Sitting in her hairdresser’s chair on a recent afternoon, Veronica Ancrum noticed that she had never before seen her hairstylist in the Greensboro, North Carolina salon that she frequented. Striking up a conversation, she was thrilled to discover that the woman—who was also Black—was her homegirl. Both were from New York: Ancrum from the South Bronx, her hairdresser from Harlem.
As her beautician continued to braid Ancrum’s hair, she asked her what motivated her to relocate. “She told me that she worked as a stylist for years at a shop her mama owned on 125th Street,” Ancrum told the Spokesman-Recorder in an interview, “but when the landlord suddenly raised the rent from $10,000 per month to $26,000 they had to close the business.
“And she had to come all the way down here to Greensboro to start all over again. It seems that everybody is scrambling just trying to survive these days.”
The consensus among economists is that the U.S. is closing in on a steep recession, triggered by living costs that have not risen so high so fast since the early days of the Reagan administration. With the price of rent, food and gas increasing by nearly 10% year over year, the Federal Reserve Bank last week raised interest rates by three-quarters of one percent—the highest hike in its overnight lending rate to retail banks since 1994—in an attempt to cool down an overheating economy.
Historically, however, raising interest rates causes side effects. In 1980, then-Federal Reserve Chairman Paul Volcker raised the Federal Funds rate to a historic high of 21.5 percent, triggering what was at the time the worst economic downturn since the Great Depression. In Volcker’s obituary, the New York Times wrote in 2019:
“As consumers stopped buying homes and cars, millions of workers lost their jobs. Angry homebuilders mailed chunks of two-by-fours to the Fed’s marble headquarters in Washington. But Mr. Volcker managed to wring most inflation from the economy.”
It is with that history in mind that JP Morgan Chase’s CEO Jamie Dimon told reporters last week following the Fed’s rate increase: “I said there were storm clouds, big storm clouds [hanging over the U.S. economy.] Now it’s a hurricane.”
That is particularly ominous for African Americans who, in addition to being the last hired and first fired, catch pneumonia when Whites have a cold as the saying goes. Blacks lost more wealth following the 2008 collapse of the real estate market than at any time since the 1874 failure of the Freedman’s bank and never truly recovered.
Wells Fargo bankers testified that they peddled “ghetto loans” targeting “mud people,” which is consistent with an Economic Policy Institute analysis that found that 53 percent of all Black borrowers were issued subprime loans, compared to 47 percent of Latinos and a quarter of White borrowers. In New York City, African American home buyers in 2006 were four times more likely than Whites to be saddled with a subprime mortgage.
Another study found that between 2004 and 2008, only 6.2 percent of White borrowers with a credit score of 660 or higher received a subprime loan while the rate for Black borrowers with similar credit scores was 21.4 percent. In fact, lending disparities actually widened when households with higher incomes were compared.
That meant that an African American family earning $200,000 annually was more likely to be saddled with a subprime loan than a White family making less than $30,000. New York University Sociology Professor Jacob Faber concluded that borrowers of color were targeted not because they were credit risks, but because they weren’t.
The result is that Black homeownership has plummeted to 43 percent even while overall homeownership nationwide has surged to an all-time high of 65 percent; more than 72 percent of White households own their own homes. Unsurprisingly, the racial credit gap today mirrors the racial divide in unemployment.
According to a 2016 study, nearly half of all African Americans have bad credit, compared to roughly a quarter of Whites. In fact, Whites earning $25,000 annually are likely to have better credit than Blacks earning between $65,000 and $75,000.
Nine of every 10 Black college students enrolled in four-year public universities rely on federally-subsidized student loans compared to six in 10 Whites. African Americans who earned their bachelor’s degrees from a four-year public university in 2012 owed an average of $3,500 more in school loans than their White classmates.
Regulators have fined lenders such as Toyota, Fifth Third Bank and Ally for overcharging Blacks and Latinos for car loans. African Americans, on average, pay between $300 and $500 more for an auto loan than do White borrowers.
Such heavy debt burdens have left Blacks in a precarious position as a financial downturn approaches. On social media, African Americans say they have been forced to sell purses, jewelry, cars, and even blood to make ends meet. At her neighborhood Dollar store in Greensboro, Veronica Ancrum told the Spokesman-Recorder that the number of shoppers on a typical day has doubled from roughly 10 to 20, including more Whites, even though prices continue to soar.
“There are no more dollar stores, “ she joked, “it’s all $1.25 now… Some people can’t afford to buy but one roll of toilet paper at a time.”
An accountant who hasn’t worked in her field in 20 years, Ancrum, an activist, says that Blacks in her community are so indebted that it even affects marriage rates. “No one wants to take on someone else’s debts,” she said.
She and her husband are besieged with calls from investors asking if they want to sell their home. “The problem is that every aspect of our lives has been commodified,” she said. “Even if you date, you gotta do it online. Black folks have to find a hustle just to survive.”
Jon Jeter is a contributing writer at the Minnesota Spokesman-Recorder, who has also served stints at the Minneapolis Star Tribune, and The Washington Post, among others.