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HomeSariego Abstract

Chloe Sariego,

Sarah Lawrence College


The rise of subprime lending in the 2008 financial crisis had disproportionate
effects on black homeowners in Detroit. In 2016, the American Civil Liberties Union
(ACLU), along with the National Consumer Law Center and the law firm of Lieff,
Cabraser, Heimann & Bernstein, filed a lawsuit with the goal of holding Morgan Stanley
accountable for its collaboration with the subprime mortgage lender New Century during
the 2008 financial crisis. New Century supplied Morgan Stanley with high-risk loans,
discriminately issued to communities of color in Detroit, Michigan. The ACLU cites that
the behavior of Morgan Stanley was an explicit violation of the Fair Housing Act (FHA)
(Adkins et. al. v Morgan Stanley). By providing a comprehensive theoretical background
on power and historical background on fair housing legislation, the paper finds that the
“disparate impacts” felt by black homeowners was a result of the increased separation of
politics from economics and law. Without better public recognition of politics in the
mainstream economic and legal discourse, Fair Housing legislation will continue to face
enforceability problems in the courts and housing fueled poverty will remain entrenched.
Increasing the coercive capacity of black homeowners in Detroit is a substantial method
of decreasing harm, but without a legally enforceable mechanism, powerful profit
seeking entities will continue to price them out. This case, and those similar to it, invoke
more than just questions of class certification and damages. Whether purposeful or not,
the ACLU has brought a case that challenges some of the most historically problematic
legal concepts: property, damages, and discrimination.
Looking closer, two distinct discourses emerge in the conflict between Morgan
Stanley’s discriminative practices and the FHA. On the one hand, the financial
technology and lack of regulating financial tools during the crisis created a distinct
discursive tactic of free market, laissez faire mentality. By looking at the 40 years post
implementation of the FHA I argue that it is not the work of individual firms but the legal
framework that is either permissive or un-permissive of housing discrimination. While in
the ACLU case Morgan Stanley justifies their predatory lending, I will argue that
discrimination is never a result of the “natural market forces” but instead a direct result of
law’s inability to actively combat discrimination in the financial sector and the dangers of
un-critical mainstream legal and economic theory. Furthermore, I will look for
conclusions regarding anti-discriminatory legislation and reach for solutions besides the
dominant “colorblind” legal approach.