Here's the deal. You had a community which was readily identifiable by race or ethnicity. There was a track record of low incomes and difficulty paying off loans in that community.
What the banks would do is get a map and draw a red line around the district with all the problem people.
The theory was that by doing it this way the banks wouldn't have to worry about getting more borrowers of "their kind" anymore, plus, the "red lined" area would fall into decay that much faster (due to the inability of even better off folks living there to get credit) and it could simply be forgotten until urban redevelopment (or comparable process) came along.
Insurance companies still do things that way ~ unless prohibited by law, and then they do something similar to get the same effect.
Obviously "red lining" was fairly well directed at black people, even those with good jobs who paid their bills.
Ever wonder why so many blacks back in the 1960s wanted to get out of inner city areas so badly? It was very often the case that they couldn't buy houses in their own neighborhoods because they couldn't get a mortgage.
It really wasn't because they wanted to move in next door to white people!
Simply abolishing red lining didn't solve the problem of the individual borrower who couldn't or wouldn't repay debt!
I’m not sure about the Constitutionality of banning such overt racism by private businesses, despite the truly laudable goal. Unfortunately, the effect has been affirmative action loans. People whose homes are foreclosed because they have debt they cannot pay are not beneficiaries.
So are you saying that a private enterprise such as a bank should be forced to do business with anyone because of their skin color? It’s identical to saying that the government can force individuals to marry someone of a certain race, or that I must hire someone because of their ethnicity.
Discrimination may hurt someone’s feelings and/or their economic status, but nonetheless it is the backbone of wisdom and prudent decisions. And it should be carried out by individuals, not by government authorities.
Just because some do a poor job of properly discriminating for or against whatever individual or group based on whatever criteria (which should after all remain a purely personal preference), doesn’t mean any authority should be able to prohibit discrimination in any form.
Am I misreading you in my comprehending that you are saying that “redlining” is wrong?
Obviously the forcing of banks to do the complete opposite of redlining doesn’t solve the problem of individuals who don’t repay loans, as you point out. My argument is that it should be the prerogative of the private enterprise, the bank, as to how to address the problem, as insurance companies are allowed to do.
It’s common sense to completely avoid bad neighborhoods, in any given circumstances. Just because there are good individuals to be found therein doesn’t mean the government should be able to force me or anyone else to go there and seek them out at certain dire risk.
“directed at black people, even those with good jobs who paid their bills.”
This, of course, was grossly unfair, and failure to verify that many of the subprime mortgage holders had good jobs and paid their bills so more commissions could be gained quicker undoubtedly has played a part. Perhaps annual commissions should be paid out over a 5 year period, and canceled if a loan goes bad?
Not sure where you came up with that.