The Oxford dictionary defines bias as “prejudice in favor of or against one thing, person, or group compared with another, usually in a way considered to be unfair”. Should there have been a prejudice against less-credit-worthy home buyers during the housing bubble that led to the subprime mortgage crisis of 2008?
One of the reasons suggested by experts like Mark Zandi to explain the subprime mortgage crisis, was that the percentage of lower-quality subprime mortgages originated during a given year rose from the historical 8% or lower range to approximately 20% from 2004 to 2006, with much higher ratios in some parts of the U.S. The exponential increase in lower-quality subprime mortgages was part of a broader trend of lowered lending standards and higher-risk mortgage products, which contributed to U.S. households becoming increasingly indebted.
Some news reports assert that some people without a job or even a physical address were given those subprime mortgages.
We can clearly see here that credit-worthy and less-credit-worthy folks who shouldn’t have gotten those mortgages were put in the same basket and given these subprime mortgages.
These folks who shouldn’t have gotten those mortgages could be found in all demographics, meaning whites, blacks, Hispanics and others.
Today, to avoid repeating the same mistakes that led to the 2008 financial crisis, banks are extremely careful about who to lend to. The problem here is that one group, blacks are disproportionately victims of the newfound attitude of banks. The worst part is that black entrepreneurs who are credit-worthy and satisfy all other requirements from banks are still denied loans to launch or expand their businesses in comparison with white entrepreneurs.
The issue is so acute that one-time presidential candidate, Senator Kamala Harris has proposed during her campaign to pour billions into black businesses. “I’ll put $12 billion into federal grants for black entrepreneurs and expand access to capital through federal contracting programs,” said the California Senator.
In light of this case, should we understand that some form of bias or “prejudice against” in this case, less-credit-worthy home buyers could have been a “positive” thing?
In other words, when does some “prejudice against” is acceptable? That was the meaning of my question tonight in class. I might not have expressed myself very well. Your feedback is appreciated. Thanks. John Adu.