'The Killing Fields of East New York' exposes America’s first subprime crisis

Stacy Horn investigates a 1970s financial scandal that devastated East New York and left lasting scars on its community.

Illustration by Lonnie Hanzon

By Novanka Laras and Adelina Indah

The Killing Fields of East New York: The First Subprime Mortgage Scandal, a White-Collar Crime Spree, and the Collapse of an American Neighborhood, by Stacy Horn

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In the wake of the 2008 financial crisis, Americans demanded accountability. Millions of people lost their homes, jobs, and financial security. Yet, while the fallout devastated lives, the architects of the crisis largely evaded justice. Few faced significant repercussions, and many walked away with fortunes intact. The widespread frustration over this impunity fueled political and cultural shifts, including the rise of populist leaders like Donald Trump.

Stacy Horn’s The Killing Fields of East New York revisits an earlier financial crisis—one that played out decades before the 2008 collapse. This largely forgotten scandal unfolded in the 1970s, leaving neighborhoods like East New York in Brooklyn ravaged by predatory lending, systemic corruption, and violent consequences. Horn's deeply researched account unpacks how this crisis unfolded and the starkly different government response that followed.

Horn describes the events of the 1970s as "America’s first subprime mortgage crisis." The scheme began with a network of unscrupulous bankers, brokers, and even federal housing officials who exploited the vulnerabilities of the housing market. These perpetrators preyed on middle-class families, stoking racial fears to convince homeowners to sell their properties at drastically reduced prices. Others targeted decrepit homes, conducting superficial repairs before flipping them at exorbitant prices.

The victims of these schemes were predominantly low-income Black and Latino families, lured into purchasing these homes through government-backed mortgages. These loans, insured by the Federal Housing Administration (FHA), were part of an effort to address decades of systemic housing discrimination. But instead of uplifting marginalized communities, the system became a vehicle for exploitation. Families were deliberately saddled with unaffordable loans, leading to mass defaults.

When homeowners inevitably fell behind on payments, lenders faced no losses. The FHA reimbursed them, allowing banks and brokers to profit while families lost everything. The ripple effects devastated neighborhoods like East New York, where foreclosures led to waves of vacancies and blight. The streets, once filled with vibrant community life, descended into chaos.

Horn’s narrative vividly captures the toll this crisis took on East New York. Foreclosed properties became targets for arson, leaving entire blocks in ruins. Drug markets flourished in the abandoned spaces, and the neighborhood became synonymous with violence. The crime wave peaked in 1991, a year marked by 116 murders, many involving teenagers. Horn uses the story of Julia Parker, a 17-year-old girl killed in a senseless shooting that year, as a poignant thread running through the book. Her death, like dozens of others, remains unsolved, underscoring the enduring wounds inflicted on the community.

What sets this earlier financial crisis apart from 2008 is the robust government response. Horn details the efforts of Brooklyn prosecutors and FBI agents who relentlessly pursued the perpetrators behind the crisis. Predatory brokers, corrupt federal officials, and speculators were investigated, many ultimately convicted and imprisoned. The investigation involved undercover operations, wiretapped conversations, and flipped witnesses, painting a dramatic picture of justice in action.

Horn contrasts this response with the Obama administration’s handling of the 2008 crisis. While 1970s investigators prioritized holding individuals accountable, the post-2008 approach largely shielded the most powerful players from meaningful consequences. Books like Jesse Eisinger’s The Chickenshit Club have criticized this hesitancy, and Horn’s account only highlights the disparity further.

However, The Killing Fields of East New York is not without its shortcomings. Horn's reporting occasionally veers into caricature, particularly when portraying the central villains of her narrative. Harry and Rose Bernstein, a couple heavily implicated in the scheme, are described as “heartless, mindless scavengers.” Horn's reliance on hyperbole at times undermines her otherwise meticulous reporting. While the crimes committed were undoubtedly heinous, more nuanced portrayals of the perpetrators could have added depth to the narrative.

Even with its flaws, Horn’s work serves as a sobering reminder of the catastrophic consequences of unchecked greed. The systemic exploitation detailed in The Killing Fields of East New York highlights how financial crimes can decimate communities, leaving scars that linger for generations.

Horn’s book also carries an urgent message for today’s policymakers and law enforcement. Financial crises are cyclical, often emerging every decade or so. The subprime crisis of the 1970s offers valuable lessons in addressing these events: the importance of rigorous oversight, the need for swift and decisive justice, and the dangers of ignoring systemic inequities.

At its core, The Killing Fields of East New York is more than a history lesson. It’s a call to action, urging society to recognize and confront the structural forces that allow such exploitation to persist. As Horn vividly illustrates, the cost of inaction is measured not just in dollars and cents but in the lives lost and communities destroyed.

For readers grappling with the fallout of modern financial scandals, Horn’s work offers a chilling reminder of what’s at stake. It underscores the importance of accountability in preventing future crises and ensuring that justice is not reserved solely for the powerless. As Horn writes, the aftermath of East New York’s crisis “should serve as both a cautionary tale and an inspiration for those who seek to build a more equitable future.”

With The Killing Fields of East New York, Stacy Horn brings to light a dark chapter in America’s financial history. Her investigation is a powerful reminder of how greed and corruption can erode the very fabric of society. At the same time, it offers hope that with vigilance and accountability, we can learn from the past to forge a better path forward.