LAST WEEK REV.

Jesse Jackson visited Brooklyn, N.Y., where foreclosed homes were being put up for auction. It was one of the many stops Jackson, founder of the Rainbow/PUSH Coalition, has made to neighborhoods nationwide where the housing boom has given way to exploding ARMs, mortgage defaults and eviction notices.

His foreclosure tour might take a while. According to a December report by Moody's Economy.com, first mortgage loan defaults surged to 1.5 million annualized in the third quarter of 2007, about double the rate two years earlier. Worse, Moody's forecasts a rise in defaults and foreclosures throughout 2008 and into 2009.

Jackson says President Bush's plan to freeze for five years the introductory "teaser" interest rates on many subprime loans doesn't go far enough. He's calling on Congress and lenders to do more to help people keep their homes. Otherwise, he says, entire communities and neighborhoods are at risk of depression and abandonment.

The neighborhoods bearing the brunt of subprime woes the ones Jackson has been visiting are mostly minority ones. Black borrowers are two-and-a-half times more likely to hold a subprime mortgage than whites, according to the 2007 Annual Report on Minority Lending, sponsored by Compliance Technologies and Genworth Financial. Blacks also earn a median of $17,902 per capita, about $10,000 less than whites, according to the U.S. Census. That raises the question of whether the disproportionate exposure of black Americans to subprime credit terms is the result of poverty, racial discrimination or both. Some see clear signs of discrimination. The city of Baltimore on Jan. 8 filed suit against Wells Fargo, claiming that a review of foreclosure records showed clear signs of predatory and discriminatory lending.

The problem, though, is not just one for minority areas, Jackson says. Foreclosed property that sells at steep discounts sometimes for pennies on the dollar puts pressure on neighboring home sellers to lower their prices. "The water came in the hull of the ship; those in the bottom were hurt first," Jackson says with his trademark rhetorical flourish. "But as it rises, it hurts everybody."

In opinion pieces and TV appearances, Jackson has advocated a comprehensive government-sponsored refinancing effort to rescue homeowners saddled with unaffordable loans. We wanted to hear Jackson's opinions on subprime loans and race. True to form, the reverend didn't need to be prodded.

Jesse Jackson: I'm really sad. I was in Brooklyn today, where they're auctioning off people's homes. It's sad to see people line up and the predators and vultures wait and buy them up and people stand there helpless. Banks take the property back because they couldn't get any buyers.... So it's just kind of sad to see people in that predicament. People are so heartless about it.

SmartMoney.com: Does this constitute a crisis? Or did people just get into houses they couldn't afford?

JJ: It's a combination. The magnitude of this crisis takes it beyond blame. You've got several million people in this predicament whose problem bleeds over to the rest of the neighborhood. It's a big deal. It's like your neighbor's house is on fire because they were doing the wrong thing, but the wind is blowing and at this point you both have a problem.

In some instances people who couldn't get money from a regular bank got driven into a riskier deal. It's like you're driving down the highway in your small car and a big truck pushed you into gutter...

SM: Is this a racial issue?

JJ: It's several dimensions... Clearly there are patterns of targeting and steering... People who can't get money from a regular bank, but in some instances people who are qualified for a prime mortgage get steered to subprime loans.

SM: And you're saying that's because of their race?

JJ: It's the neighborhoods where predatory exploitation is more prevalent where people pay more for housing, for car insurance. Invariably, it's in the ghetto and barrio... You can just document that pattern.

In addition people are not able to get money from regular banks... This is a structural crisis. You have a Singaporean group bailing out Citigroup; Northern Rock being bailed out in London. Its impact is global.

SM: What should we do in terms of public policy right now?

JJ: First of all, Mr. Bush says they're helping people who are current [on their mortgage payments], but that's not enough. It's a gesture toward intervention, but it's not far enough. He's making a 10% move, and saying the rest of you volunteer. It's going to require more than that.... [Federal Deposit Insurance Corp. Chairman] Sheila Bair seems to have an appreciation of government infrastructure, refinancing. The sheer size of this takes us to that level.

SM: If this is a problem that disproportionately affected people of color, should the solution be so as well?

JJ: The help should be based on need. For example, it's common knowledge the predatory markets for insurance and redlining.... The poor make less money and pay more money, for cars, for insurance. So long as the predatory exploitation was somewhat isolatable, it was somewhat ignored. But now whole city and state budgets and banks are reeling. It is now demanding the level of attention it should have gotten a long time ago. If banks had been more regulated and more scrutinized, and had more transparency... The things Bernanke and Paulson say we need to do from now on should be done retroactively.

SM: You've endorsed Barack Obama for president. But is there any one candidate running now who you think has a better solution for this problem than the others?

JJ: Republicans are saying so far that it's a free market. But a market without checks and balances, without transparency, cannot be trusted to its own devices. The idea of federal intervention offends them. Like the New Deal and the Marshall Plan offends them ideologically. They say that's the price you pay for being an American. The Democrats also have not dealt with it because it's controversial. This is heavy lifting.... This has nothing to do with the [presidential] election.

SM: Did we fail on a broader level in terms of financial services and financial information to minority groups?

JJ: Of course that's true. You can document the zones of predatory exploitation. The ghetto and barrio are subprime markets. In those areas everything costs more. You have the least education, the least access to affordable health care, to job creation, investment. Taxes are up, drugs and guns in; you have first-class jails, second-class schools. You see the most payday lenders, the most currency exchanges. The same is true with the cost of insurance. It's called structural inequality.

Additional reporting by Jack Hough.