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Chapter 3
Themes
Key
LitCharts assigns a color and icon to each theme in The Sum of Us, which you can use to track the themes throughout the work.
Zero-Sum Thinking vs. Solidarity
The Toll of Racism
American Values and Identity
Research, Persuasion, and Policy Change
Summary
Analysis
After Black newlyweds Isaiah and Janice Tomlin bought a house in Wilmington, North Carolina in 1977, all the white families in their neighborhood almost immediately moved out. Two decades later, the neighborhood was all-Black, and an “exceptionally kind” mortgage broker called the Tomlins and offered them a new loan. Legally, mortgage brokers have to help borrowers select the best loan for them, but this woman was secretly working for a lending company, which paid her kickbacks to steer families like the Tomlins into high-interest subprime loans. The woman didn’t tell the Tomlins about the hidden fees on their loan or mention that they qualified for a far lower interest late.
The Tomlins’ story shows how housing market simply hasn’t provided Black families with the same opportunities to build wealth and enter the middle class as it has white ones. Their ancestors could not buy homes because the housing market was specifically designed to exclude Black people until the 1960s. White families fled their neighborhood, a common trend that typically caused property values to decline and city governments to stop investing in public services. And, of course, the mortgage broker targeted them and manipulated them into a predatory loan.
Themes
In 2002, long before subprime mortgages triggered the 2008 global financial crisis, McGhee was studying them for Demos by interviewing homeowners who took them out. In theory, subprime loans were supposed to make it possible for people with low credit scores to buy homes. But in practice, most were refinance loans for homeowners whose credit qualified them for normal (“prime”) loans. And lenders specifically targeted subprime loans at families of color: after controlling for all relevant financial factors, Black and Latinx borrowers got subprime loans at twice the rate of white borrowers.
Many Americans generally understand that subprime loans and mortgage-backed securities triggered the financial crisis, but few know about the predatory bank behavior that made these loans and securities so common. This is peculiar, because the banks’ misbehavior is the truly scandalous part of the story. Often, Americans assume that the people who lost their homes during the crisis had poor credit, so would not have ever had those homes in the first place if it weren’t for their subprime mortgages. But in reality, the banks were draining wealth from ordinary homeowners with good credit.
Themes
When Janice Tomlin closed on her subprime loan, the agent prayed with her and promised her that she would eventually be able to lower the high interest rate. Much later, the Tomlins casually mentioned the loan to an attorney, who looked through the paperwork and realized that the lender was charging them all sorts of outrageous fees. After investigating the company’s other loans, the attorney put together a class-action lawsuit with 1,300 plaintiffs, including the Tomlins.
The Tomlins were lucky to be able to take their case to court, although it’s not clear whether this was because their agent’s behavior was especially egregious or simply because they happened to meet the right lawyer at the right time. Countless other families were swindled in the same way, but did not have the same opportunity to pursue justice.
Themes
This kind of predatory lending was widespread in the U.S. in the early 2000s. But when McGhee visited Congress to present Demos’s report on it, nobody listened to her because both parties had long since agreed to continually loosen regulations on banks. But this came at a great cost. McGhee recalls visiting one Ohio neighborhood where nearly every family lost their house. (In comparison, Isaiah and Janice Tomlin were lucky to keep theirs.) And eventually, the subprime loan crisis brought down the rest of the global economy. The Black families McGhee met “were the canaries in the coal mine.”
McGhee’s research gave her unique insight into why the government failed to stop the financial crisis. Specifically, she noted that lawmakers’ biases led them to blame families of color for losing their homes, instead of empathizing with them. In turn, this prevented those lawmakers from seeing subprime lending as the predatory, unsustainable practice that it was. McGhee compares the Black victims of subprime lending to “canaries in the coal mine” because their experiences foreshadowed the misfortune that would befall everyone else later on, when the financial crisis devastated everyone’s wealth.
Themes
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The Great Recession, the U.S.’s worst financial downturn since the Great Depression, erased trillions of dollars in wealth and brought homeownership rates down for the first time ever. Banks foreclosed on more than five million homes, which brought down local property values, tax revenues, and public services. Unemployment, suicide, and illness spiked. This all disproportionately affected people of color, but the majority of those affected were still white.
