Posted on February 7, 2011

‘Racist US Bankers’ to Blame for Credit Crisis

Rosa Prince, Telegraph (London), February 7, 2011

The failure of racist American bankers to provide black home owners with fair mortgages fuelled the financial crisis, Trevor Phillips, the equalities chief, will claim in a major speech this week.

Calling on the Government to ensure that the programme of public sector cuts does not fall disproportionately on minorities, Mr Phillips will warn that discrimination can have unexpected economic consequences.

Addressing the Policy Exchange think tank, he will argue that the phenomenon of subprime home loans, which led to the 2008 banking collapse, emerged because even wealthy black families could not obtain regular mortgages.

A number of banks involved in the crash, including Lehman Brothers and Royal Bank of Scotland (RBS), were over reliant on toxic subprime loans to customers who could not afford to maintain repayments.

Mr Phillips will say: “I know it’s not a thing that the bankers and economists like to talk about, but the American financial crisis was precipitated at least in part by racial prejudice.

“Why were so many minority families taking these expensive loans?

Because discrimination left them with no choice.

“The rapid growth of the sub-prime market in the past decade probably owed more to the history of racial discrimination than any other factor.”

Mr Phillips said before the crash that black families in the US were more likely than white people to be charged higher interest rates and have a subprime loan.

In order to prevent a repeat of the problem here during the recovery, he said the Equalities Commission would carry out a review of the Coalition’s cuts programme.

Mr Phillips will say: “Racism did not cause the crisis . . . we would probably have faced a meltdown at some point even if all the loans had been to white folks.

“But there is no doubt that when the full story is unravelled we’ll find that a racial factor did play a role in what happened.

“We now know what it led to. Perhaps now is the time to make sure that we don’t repeat the mistakes we made going into recession on the way out.

“The spending review and the cuts that follow must not fall disproportionately on already disadvantaged social groupings.”