Racism in the 2008 Political Campaign

Ed Kilgore:

Democratic Strategist: hroughout this long presidential campaign, there's been endless discussion of race as a factor.... Now, in the wake of the ongoing financial crisis, racism has entered the campaign conversation from an unexpected direction. In the fever swamps of conservatism, there's a growing drumbeat of claims that the entire housing mess, and its financial consequences, are the result of "socialist" schemes to give mortgages to shiftless black people whose irresponsibility is now being paid for by good, decent, white folks.

Some of this talk is in thinly-veiled code, via endless discussions on conservative web sites (though it spilled over into Congress during the bailout debate) attributing the subprime mortgage meltdown to the effects of the Community Reinvestment Act of 1977... aimed at fighting the common practice of mortgage "redlining" in low-income and/or minority areas.... [T]he CRA didn't require lending to unqualified applicants... CRA doesn't even apply to the non-bank lenders responsible for the vast majority of bad mortgages....

A closely associated and even more racially tinged element of the conservative narrative on the financial crisis focuses on lurid claims about the vast influence of ACORN, a national non-profit group active in advocacy work for low-income Americans. Among its many activities, ACORN has promoted low-income and minority homeownership, mainly through personal counseling. More to the point, though it's unrelated to any of the claims about ACORN's alleged role in the financial crisis, the group worked with Barack Obama back in his community organizing days on the South Side of Chicago.... Google "ACORN financial crisis" and you'll be treated to an amazingly huge number of articles and blog posts on the subject, virtually all of them from conservatives. None of them, so far as I can tell, establish that the group has had any significant involvement in mortgage decisions, mainly because most subprime loans were made in areas where ACORN activists would never set foot. ACORN is being singled out by conservatives for a leading role in the crisis simply because it's crucial to the whole CRA/Socialist/Minorities/Fannie Mae/Freddie Mac/Obama narrative about the financial crisis. And that narrative is not simply all over the internet: it's common on the airwaves as well, from Lou Dobbs to an assortment of "analysts" at Fox.

While some conservatives are careful not to get too explicit about the racial underpinnings of this argument, others aren't. As usual, we can rely on Ann Coulter.... [R]ich liberals in league with shiftless minority "welfare recipients" are sticking it to Joe Sixpack. Coulter's uninhibited take seems to be closer to what we are now seeing and hearing among grassroots conservatives, whose anger is now visibly spilling onto the campaign trail, than the more circumspect "analysis" of her more "responsible" colleagues....

Perhaps it's an ironic sign of social progress that today's emerging racist stereotypes involve minorities getting behind on their mortgage payments, rather than "welfare queens" using change from their food stamps to buy vodka (the famous Ronald Reagan anecdote) or black men impregnating their girlfriends to live off those bountiful welfare payments. But it's still disgusting. As Rick Perlstein has righteously argued, it's a blood libel on people who exert no real power in this country....

I'm less inclined to blame those fist-shaking angry Main Street conservatives at McCain's rallies than the conservative "thinkers" who promote racist stereotypes as part of a broader effort to deflect responsibility anywhere, everywhere, than towards the corruption and ideological manias of their own leaders...

Comments

[christofay]

Talking about minorities, we made a country-damaging mistake breaking all our rules to let Murdoch control our national media.

If it isn't T & A, it's race baiting all the time at Faux World News. What can we do to undo our mistake? Stick some country-rectifying moves in a 1,000 page omnibus spending bill is how our system works, I guess. Everyone votes for spending.

[Neil B.]

Christofay (or anyone): It will be helpful if you explain to some extent how the rise of Murdoch went against rules (formal and informal), since most people just consider it a sad consequence of free markets in the media, and don't know the details (nor do I.) Also, I think appreciable numbers of Americans have been hearing of the packaging of sub-prime debt into financial instruments, about credit-default swaps and even "netting" and the like. Most know better than to just blame Freddie and Fannie, altho I doubt the latter were blameless, nor are the Democrats.

Finally, where is the best run-down on just what CRA told banks they had to do concerning eligibility? I assume, there still had to be reasonable matching of income and payments, and of course the pernicious influence of ARMs is an external factor to all this about income groups and credit ratings, etc.