By reminding her readers of the Great Recession’s severity, McGhee underlines how much suffering and loss policymakers could have prevented by simply paying attention to the subprime mortgage crisis sooner. Her account once again shows how, in modern society, we are all interconnected. Thus, zero-sum policies designed to benefit one group at another’s expense actually end up harming everyone instead.
Themes
In 2009, a white North Carolina woman named Amy Rogers could no longer afford her mortgage. She had lost her government job, watched her health insurance costs increase tenfold, and seen her property taxes triple. When she asked Wells Fargo for repayment assistance, her credit score automatically decreased, and the bank just sent her to useless classes. The bank foreclosed on her in 2013, ruining her credit forever and stripping away 13 years of home equity. Now, Rogers is 63, uninsured, and unable to find a full-time job. But McGhee has seen all of these things happen over and over again. In fact, lenders spent a decade practicing their tactics on homeowners of color before branching out to white people like Amy Rogers.
Amy Rogers’s story is representative of that of millions of Americans, who lost their homes, livelihoods, and healthcare during the Great Recession. Her fall from the middle class shows how the U.S. system disproportionately punishes poor people—for instance, by tying health insurance coverage to employment. It also shows how the same financial institutions that exploit ordinary Americans are strikingly unresponsive to their needs. Of course, her tale is also a stark reminder that the financial crisis—which began with racist lending policies targeted at Black and Latinx people—ultimately devastated countless white people, too.
Themes
From the Civil War to the civil rights movement, Black Americans were excluded from all the financial tools that ensured prosperity for white Americans, including the banking system, the New Deal, and federally-guaranteed mortgages. In fact, during the Great Depression, an agency called the Home Owners’ Loan Corporation even bought and refinanced struggling white homeowners’ mortgages. But it also invented the practice known as redlining: in its investment risk maps, it colored neighborhoods where Black people lived red, designating the highest level of risk.
In the next part of this chapter, McGhee provides important context about the U.S.’s history of racist discrimination in financial services and housing policy. This discrimination has multiplied inequality—it’s the main cause of the racial wealth gap today, and it explains why it was so easy for lenders to peddle subprime mortgages to homeowners of color even in the 2000s. As McGhee points out here, the New Deal was intentionally segregated: it was designed to prevent white people—and only white people—from falling into poverty. As a result, during the Depression, a generation of Black families took an additional financial hit.
Themes
Starting in the 1930s, the Federal Housing Administration subsidized mortgages based on these maps. This made it extraordinarily easy for white Americans to buy a home, regardless of class, but nearly impossible for Americans of color. In fact, the government even mandated that developers write clauses into their contracts to prevent buyers from ever reselling their homes to people of color. These official redlining policies are the main source of the racial wealth gap today: the average white family has 10 times the wealth of the average Black family, and eight times as much as the average Latinx family.
Many Americans do not realize that redlining was actually mandated by the government. Even if they wanted to, developers and real estate agents could not have helped families of color achieve homeownership on the same terms as white families. Homeownership was very affordable in this era, and it allowed families to build wealth fast, so redlining effectively blocked families of color out of the middle class altogether. Of course, around the same time as government-mandated redlining ended, growth in home prices started outpacing growth in wages. So homeownership became even more difficult to achieve for non-homeowners, who were disproportionately people of color, while the white families who managed to buy homes during the redlining era saw their wealth inflate even more.
Themes
While the 1968 Fair Housing Act outlawed redlining, the government didn’t start enforcing it until the 1990s. Thus, throughout the 20th century, most Americans of color could only buy homes through a parallel, unregulated market that was rife with predatory loans. Activists convinced Congress to reform the mortgage system in the 1970s and won major lawsuits against lenders, but then the Supreme Court removed limits on interest rates and Congress repealed the Glass-Steagall law, which regulated lending and investment.
While white homebuyers had inexpensive mortgages subsidized by the federal government, nonwhite ones could only access predatory ones that prevented them from building wealth. Of course, as McGhee has shown, this same pattern repeated itself in the 1990s. The executive branch’s failure to enforce the Fair Housing Act and Congress’s decision to deregulate lending both indicate that the government still hasn’t made housing equity a priority. And until it does, the racial wealth gap is unlikely to significantly decrease.
