October 17, 2018
Ten years ago, President George W. Bush signed into law the Troubled Asset Relief Program, or TARP, authorizing $700 billion in federal funding to buy troubled assets from banks deemed to be in danger of failing as a result of the subprime foreclosure crisis.
A lot has changed since then, but one thing has remained the same: progressive philanthropy continues to under-prioritize efforts to hold the financial industry accountable.
It's a choice that risks undermining the headway progressive foundations are making on issues of inequality and wealth building. Placing big bets on policies designed to lift up low- and moderate-income communities while failing to address the accountability of financial institutions is a gamble we cannot afford to take — not least because it puts at risk the very people we are trying to serve.
American households lost $16 trillion in wealth in the years after the 2007-08 financial crisis. And while some experts estimate that Americans have regained $14.6 trillion, or 91 percent, of those losses in the decade since, the collapse affected different segments of society unequally, with the gains just as unequally distributed. In other words, both the crash and the recovery increased inequality in America.
The impact on African Americans was especially profound. Nearly 8 percent of African-American homeowners lost their homes to foreclosure in the years after the crisis, compared with only 4.5 percent of white homeowners, and between 2007 and 2010 African Americans saw their retirement accounts lose 35 percent of their value. Indeed, according to the National Association of Realtors, African Americans lost fully half their wealth as a result of the financial crisis.
It's not just the likelihood of future financial crises that should give philanthropic leaders pause; it's also the fact that an under-regulated and unaccountable financial industry will continue to target communities of color and low-income communities with sketchy products and put vulnerable households at risk.
The payday lending industry is one example: the average payday loan, $300, costs the borrower $450 in fines and fees. And if it's not the payday industry preying on low-income individuals, it's car title loan companies, usurious overdraft fees, or predatory mortgage lending.
Philanthropic funding in support of efforts to hold the financial sector accountable is most helpful in advance of a crisis, not in the midst of or after one. Progressive grantmakers and grantees should be working to prevent the next crisis and gaming out what they can do when and if it happens. We need to move faster and more effectively to mitigate the effects of the next crisis, and acknowledge that it could happen sooner than we expect.
With adequate philanthropic investment, we could shape a financial sector that works to help low- and moderate-income households build and protect their wealth. That we have not isn't for lack of ideas: there are efforts already underway to create affordable small dollar loan programs, new and smart affordable mortgage models, and state banks like the one currently being debated in New Jersey.
When the last financial crisis hit, there wasn't a lot of nonprofit infrastructure in place focused on mortgage and financial sector issues. People's Action, the nonprofit I direct, organized the largest street mobilizations during the crisis with the aim of demanding accountability, from the financial sector and its regulators, and some measure of restitution for homeowners, workers, and retirees. Initially, we subsidized this work through general operating funds. Similarly, the campaign to win the Wall Street Reform and Consumer Protection Act of 2010 (more commonly known as Dodd-Frank), which was led by Americans for Financial Reform, had a budget of $1.3 million. That's the same amount the financial sector was spending every day to defeat the bill.
A handful of philanthropic organizations answered the call, including the Arca Foundation, the Panta Rhea Foundation, and Atlantic Philanthropies. But once the worst of the crisis had passed (and the financial reform bill had been signed), consistent funding in support of stricter regulation of the financial industry largely dried up (with the important exception of the Arca Foundation).
Unfortunately, the work we need has barely begun. Experts have predicted that housing bubbles in many U.S. cities will cause mass displacement as the wage-to-housing cost gap reaches unsustainable levels. New lending schemes that sound eerily similar to many of the subprime lending scams are being widely advertised. Non-bank lenders, who now comprise the bulk of the mortgage market, are not subject to the same oversight as traditional banks and are growing like kudzu.
Now is the time for progressive philanthropy to engage in a serious conversation about how it can support efforts to strengthen financial regulation. With all three branches of government controlled by the GOP, Wall Street and Republicans are free to mischaracterize and roll back the protections that are keeping the titans of Wall Street from crashing the economy again, including an attempt to exempt 80 percent of banks from the Home Mortgage Disclosure Act (which requires banks to disclose who they are making and denying loans to) and to erase common-sense tax rules for corporations and billionaires.
Because we in the nonprofit sector don't have their resources, we must combat the regulatory rollbacks and irresponsible policy making with good organizing and strategic communications. With the ten-year anniversary of the big bank bailout upon us, it's a good time to question why this work continues to be under-supported, and what we can do to change that.
George Goehl is a community organizer and executive director of People's Action, whose work in the lead-up to the Occupy Wall Street movement played a critical role in the passage of the Dodd-Frank financial reform package and a $26 billion mortgage relief settlement for communities and homeowners.