavis Smiley for his affiliation with Wells Fargo (which he eventually dropped) and not engage in the same degree of scrutiny of the NAACP's acceptance of Wells Fargo sponsorship dollars. I'd hate to believe that Wells Fargo has simply bought the NAACP's silence, and I sincerely doubt that the group will be vocal if the firm is accused of predatory lending in the future.
At any rate, as black people are suffering economically, there's work we can all do to prepare ourselves for the next recession. We can also remind the Obama administration of the importance of securing targeted economic policy to help those communities that have been impacted the most by the economic downturn.
First, we should remember the difference between having a high income and being wealthy. Many of those among the middle and upper class have no problem living paycheck to paycheck, not realizing that your great job can disappear at any second. Your goal should be to invest in assets that can protect you when times get rough. Although there are clear, systemic reasons for the wealth gap, the truth is that our spending and savings habits are also to blame.
Second, saving every month should be your most important budget item. You shouldn't simply save what you have left over, you must make saving a top priority. Good financial times always come to an end, and by saving your money, you can be protected later on down the road.
We will make it through this recession, and with tough times come difficult lessons. But with those difficult lessons, there can come valuable wisdom. Let's not let this happen to us again.