The news: Federal Reserve Board Chairman Ben Bernanke predicted this spring that the nation’s 17-month recession could end “probably this year.” Two months later, Fed officials extended the projection to 2010.
Behind the news: The housing market meltdown coupled with the foreclosure crisis has disproportionately affected the wealth of minorities, who have less diverse financial portfolios.
White families invest 29 percent of their assets in stocks, bonds, mutual funds, trusts, annuities and retirement funds, according to the Federal Reserve Board’s 2007 Survey of Consumer Finance. But the average black and Latino families have invested less than 15 percent in the same areas and instead put a majority of their assets in housing. A primary residence accounts for 77 percent of the average black family’s wealth and 73 percent of the average Latino family’s wealth, compared with a 34 percent investment for white families, according to the Fed data.
“If about 80 percent of African- American wealth is in their homes, there’s an inability to have a diversified portfolio,” said Thomas Shapiro, director of the Institute on Assets and Social Policy at Brandeis University and author of “The Hidden Cost of Being African American.” “The more diversified a portfolio is, the less risk they have.”
Since the recession began in the fourth quarter of 2007, stock prices have dropped more than 40 percent and nearly $6 trillion has been lost in housing wealth, according to Dean Baker, codirector of the Center for Economic and Policy Research, in his release of a 2009 report on the wealth of American seniors. So while the average white family has indeed suffered losses, it also entered the recession with six times the financial assets of the average black family.