How Wall Street Sold the American Dream

A demonstrator holds a sign outside of Lehman Brothers’ headquarters in New York in 2008 ( Image )

A demonstrator holds a sign outside of Lehman Brothers’ headquarters in New York in 2008 (Image)


Everyone has a story from the Great Recession. Whether you lost your home, or it simply meant you were more risk-averse than usual, the adjective “great” is used for a reason. Depending on your familiarity with economic analysis and, to a larger extent, the Oscar-nominated film “The Big Short,” your knowledge of the details behind the recession may vary. The origins of the crisis lay, most ironically and most fundamentally, in the American dream. That American dream was wrapped in politics, coated in Wall Street investors, and dipped in deceit, but it was still based on the prospect that everyone wants to buy a home—what’s more quintessential of the American dream than that?

For anyone unfamiliar with the crisis: Wall Street investors bought huge pools of mortgages from big investment banks, who had bought them from smaller banks, who had bought them from mortgage brokers. This was lucrative and low-risk for a while, but eventually there were no more people who could afford a house. The regulations for a mortgage loosened in order to accommodate more people. Low-income and unemployed individuals took out mortgages, and eventually this bubble—created from increasing housing prices but stagnant or decreasing incomes—burst.

The burst disproportionately affected black and Hispanic families compared to white and Asian families. In 2006, 26 percent of mortgages loaned to white individuals were subprime, compared to 47 percent for Hispanics and 53 percent for African Americans. Controlling for other factors that could contribute to this difference, studies proved that the only thing responsible for the disproportionate number of high-rate subprime loans that minority populations received was racial discrimination. Wall Street didn’t intentionally target minority populations with subprime mortgages that they couldn’t pay, but most dominant financial institutions did create conditions encouraging smaller banks and mortgage brokers to discriminate. According to lawyer Larry Schwartztol with the ACLU, “Conventional lenders had historically not set up shop in communities of color, so subprime specialists could flood those communities without competing with institutions offering standard loan products.”

The front page of an edition of  The Wall Street Journal  published in the midst of the 2008 financial crisis ( Image )

The front page of an edition of The Wall Street Journal published in the midst of the 2008 financial crisis (Image)

Ten years after the housing market crashed, not much has changed. Black men are still the only demographic who have yet to fully recover from the recession. Racial inequality in median household income is striking. For Hispanic and black families, real income has remained significantly lower than that of white and Asian households, with the highest median household yearly income in 2017 at $80,000 for Asian families and the lowest median household yearly income at just above $40,000 for African American families.

This isn’t to say that the recession didn’t negatively affect white and Asian individuals and their families—it would be both crude and incorrect to discount the collective pain and loss felt across the country. However, the data shows that, much like the War on Drugs or incarceration, the crisis was unmistakably worse for African American and Hispanic individuals. The media has disregarded this aspect of the Recession’s narrative, from NPR’s “Giant Pool of Money” podcast to the big screen in “The Big Short”. National discourse and media portrayals of the recession suggest that poverty and loss is uniform across socioeconomic classes, when in reality, it’s far from it.


The greater lessons to be learned from the Great Recession deal with credit, lending, government institutions, and private banks. But what might be more useful is a conversation around why it affected some demographics much worse than others. Behind every conflict, whether between individuals or across party lines, is an issue of value and the hierarchy of struggle. Historically, black folks have been marginalized and discriminated against more than white folks have. It doesn’t erase the struggle of the poor or working-class white American; it simply means that there are additional obstacles for the poor or working-class black American that are systematically ignored.

Most Americans put the blame on big banks and Wall Street for the struggle that ensued after 2008, but that’s a fairly easy way out that ignores the racial implications. To really blame anyone for this, we have to face who was affected the most, why they were targeted by mortgage brokers, and what it says about our nation’s progress that black men are still feeling the burden of an event from which every other demographic has recovered.