Themes
In the early 2000s, more and more new investment and brokerage companies formed, peddling predatory loans and profiting handsomely at borrowers’ expense. Memphis Wells Fargo employees have testified in court about how bank managers pressured them to target Black homeowners with subprime refinancing loans. Often, the bankers never mentioned the new loans’ fees and conditions, and sometimes they even altered their customers’ data.
McGhee’s brief history lesson demonstrates that the predatory behavior behind the financial crisis was not new or surprising. Rather, it was just the latest stage in an unbroken tradition of discrimination in the financial system. And since such discrimination has always prevailed, in the aggregate, people of color have never truly had the chance able to build wealth on the same terms as white people.
Themes
The above testimony should help correct the popular misconception that the financial crisis happened because too many irresponsible people defaulted on their loans. The truth is that irresponsible banks cheated customers by steering them into subprime loans that they could not afford. Bank employees even made extra commissions for doing so.
Many Americans still think that the banks’ great mistake was lending to unworthy people, and not cheating, lying to, and stealing from their customers. This convenient misconception once again shows how American culture habitually shifts blame from powerful people and institutions to the poor and powerless, especially when they are people of color.
Themes
This predatory lending was certainly about greed, but it was also about racism. Indeed, racism explains why the banks specifically chose to exploit Black people—and how they managed to get away with it. Indeed, one Black Wells Fargo employee remembers his colleagues calling subprime mortgages “ghetto loans” and his boss frequently using the N-word. Ultimately, Black customers ended up in subprime loans at more than twice the rate of white customers, and the median Black family lost half of its wealth during the crisis.
When McGhee argues that greed and racism worked hand-in-hand to cause the financial crisis, she asks her readers to reject the common assumption that actions only count as racist if racial hatred is their primary motivation. Instead, racism also influences people’s thinking in more subtle ways, leading them to make decisions that have racially inequitable outcomes. In the case of subprime mortgages, racism made it easier and more profitable for banks to specifically target people of color.
Themes
State government officials warned the federal government about predatory subprime lending thousands of times over more than a decade, but Washington refused to act. Policy activist Lisa Donner argues that regulators simply could not relate to the people who were suffering. McGhee remembers a white congressional staffer telling her that “we put these people into houses when we shouldn’t have”—the implication being that benevolent, white government officials went too far in trying to help people of color buy houses. (In reality, under 10 percent of the subprime loans went to new homebuyers.)
McGhee’s analysis should leave readers skeptical of any claim that the U.S. couldn’t have seen the financial crisis coming. Namely, she argues that state officials did their job by reporting the situation, and blame lies squarely at the feet of federal regulators. Meanwhile, the staffer’s comment shows how powerful racist stereotypes are: even an educated, well-informed policy professional chose to explain circumstances through racist stereotypes, rather than through the well-documented evidence right in front of her.
Themes
Politicians and conservative media figures told a similar story, blaming the financial crisis on the government forcing banks to stop redlining and start lending to minorities. This narrative fell into convenient, age-old stereotypes about irresponsible people of color seeking help from the government. In fact, it portrayed minority homeowners as the aggressors and banks as the victims. One Ohio prosecutor’s case against a politically well-connected subprime lender fell apart because federal attorneys couldn’t figure out who the criminal was. And even though they knew the crisis wasn’t the borrowers’ fault, the Obama administration continued blaming them because it didn’t want to anger white voters.
Prejudices and stereotypes had more power over public opinion and official decisions than demonstrable facts. The Obama administration officials even admitted as much: they chose politically popular racist lies over the unpopular truth. Similarly, the federal attorneys assumed that a wealthy, well-connected white man couldn’t possibly be exploiting poor Black people. This reflects another crucial way in which racism shapes policy on a fundamental level: it conditions Americans to view white people as innocent and people of color as guilty, which prevents them from recognizing discrimination and injustice.
Themes
Lenders managed to profit from mortgages with such high foreclosure rates by selling off those mortgages as investments (or securities). After selling these securities, lenders stopped caring whether borrowers actually paid off their mortgages. And the investors who bought these risky securities quickly resold them.
