WASHINGTON, D.C. – At the height of the 2008 economic collapse, then-New York Mayor Michael Bloomberg said the elimination of a discriminatory housing practice known as “redlining” was responsible for instigating the meltdown.
“It all started back when there was a lot of pressure on banks to make loans to everyone,” Bloomberg, now a Democratic presidential candidate, said at a forum that was hosted by Georgetown University in September 2008. “Redlining, if you remember, was the term where banks took whole neighborhoods and said, ‘People in these neighborhoods are poor, they’re not going to be able to pay off their mortgages, tell your salesmen don’t go into those areas.’”
He continued: “And then Congress got involved -- local elected officials, as well -- and said, ‘Oh that’s not fair, these people should be able to get credit.’ And once you started pushing in that direction, banks started making more and more loans where the credit of the person buying the house wasn’t as good as you would like.”
Bloomberg, a billionaire who built a media and financial services empire before turning to electoral politics, was correct that the financial crisis was triggered in part by banks extending loans to borrowers who were ill-suited to repay them. But by attributing the meltdown to the elimination of redlining, a practice used by banks to discriminate against minority borrowers, Bloomberg appears to be blaming policies intended to bring equality to the housing market.
The term redlining comes from the “red lines” those in the financial industry would draw on a map to denote areas deemed ineligible for credit, frequently based on race.
“It's been well documented that the 2008 crash was caused by unethical, predatory lending that deliberately targeted communities of color,” said Debra Gore-Mann, president and CEO of the Greenlining Institute, a nonprofit that works for racial and economic justice. "People of color were sold trick loans with exploding interest rates designed to push them into foreclosure. Our communities of color and low income communities were the victims of the crash, not the cause."
Campaign spokesman Stu Loeser said that Bloomberg “attacked predatory lending” as mayor and, if elected president, has a plan to “help a million more Black families buy a house, and counteract the effects of redlining and the subprime mortgage crisis."
The campaign also pointed to efforts by Bloomberg's private philanthropy to help other cities craft policies that will help reduce evictions. He promised in a January speech to do a version of the very thing he criticized in 2008: Ask lenders to update their credit-scoring models, “because millions of black households don't have a credit score which is needed to get a mortgage.”