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Understanding the Origins and Impacts of the Economic Crisis

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  • 1. Understanding the Origins and Impacts of the Economic Crisis…and Moving Forward with Justice 2009 Washington State Access to Justice Conference Justice: Hope and Help in Hard Times john a. powell Executive Director, The Kirwan Institute for the Study of Race & Ethnicity and Williams Chair in Civil Rights & Civil Liberties, Moritz College of Law
  • 2. ORIGINS
    • john a. powell
  • 3. The Foreclosure Crisis
    • Deregulation: In the 1980s, federal deregulation removed state caps and limits on mortgage lending, preempting, in many cases, state laws
    • Rise in Real Estate Values : The rise in real estate values in the 1980s created much new wealth. This led to “asset-based” lending, loans based on the value of the security rather than the borrower’s ability to repay. This was a crucial change that led to the subprime market
  • 4. The Foreclosure Crisis
    • Rise in the secondary market : In the 1980s, mortgage companies began bundling mortgage loans into large portfolios and selling them on a secondary mortgage market
    • This let mortgage companies specialize in home equity lending and make a lot more money. They could make loans and quickly resell the loan into the secondary market
  • 5. The Foreclosure Crisis
    • Securitization and Capital Markets : Because mortgages were viewed as safe collateral and increasingly profitable, Investment Bankers became hungry for mortgages for use as collateral in the sale of mortgage backed securities to investors
    • Wall Street’s hunger for mortgages led to asset-based lending, which fueled the subprime market.
    • This phenomenon took off in 1994 when $10 billion worth of subprime home equity loans were securitized
      • By the end of 2005, the volume of securitized loans leaped to $507 billion
  • 6. Evolution of the Housing Market The Post Depression FHA Era: The Three Party Mortgage Market Pre Depression: The Two Party Housing Market Based on research by Chris Peterson, University of Utah Law School
  • 7. Created by Chris Peterson, University of Utah Law School Today: The web of actors and institutions involved in the sub prime lending and mortgage securitization market
  • 8. The Foreclosure Crisis
    • Communities of color and low-income communities were physically, socially and economically segregated from prime credit markets
    • People in these communities were subject to sub-par lending from rent-to-own to payday lenders to check cashing places that all charged exorbitant interest rates
      • And finally…subprime home loans
  • 9. LEGAL ADVOCACY
    • john a. powell
  • 10. Systems Thinking
    • The typical legal advocate thinks of problems from a individual perspective rather than a systems perspective.
    • The legal framing of a claim has the potential to restrict inquiry into the nature and depth of a problem as well as a proper solution.
  • 11. Legal Advocacy
    • Traditional non-discrimination models encourage lawyers and organizations to see issues as potential legal claims rather than as problems in need of systemic resolution.
    • Lawyers must think and act globally to produce community-wide change. The consequences of the crisis are not limited to a client or even a family, but wash over entire cities.
  • 12. Legal Advocacy
    • Lawyers building a case tell a story. Lawyers can use media to shine a light on the plight within their community. Lawyers must create and sustain good working relationships with media by being honest, accurate, and timely.
    • Lawyers must looking beyond the legal community, and work with housing counselors, neighborhood organizations, and local government. Building coalitions is key.
  • 13. MOVING FORWARD
    • john a. powell
  • 14. Equitable Recovery
    • Moving Beyond Reactionary Recovery
      • Recognizing our linked fate
      • Developing equitable systems
      • Ensuring sustainable investment and recovery
  • 15. Equitable Recovery
    • Towards an Equitable Recovery
      • Transparency and Accountability
      • Help Those Most in Need
      • Equity and Opportunity for All
  • 16. Communities of Opportunity
    • Everyone should have fair access to the critical opportunity structures needed to succeed in life
    • Low-opportunity neighborhoods limit the development of people and neighborhoods
    • A Community of Opportunity approach can develop pathways that result in increased social and economic health, benefiting everyone
  • 17.  
  • 18. Thompson v. HUD : Proposed remedy
      • Submitted expert reports in both the liability and the remedy phases of the litigation, on behalf of plaintiffs
      • Used GIS to analyze current conditions of segregated public housing (liability phase) and frame solutions for desegregation (remedy phase) in a regional context
  • 19. Thank you!
    • Please visit www.kirwaninstitute.org

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