How a Subprime Mortgage Crisis Led to the Rise of Crime in East New York

Summary

Podcast Summary: All Of It – Episode: How a Subprime Mortgage Crisis Led to the Rise of Crime in East New York

Introduction

In this compelling episode of All Of It, hosted by Tiffany Hansen for Alison Stewart, WNYC delves into the intricate web of housing policies, financial scandals, and social upheaval that transformed East New York, Brooklyn, into one of New York City's most notorious crime-ridden neighborhoods. Featuring author Stacy Horn, whose new book, The Killing Fields of East New York: The First Subprime Mortgage Scandal, White Collar Crime Spree, and the Collapse of an American Neighborhood, provides an in-depth exploration of these dynamics, the episode unpacks the historical and socio-economic factors that led to the 1991 murder spree where 116 residents lost their lives.

The HUD Act of 1968 and Its Intentions

Stacy Horn begins by contextualizing the creation of the Housing and Urban Development (HUD) Act of 1968. Originally intended to combat systemic discrimination in housing based on race, religion, and sex, the legislation was a response to the civil unrest and riots of the 1960s. As Horn explains, “[...] America is a racist country” (02:36), a stark acknowledgment from the Kerner Commission that underscored the need for comprehensive housing reforms. However, while the Act aimed to make homeownership more accessible to families of color, unintended consequences ensued.

Discriminatory Housing Practices: Redlining and Blockbusting

Before the HUD Act, discriminatory practices like redlining and blockbusting were rampant. Redlining involved banks drawing red lines around predominantly minority neighborhoods, effectively denying residents access to mortgages and financial services. Blockbusting, on the other hand, saw realtors persuading white homeowners to sell their properties at low prices by instilling fear of racial integration, only to resell them at inflated rates to Black families (04:13).

Michael, a listener and former assistant district attorney, highlights the systemic negligence: “Why is it you think that New York City continually allowed the crime, filth, and the redlining to occur in East New York?” (04:44). Horn identifies three critical "crime waves" that devastated the neighborhood: unethical blockbusting, redlining, and the first subprime mortgage scandal orchestrated by white-collar criminals exploiting the very policies meant to help.

The First Subprime Mortgage Scandal

With the implementation of the HUD Act, lenders saw an opportunity to profit from lax regulations. Horn details how bankers acquired distressed properties in East New York, cosmetically repaired them without substantial improvements, and fraudulently secured FHA loans by bribing appraisers. This manipulation flooded the market with subprime mortgages, destabilizing the housing sector and contributing to widespread foreclosures (07:56).

Decline of East New York

The compounded effects of these housing policies led to a stark demographic shift. As crime surged, white residents fled, often compelled by blockbusting practices, leaving predominantly families of color with limited housing options. Horn observes, “[...] families of color were the victims of these crimes and the perpetrators were the white-collar criminals” (11:58). This segregation intensified poverty and crime, culminating in the infamous nickname “Killing Fields” following the 1991 murder spree.

Listener Richard shares personal experiences of police corruption and neglect within the NYPD’s 75th Precinct, emphasizing the community's lack of protection and support: “They would see it on the street. It was absolute mayhem” (23:56). Horn echoes this sentiment, noting that the precinct was "undermanned and stretched too thin" (21:51), exacerbating the neighborhood's decline.

Community Responses and Current State

Despite the bleak history, there are glimmers of resilience. Horn discusses the efforts of local activist groups and congregations that sought to mitigate the neighborhood's decline. For instance, the East Brooklyn Congregations banded together to address public housing deterioration and community violence. Mel, a youth worker since 1967, recounts the transformation from a once-thriving immigrant neighborhood to a battleground of violence and neglect (17:22).

Today, while East New York remains challenged, Horn notes a significant improvement from the 1990s. Modern visits reveal fewer abandoned homes and a safer environment, though remnants of past struggles linger. Residents still exercise caution, but the area no longer mirrors the pervasive danger it once did (25:26).

