Thursday, October 02, 2008

Blame the Poor (and the minorities, and social justice movements) for the Financial Crisis

Did you know the current financial crisis is the fault of poor (which means lazy and immoral) Americans and brown and black people. Not only them, but evil socialist Carter and Clinton and probably Obama, too. ... whaaaa?

Have you noticed recently everywhere you look, someone is blaming visible minorities and the poor (or organizations and governments that support them)? New talking point starting to catch on? (Too many people listening to Neil Cavuto: "Loaning to minorities and risky folks is a disaster."?) Every online article - even in Canada - has at least one comment now to that effect. Just today:

The Star - top of second page:
The Democrats, over the years, in their zeal for social interventions created the perfect storm and then failed to step up when it hit. Their policies, especially Clinton's threats to banks over "discriminatory banking" paved the way for the "poor" to get mortgages that a free market would have never permitted. This caused as housing bubble they resulted in many people paying inflated prices for housing. When questioned about this practice the Democrats threw up charges as ridiculous as racism (many unqualified mortgage holders were minorities) and refused to listen or investigate the concerns. This bit of social engineering by bullying the free market has done a lot of damage. Perhaps voters will pay attention to political parties who will damage economies to push their socialist goals. There is only so much money available for social programs and the economy can't be pillaged to find more. The Democrats control the House and they must find a solution acceptable to enough Democrats.

CBC: comment on 10/2/2008 9:04 AM EDT
One of the major 'stories' I see missing in all this coverage is how we wound up here in the first place. Wall Street, lenders and banks get blamed but no one examines how or why they were able to 'set up' the subprime mess.

Answer? Go back to Jimmy Carter in 1977 and the Community Reinvestment Act which essentially forced banks to make loans to people without sufficient credit history to warrant loans under regular credit terms.

Fannie Mae and Freddie Mac were set up to essentially guarantee those poor quality loans which gave the incentive to make more loans. Banks were also mandated to provide those loans and were graded on the number of subprime loans they made. They could be penalized if they didn't make subprime loans.

Fannie Mae and Freddie Mac became safe havens for US Democrats who insulated themselves from regulatory oversight thanks to Clinton and other powerful US democrats. Obama has represented a radical group (ACORN) in court to press for subprime loans.

In short, capitalism, traders, investors are not to blame for this mess, look instead to naive pandering socialists and their pie-in-the-sky legislation.

Interesting that everyone is blaming Bush (who tried something like 17 times to reign in Fannie and Freddie but was fought by the same 'senators' screeching so loudly today) and Conservatives for a Democratic mess that they set up, perpetuated and protected.

Not that I think Clinton's policies were so great - mostly because they were too similar to the Republicans' - but to blame this crisis on the Community Reinvestment Act and the people it helped is ridiculous, not to mention false:
The CRA just affected banks and thrifts, which are regulated. 'The heart of the crisis was caused by unregulated and lightly regulated mortgage brokers and independent mortgage bankers and affiliates that are not subject to the CRA,' says law professor Michael Barr.

A good round-up of the debunking here: 11 Racist Lies Conservatives Tell to Avoid Blaming Wall Street for the Financial Crisis

So, aside from the fact that their argument is false, why does this matter?
One could certainly oppose the CRA on principle. But simply shoe-horning that argument into the current crisis connects the argument with an ugly, ugly history. One of the most disturbing aspects of racism is how whites have historically used the black community as a kind of sin-eater for their own moral shortcomings. So post-slavery, even as sexual assaults on black women were virtually never prosecuted or punished, whites concocted the myth of the rapacious, sex-crazed black ogre and organized mass lynchings to purge themselves of the beast. Of course they were really purging themselves of their own guilt. So today as we pay the price for becoming overconsumers, we now hear voices telling us that the real problem is that the niggers and spics are overconsumers. It is from the conservative disciples of the same people who historically defended southern white thuggery that we get this novel theory. It's hard to not wheel around and hurl large objects across long living rooms when faced with such brazen displays of cowardice, and blatant punk-assness. But as I've said, it's best not to dwell on these people. At night, when no one is around, they know who they are. And now, so do we.<Ta-Nehisi Coates>


Anonymous said...

Nobody is blaming poor people her. One of the leading factors here is Clinton and democrat legislation that forced financial institutions to give out riskier loans. Banks are truly colour blind -- they only colour they see is a credit score. When government, in the name of chasing the racism bogeyman, forces banks to suspend their own common-sense policies they create an unstable banking system. That's the argument. Nobody blames the guy who gets a loan he can't afford. Everyone blames the government for creating an environment where banks are forced to loan money to unqualified people.

Anonymous said...

The government did not create this situation, capitalism did...the mortgage crisis is just one aspect of the overall "credit" solution to finding markets to overcome the crisis of overproduction - helping people to consume in spite of falling wages...