These “mortgage-backed securities” resembled a pyramid scheme more than a legitimate investment: brokers knew they weren’t solid, but they didn’t need them to be solid in order to make money from selling them. In a sense, they were also the product of zero-sum thinking: brokers figured that they could simply pass on the risk before it came back to bite them.
Themes
Once they realized that the government wouldn’t shut down their highly profitable “hot-potato investment scheme,” lenders started taking their dubious services to white borrowers, too. They created Option ARMs, a new kind of mortgage that allowed borrowers to choose whether they wanted to pay their full payment, just the interest on their loan, or just part of this interest. Most chose the minimum, which meant that their overall loan amount increased over time. But after a few years, they had to start making full payments, which they often couldn’t afford unless their home values kept rising.
Again, systematic bias leads to bad policy: regulation is the only way to stop financial misbehavior, but the U.S. government decided that it simply wasn’t worth regulating bankers (who were rich, powerful, and mostly white). Just as with healthcare, education, and public pools, then, elites eventually turned racist policies against the white majority. Just like subprime mortgages, Option ARMs were intentionally deceptive: they were designed to sell easily, while hiding their true risks.
Themes
In 2006, home prices started stagnating, and the next year, the mortgage market collapsed. The five largest investment banks either went bankrupt or were bought out, and the economy fell into a recession. This created a vicious cycle: people lost their jobs in the downturn, so they couldn’t afford their mortgages, which damaged the housing market even further.
McGhee leaves the chain of cause and effect clear: structural and personal biases in the government led to under-regulation, which enabled banks to exploit consumers, which crashed the whole economy. If it weren’t for these biases, McGhee suggests, the world could have avoided the Great Recession.
Themes
McGhee profiles a white woman named Susan Parrish, who got divorced, lost her job, and had to sell her house in 2011. Even though she found a new job as a journalist, rent was so expensive that she ended up living in a shed without heat or plumbing. Ten years later, she lives in an RV. This is not atypical: most of the Americans who lost their homes during the Great Recession will never buy another one.
Susan Parrish’s story once again shows how the U.S.’s unwillingness to regulate or punish the wealthy and powerful causes untold, undeserved suffering for ordinary people. Unlike in generations past, it is now extremely difficult for people not born in middle class to join it. Of course, it’s also a reminder that racism (and policies borne out of it) ultimately hurts white people in addition to the people of color it specifically targets.
Themes
If the U.S. had cared back when subprime mortgages were only devastating communities of color, McGhee argues, it would have prevented the financial crisis. But McGhee’s research on subprime loans showed her how easily people can use racial stereotypes to mentally de-link themselves from the people they exploit. Still, the collapse of banks like Lehman Brothers proved that this link will never go away—the pain they inflicted on others eventually came full circle. In fact, the original Lehman Brothers were slaveowners who grew rich by trading cotton during the Civil War. So the company ended as it began: by building a business model around Black suffering. Like the plantation economy, the subprime mortgage market could not survive, which shows that “society can be run as a zero-sum game for only so long.”
McGhee argues that racism is dangerous because it gives people the illusion that they are separate from others, when really, they are interlinked. This is why racists can so easily think that they are only hurting people who don’t look like them, when in reality, they are hurting everyone. McGhee mentions the history of Lehman Brothers not only because the firm’s collapse represents a kind of poetic justice, but also because the firm’s long lifespan shows that the tradition of building white wealth from Black suffering in the U.S. is still alive and well. Indeed, many major players in the economy today are built on the spoils of slavery. Wealth was never redistributed after emancipation, so slaveowners and their descendants can continue collecting interest on the exploitation of centuries past.
Themes
Isaiah and Janice Tomlin’s class action suit gives McGhee hope: it shows her that society can still choose moral values above profit. In court, Janice told the judge that she was testifying because she teaches her second-grade class to honor and believe in the U.S., and she wants to do the same. Their suit won a $10 million settlement for its more than 1,000 plaintiffs.
In a rare moment of optimism about the nation’s direction, McGhee cites the Tomlins’ case as evidence that U.S. government institutions can still produce just outcomes. Similarly, Janice Tomlin’s testimony suggests that Americans of all backgrounds are still united by a set of basic values—and that they can build a more just, equitable society by using these values as the basis for a solidarity-oriented politics.
Themes