Conclusion

Stacy Horn’s investigation into East New York’s fall and gradual recovery paints a vivid picture of how policy failures and financial exploitation can devastate communities. Her work underscores the critical need for vigilant oversight in housing policies and a comprehensive approach to urban development that prioritizes community well-being over profit.

As Horn poignantly states, “[...] the varied perspectives and diversity of experience is what makes New York City great” (00:25), reminding listeners of the enduring strength and resilience within diverse urban communities.

Notable Quotes

• Stacy Horn: “America is a racist country.” (02:36)
• Michael: “Why is it you think that New York City continually allowed the crime, filth, and the redlining to occur in East New York?” (04:44)
• Stacy Horn: “Families of color were the victims of these crimes and the perpetrators were the white-collar criminals.” (11:58)
• Mel: “It was absolute mayhem.” (23:56)

Final Thoughts

All Of It effectively unravels the complex interplay between government policy, financial malfeasance, and social dynamics that led to East New York’s transformation into the "Killing Fields." Through engaging discussions, personal anecdotes, and expert insights, the episode offers a thorough examination of urban decline and the path toward recovery, making it a must-listen for those interested in the cultural and historical fabric of New York City.

Transcript

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[Tiffany Hansen]

Listener Supported WNYC Studios this is all of it here on wnyc. I'm Tiffany Hansen in for Alison Stewart today. East New York Brooklyn has long had one of the highest murder rates in New York City. In one horrible year, 1991, 116East New York residents were murdered. The neighborhood became known as the Killing Fields. Journalist Stacey Horn argues that in order to understand what happened in 1991, you need to roll back to 1968. That's the year the Housing and Urban Development act was passed with the goal of making it easier for some Americans to buy a house. Unfortunately, that legislation left the door open for some bad actors to take advantage by issuing subprime mortgages for homes that were unlivable to people who could not afford them. East New York was left with hundreds of vacant properties, which in turn helped lead to the rising crime rates of the 80s and 90s. Stacey Horn lays out all of this in her new book, the Killing Fields of East New York, the First Subprime Mortgage Scandal, White Collar Crime Spree and the Collapse of an American Neighborhood. It was published yesterday. Stacy, welcome to all of it.

[Stacy Horn]

Thank you for having me and for that excellent summary of my surprised at all.

[Tiffany Hansen]

We don't we're done listeners. We would love to have you in this conversation as well. Do you live in East New York now? Do you remember what it was like in the 80s or 90s? You can call us text us 212-433-9692. Yes, you can text that number, 212-433-WNYC. We are also on social media at all of it wnyc. So let's Stacy, let's start by talking about that bit of legislation I mentioned in 1968, the HUD Act. It was supposed to prohibit discrimination based on race, religion, sex, among other things. So just remind folks why we had the establishment of HUD to begin with.

[Stacy Horn]

At the time in the 60s, America was going through a period of civil rights riots, which what they called riots, which I point out in my book was part of the problem really more fairly should be characterized as rebellions. They were a righteous response to the injustices that they were suffering. So it had gotten really bad. People were dying, properties were being destroyed. And Johnson established what is called, referred to as the Kerner Commission. And he wanted them to look at what was going on and tell him why people were rioting. And they came back with a startlingly simple response. And that is because America is a racist country. And I can't summarize the whole report in a few sentences, but people on both sides of the aisle in Congress recognized that there was a problem that needed to be addressed. And the problems that the Kerner Commission pointed out was discrimination in place, unemployment, housing, police brutality. And I think what happened is they looked at all the problems that were pointed out and thought housing. It was a problem that they could understand. Yes. People need a decent place to live. And it must have sounded like a problem they had at least a prayer of solving. Go ahead.

[Tiffany Hansen]

No, I was just gonna say. So what were the housing policies in East New York and in general, like before this? They were discriminatory, obviously, right? Yes.

