I was just reading [1] about how Detroit's original decline was due, to a significant degree, to the mortgage industry: Through a system called Red-Lining in t

I was just reading [1] about how Detroit's original decline was due, to a significant degree, to the mortgage industry: Through a system called Red-Lining in the mid-20th century, which the federal government actively facilitated [2], banks refused to lend to any residents of neighborhoods with even a few residents who were of 'undesireable' races, including of course, blacks. This wasn't a conspiracy theory; it was all done in the open. Consequences: 1) Even for whites happy to integrate: A few black families move in, credit dries up, nobody can sell or improve their homes, and your housing values plummet. 2) And even worse for blacks: Imagine trying to buy a house without credit. Now imagine doing that coming from the rock-bottom financial circumstances imposed on most blacks in the mid-20th century. 3) Blacks who did obtain homes couldn't get home improvement loans, resulting in deterioration of their homes and a reputation among whites for not caring about their properties. 4) The effect on supply and demand: It forced a very large and growing number of black residents into a small, artificially limited number of rentals (they could only live in certain neighorhoods, remember), driving up rental rates and driving down the quality of their residences (landlords could fill their properties without doing maintenance). Even more perversely, even if someone would sell them a house, blacks had to pay more than whites for the same house - the black bidder had far fewer options. Again, remember the people in the worst financial circumstances were the ones facing these problems. Back then bankers said the same thing: They are bad credit risks. ---- [1] The Origins of the Urban Crisis:Race and Inequality in Postwar Detroit by Thomas J. Sugrue: A prize-winning scholarly history. Highly recommended; it changed dramatically how I understood racial issues and urban development (http://press.princeton.edu/titles/10233.html http://press.princeton.edu/titles/10233.html) [2] It was called 'red-lining' because the Federal Home Loan Association (I think I have the right agency) would literally draw red lines around these neighborhoods and identify them to banks as the worst possible credit risks.