The Washington Post reports today about a brewing controversy over bank safety. The Fed wants to increase capital requirements for risky mortgage loans, with riskier loans requiring more capital. This sounds sensible, but banks, of course, are fighting it.
The only thing that makes this a live controversy is that the banks have an odd partner: organizations that advocate for more Black homeownership. Because of their lower income and smaller wealth (for down payments), Black homebuyers are generally riskier than white ones. Increasing capital requirements for their loans will probably lead to higher interest rates and push the Black homeownership rate even lower than it already is.
In one sense, this is yet another example of a truism: low incomes make everything harder. We would most likely be better off if we stopped piecemeal resistance to every regulation that might hurt the poor and simply gave them more money. This would accomplish the same thing but still allow sensible regulation and rulemaking.
In the case of Black homebuyers, the problem goes beyond income anyway. I did a very rough horseback calculation of how much homeownership you'd expect among Black families just based on their lower average incomes and then compared it to reality:
Take these numbers with a grain of salt. But only a grain: they're probably not too far off. What they show is that you'd expect the Black homeownership rate to be about ten points lower than white homeownership just by virtue of their lower incomes. But in reality, Black homeownership is about ten points lower still. This difference might be due to a lot of things, but plain old racism is almost certainly part of it.
So sure, we could give money to low-income families. That would help. But it wouldn't solve the whole problem.