[Stacy Horn]

Black families, families of color, could not buy a home. I mean, it was baked into everything in our society.

[Tiffany Hansen]

Stacy, we already have a call here from someone who says, I've lived through Stacy's book, so definitely. Let's bring Michael in from East New York. Good morning. Afternoon, Michael.

[Michael]

Good afternoon. And, Stacy Horn, I cannot thank you enough. I got your book yesterday. I read it almost twice. And I have to say, for someone that lived through everything you wrote about, thank you wholeheartedly for taking Walter's work and putting it all together in a concise history. Those of us that lived through the redlining and the blockbusting and the fires and the crime, as I also was an assistant district attorney in 1990, really, really nailed it. Stacey Horn, cannot thank you enough. I have so much to add that I don't want to take up your time, but my question to you is, through all your documentation and talking to everyone, Frank Fauci was actually. We called him Uncle. I lived right around the corner from that bar. Why is it you think that New York City continually allowed the crime, filth, and the redlining to occur in East New York? I mean, I lived through Officer Dowd, the Palm Sunday Massacre. Did you come to a hypothesis as to why it's still allowed to be the way it is?

[Tiffany Hansen]

Thank you, Michael. Stacy, can we. Michael has a lot there. I'm wondering, because we were talking about these housing policies specifically, if we could zero in on something he said about redlining.

[Stacy Horn]

I would love to address that, because essentially, my book outlines three. Three crime waves that happened in East New York that led to the decline. The first one was blockbusting, and that was realtors scaring white families, white homeowners into selling their homes by telling them that this was soon going to become a black neighborhood and there would be a rise in crime and a loss in property values and you gotta get out now. So that was the first crime. And part of the problem was this was not considered a crime at the time. Unethical, certainly. Blockbusting, yes, but not a crime. The second crime wave was redlining. Once neighborhoods became neighborhoods of color, bank would literally draw a red line on a map around that neighborhood, and they would no longer grant mortgages and other financial services. So, again, not a crime at the time. This led to the third crime wave and the focus of my book, which was the first subprime mortgage scandal in the United States. White Collar criminals. And it happened after these two important civil rights legislation were passed in 1968, the Fair Housing act and the HUD Act. They. They took one look at that and saw a way of getting rich.

[Tiffany Hansen]

Describe how that happened.

[Stacy Horn]

They had already been. A lot of them had already been participating in blockbusting. But now the United States government was making it their mission to make it easier for families of color to buy home. And so the FHA was instructed to make this your mission. They started granting mortgages in places like.

[Tiffany Hansen]

East New York in areas that were previously redlined.

[Stacy Horn]

Exactly. And so these bankers came in and just bought up a bunch of properties that were already depressed or already had been foreclosed, slapped on some paint, and didn't make any of the repairs that they would normally have to make in order to get an FHA loan. And they were able to do that because they were bribing FHA appraisers to okay these applications without having made the repairs or double checked the financials of the people applying for the loan.

[Tiffany Hansen]

We're talking about a new book called the Killing Fields of East New the First Subprime Mortgage Scandal, which we're talking about now with Stacy Horn. The book called the First Subprime Mortgage Scandal, A White Collar Crime Spree and the Collapse of the of an American Navy Neighborhood. Our guest is the author, Stacy Horn. Listeners, if you live in East New York, if you remember East New York in the 80s and 90s, we'd love to hear from you. 212-433-9692. You can call us, you can text us at that number. You can find us on social media at all of it, wnyc. And Stacy, I want to bring Glenn into the Conversation. Glenn, good afternoon. Are you there?

[Glenn]

Stacy? I'm, I'm one. I'm, I'm very happy to hear your book being published. My parents bought a house in East New York, Miller Avenue, in 1964, and they stayed there for 14 years. We were there to 1978. My dad tells about how when they were shopping for a home, the realtor was trying to get them to go to Brownsville and Red Hook. And they kept telling about how they didn't like, you know, no, no, they didn't want that. So he says to them, oh, you know, you all have Cinderella taste. So then he takes them to East New York. There was an older Jewish woman that would not let them in the house, had to wait for the husband to come, and eventually they were able to get the house.

