Subprime Mortgages Destroyed Them. Who Paid the Price?

THE KILLING FIELDS OF EAST NEW YORK: The First Subprime Mortgage Scandal, a White-Collar Crime Spree, and the Collapse of an American Neighborhood, by Stacy Horn

After a financial crisis torpedoed the U.S. economy in 2008, the public clamored for accountability. Millions had lost their homes and livelihoods. Crimes had been committed. Surely, the bankers, brokers and investors who had precipitated and profited from this collapse would be brought to justice.

Nope. While a few midlevel bank employees were prosecuted, the architects of a rotten system generally escaped with their nine-figure fortunes intact. It was not long afterward that Donald Trump began his rise to power, and many observers pointed to the hangover from the 2008 crisis, and the impunity that characterized it, as part of his appeal.

In “The Killing Fields of East New York,” Stacy Horn examines another, long forgotten financial crisis — one with a very different outcome.

Horn tells the story of how a network of bankers, mortgage brokers and federal housing officials in the 1970s conspired to commit “the perfect financial crime.” It went like this: In cities across the country, brokers and other speculators descended on places like East New York, the Brooklyn neighborhood on which Horn centers her tale. They persuaded middle-class families to sell their homes at cut-rate prices by stoking fears about the imminent arrival of minorities. Other times they bought decrepit properties and performed superficial repairs. Then they resold the homes at big profits — sometimes five times as much as they’d just paid — to low-income Black and Latino families.

These newcomers were often deliberately saddled with mortgages that they could not afford. Why? Because the lenders didn’t have anything to lose. The mortgages were insured by the Federal Housing Administration, which was trying to compensate for America’s long history of housing discrimination. A noble goal, undoubtedly. But the lofty ideals were betrayed by corrupt public and private officials.