[Tiffany Hansen]

So this. Thank you so much, Glenn, for that remembrance. We appreciate your call. Stacy, this is just the kind of thing you were talking about.

[Stacy Horn]

Yeah, I want to address that. And also the first caller. A big part of the problem and a problem that continues today is that people are hyper aware of street crimes and see street criminals as scary and dangerous and something that's a true danger to them. And everything in society reinforces this belief. You know, all books and movies and TVs and newspaper reports focus on street crimes much more than white collar criminals. So therefore, people don't fear white collar criminals. A street criminal, if he's committing a crime that involves you, he's like right in front of you. If you're a victim of a white collar crime, he's nowhere near you and chances are you don't know it. And so that's why I kind of lost my train of thought. But that's an answer to the first caller. That's why this problem still exists today.

[Tiffany Hansen]

And this example from Glenn is exactly what you're talking about, right? This white collar crime, invisible, yet visible.

[Stacy Horn]

Yeah, people. The crimes that were taking place in East New York, that people are terrified. They don't realize that the families of color were the people that were the victims of these crimes and the perpetrators were the white collar criminals.

[Tiffany Hansen]

We are talking with Stacy Horn. Stacy, we have a text here that says, I grew up in East Flatbush. Back in the day, we could hear gunshots coming from East New York. Describe the difference. If you were to walk into East New York at various points in history, what would it look like to people we mentioned in the open this moment after, you know, during this subprime crisis when houses were vacant and crime was high? Just describe for folks like previous, you know, before and after. Give us like, what would it look like for people who haven't been there?

[Stacy Horn]

Prior to the 1950s, it was a nice up and coming neighborhood of immigrants, working class and middle class, German Jewish immigrants. And as these crimes started to take place, the demographics changed. But so as these buildings were foreclosed and were abandoned, they would become crime scenes. First it would be teenagers just going in to party, destroying people, stealing things, leaving the water on. But I wanted to point out what came through in the second caller was when crime rose, white people started fleeing in droves. They had already started leaving due to blockbusting and redlining. But as crime went, anybody who was still holding on left and they left because they could, they could pretty much find a place to live anywhere they want. But families of color, as the caller too said, were only shown homes in depressed neighborhoods if they try to leave. People would not rent to them, people would not sell to them. And the only people that could move in were not necessarily, you know, like the caller in caller two, they would be people who couldn't find a place to live anywhere else. And so it concentrated crime in these places because nobody could get out. So they were stuck with this.

[Tiffany Hansen]

We're talking about the killing fields of East New York. The book was just published. The author is Stacy Horne. We're going to take a quick break here, Stacy, and we'll get back to some more calls in just a few minutes. I'm Tiffany Hansen in for Alison Stewart today.

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[Tiffany Hansen]

Here's a way you can support WMYC in our centennial year. Donate your used car. We'll turn your old car into the news and conversation that we've been serving to the community for over 100 years. Many listeners have already donated their cars to WNYC. It's an easy way to support the station and you'll get a tax deduction. Learn [e-mail] car.

[Stacy Horn]

This week on the.

[Tiffany Hansen]

New Yorker Radio Hour how Lorne Michaels invented Saturday Night Live and reinvented television. A bunch of times he thought television is just a backwater. Television was, you know, it was still the boob tube. And he was determined to help television catch up. Susan Morrison on 50 Years of Saturday Night Live. That's the New Yorker Radio Hour from WNYC Studios. Listen wherever you get your podcasts. This is all of it. I'm Tiffany Hansen in for Alison Stewart and we are talking this hour about East New York Brooklyn. It's had one of the highest murder rates in New York City. And in one year, 1991, 116East New York residents were murdered. The neighborhood became known as the Killing Fields. The name of the new book by author Stacy Horn is the Killing Fields of East New York Listeners. Are you from East New York? Do you remember what it was like being there in the 80s and 90s? We would love to hear from you. 212-433-9692. You can call us, you can text us at that number. You can find us on social media at all of it nyc. Stacy, I want to get right back to it here with Mel from Brooklyn. Good afternoon, Mel. Welcome to all of it.

[Mel]

Hi, Stacy, this is Mel. I contributed some information for your book and I see my name is in it. I want to tell you how important this work is. I worked as a youth worker in East New York since 1967, and we dealt with many of the problems. Actually. I came on a grant from the Office of Juvenile Delinquency, a federal grant. And we saw the destruction that was going on when I first came out there. People before the houses were abandoned, they, you know, the doors were left open for, you know, the tenement houses. There were broken windows, as they say, all over the place. And then the amount of violence then began to grow. My organization, United Community Centers, was mostly interested in saving the public housing which had been the so called rich part of East New York south of Linden Boulevard. And the public housing as other housing was rehabilitated people, by the way, the public housing was predominantly white and for veterans of World War II. And as the community went down, so did the conditions in public housing.

[Tiffany Hansen]

Yeah, Mel, you know what, I want to have Stacy respond to some of what you said there. First of all, he mentioned he contributed to the book. So great, great for that. You know, one of the things I think that Mel is touching on is this notion that a lot of people really didn't know what was happening until it was in their neighborhood and in their face in the house next to them. Yeah, this type of white collar crime can go to our first caller's point. Right. Can go unnoticed for a very long time.

[Stacy Horn]

Yeah, yeah, it was a first. Thank you, Mel, for your help with my book. It was first noticed by a guy named John Molenzo, who was New York's Secretary of State, and his investigators were investigating blockbusting, and he discovered that people with no income at all were buying homes that were valued like a nice home in the suburbs. So he knew that the government had relaxed their standards somewhat so that low income and middle income people could buy homes.

[Tiffany Hansen]

But this was a predatory behavior?

[Stacy Horn]

Well, yes. Well, he said he didn't know that yet. He's like, why? How can someone with no income at all get a loan, an FHA mortgage for a home priced at, I think it was $12,000, which was an impressive amount of money at the time. And so they started talking to the brokers, and that's when they started telling them the details of what they were doing. And they said this openly because they weren't aware that these things were now considered crimes.

[Tiffany Hansen]

Talking about crimes specifically, we have a text here that says, please comment on the 75th Precinct geographic and population coverage of that area of population and density. So what we're getting at Here is the 7 5, which you do touch on in the book. Right, so let's tell me why that's important. Tell us why that's important, and then explain a little bit about what happened there.

[Stacy Horn]

The 75 was a troubled precinct during this time period. They were in trouble in part because of the crime at the time. And they were way undermanned and stretched too thin to address these problems. And that was another thing I talk about in the book. How New York responded to the crisis by retreating, essentially. But they were also in trouble because in their midst were corrupt cops. And the most famous of whom was Michael Dowd, who I write about in the book. My book essentially has two threads where I go back and forth. One thread shows the discovery of the white collar crimes and the investigation and the prosecution. And the other thread shows the decline of East New. And I just go back and forth quickly and constantly throughout the book because I want people to see the decline, but I want them to be constantly reminded of how it happened. And I show it very, very clearly. And the 7pi precinct is a thread that goes through the East New York chapters. And I show the problems that they were dealing with. Both nothing that was their fault, really, they were trying, and. And many that were their responsibility.

[Tiffany Hansen]

A lot of unsolved murders.

[Stacy Horn]

Yeah, that was actually how I came to write this book. I had written a book about the NYPD's cold case squad. And one of the things I learned in the process of writing that book was that East New York had the Highest number of unsolved homicides. And I never forgot that. Like why, why East New York as opposed to any other neighborhood in New York? And it was looking into that that I learned that East New York was a nice neighborhood up until the 50s, and it started to decline and then it just plummeted in the 60s.

[Tiffany Hansen]

All right, let's bring another listener into our conversation here. Stacey. Richard is in Long Island City now, but you grew up in East New York, is that right, Richard?

[Richard]

So my grandmother moved in around the early 1960s on Sutter Avenue. Then she moved over to Berryman street and Liberty. We like, I witnessed a lot of like street level crime. And you know, you mentioned Michael Dowd. If you, I'm telling you, if you were to investigate further, there were many Michael doubts on in the 75. And we saw that playing handball. We would see it on the street. We would see cops just turn a blind eye to crack dealers. It was absolute, it was absolute mayhem. And I just, they just. You never felt cared for by the city. We were the last to be plowed for snow. Garbage collection would take forever. I mean, it was pretty bad. So right now there's a place near Berryman called the Village, and that's like these apartments that are slated to be torn down because I think one part of it's already torn down. And I guess I'm not privy to all of this. I'm actually looking forward to your books because it's part of my youth. I didn't only grew up in East New York, but a vast portion of my youth was spent there. And we were a small knit community of Latinos. And the African American Latino community tried to do their best amid the crack epidemic and then the AIDS epidemic. Richard, we never felt unsafe.

[Tiffany Hansen]

Yeah, appreciate that, Appreciate that remembrance for us. We're running out of time, sadly, Stacey. But I want to touch on what Richard is ending with here, which is what is East New York like today?

[Stacy Horn]

East New York is still a troubled neighborhood, but it was, it's nothing like what it was in the 90s. And I just wanted to say to this caller that I know exactly what he's talking about and I do address this all through the book. I talk about every activist group that I came across and talked about and covered what they did to fight the decline. And Eastbrook, the East Brooklyn congregants, Congregations.

[Tiffany Hansen]

Yes, tell us about them really quickly.

[Stacy Horn]

These are a group of priests who got together and said, you know, the congregates were dying. They would tell me about how, you know, the number of congregants they were having services for because they had died every year. And so they got together and talked about what can we do about it? And my book covers the ideas that they had and the plans and actions that they implemented.

[Tiffany Hansen]

The neighborhood is still recovering.

[Stacy Horn]

Yes. People still tell me they have to be careful about what route they take, where they go, being out at night.

[Tiffany Hansen]

Do you still see remnants of this abandoned, you know, these abandoned homes and this sort of abandonment of the people in the neighborhood?

[Stacy Horn]

A lot less. I went there, I've been there a number of times, but I went there recently specifically with the plan to take pictures of the various crime scenes and areas that I wrote about. And a lot of people told me, don't go or bring someone. And I went alone and I walked all around for hours and hours and hours, and I never felt in danger. I saw I was in a few places that felt a little bit iffy, but no more iffy than places that I felt in Manhattan or in Queens. So no. All right.

[Tiffany Hansen]

That's. To put it simply. All right. The book that we've been talking about was just came out. It was just published on Monday, Right? Am I right about that?

[Stacy Horn]

Yesterday.

[Tiffany Hansen]

Yesterday. All right. We are fresh off the presses here with Stacy Horn. Stacy, the author of the New. The new book is called the Killing Fields of East New the First Subprime Mortgage Scandal, A White Collar Crime Spree, and the Collapse of an American Neighborhood. You can get it now. Stacey, we really appreciate your time today. We appreciate you highlighting East New York and we're so glad you were able to join us.

[Stacy Horn]

Thank you for having me. I'm Ira Flato, host of Science Friday. For over 30 years, our team has been reporting high quality news about science, technology and medicine. News you won't get anywhere else. And now that political news is 24 7, our audience is turning to us to know about the really important stuff in their lives. Cancer, climate change, genetic engineering, childhood diseases. Our sponsors know the value of science and health news. For more sponsorship information, visit sponsorship.wnyc.org.