[Thads]

Well, Brad, what about the following remark Greg Mankiw makes in his blog?

(As an aside, one might ask, why did these firms make such bad bets? Essentially, it was a result of poor judgment among various private decisionmakers, encouraged by equally poor judgment of various public policymakers, many of whom were more interested in promoting homeownership among questionable borrowers than in the preserving the safety and soundness of the financial system. But this is not the time for recriminations. We have to face up to the problem sitting in our laps.)

[albrt]

The CRA had nothing whatsoever to do with the problem. It discouraged lenders from redlining, but did not require any changes in mortgage underwriting.

The Commodity Futures Modernization Act, on the other hand, had a great deal to do with the problem. It permitted (nay, virtually mandated) that "insurance" in the financial industry would be underwritten with no regulations, reserve requirements, or any other vestige of what we have learned in the last 300 years or so of insurance policy and practice in the western world.

Neither the Clintons nor Robert Rubin should be allowed anywhere near any economic policy apparatus in an Obama administration.

[Jim V]

Over at Sic Semper Tyrannis, Colonel Pat Lang's blog, commenters on this issue stated that CRA-based loans make up about 3% of Fannie Mae's portfolio, and have defaulted at less than the average rate - valuable taking points, if true.

[Blissex]

«CRA-based loans make up about 3% of Fannie Mae's portfolio, and have defaulted at less than the average rate» All the CRA requires is that the ratio of deposits to loans be not too different in minority areas; that is, it asks banks who take cheap deposits from minority areas to lend back to the same areas not too much less than the loans in non-minority areas. Very, very mild legislation, that was significantly watered down before passage. And this has resulted indeed in no big deal: not that many loans, a low rate of defaults. There is a paper that explains this: http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf and there are statistics from the Census that show that the number of dark mortagees is about 4m with a median amount owed of 67k and the number of brown mortgagees is also around 4m, with a median owed of $90k: http://www.census.gov/hhes/www/housing/ahs/ahs05/ahs05.html

[Blissex]

«Neither the Clintons nor Robert Rubin should be allowed anywhere near any economic policy apparatus» The triangulators have been nearly as good as the Republicans in supporting their similar campaign donors and in promoting the ownership society. At some point Bill Clinton realized that USA politics is pay-per-play and the way to do politics is to have rich sponsors, and any people-oriented policies have to be a sideline; thus triangulation. It is sort of Eisenhower/Rockfeller republicanism, with less idealism.

[Blissex]

«"poor judgment of various public policymakers, many of whom were more interested in promoting homeownership among questionable borrowers than in the preserving the safety and soundness of the financial system."» That's indeed very true, the Republicans have been much more interested in promoting property and stock ownership than in the financial system. As Grover Norquist has stated many times, property and stock (and gun) ownership correlate very strongly with voting for Republicans, and promoting them has been a very big part of the rise in the percentage of conservatives among voters, especially now that property owners are more than 70% of voters (and stock owners more than 60%): http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=11699 «The 1930s rhetoric was bash business -- only a handful of bankers thought that meant them. Now if you say we're going to smash the big corporations, 60-plus percent of voters say "That's my retirement you're messing with. I don't appreciate that". And the Democrats have spent 50 years explaining that Republicans will pollute the earth and kill baby seals to get market caps higher. And in 2002, voters said, "We're sorry about the seals and everything but we really got to get the stock market up."» http://www.thevanguard.org/thevanguard/other_writers/norquist_grover/060803.shtml http://www.enterstageright.com/archive/articles/0903/0903norquistinterview.htm «The growth of the investor class--those 70 per cent of voters who own stock and are more opposed to taxes and regulations on business as a result--is strengthening the conservative movement. More gun owners, fewer labor union members, more homeschoolers, more property owners and a dwindling number of FDR-era Democrats all strengthen the conservative movement versus the Democrats.» Thus all the talk by Bush about subsidising property owners, about turning safe well funded social security accounts into risky bubble-style private retirement accounts, and the ceaseless policy of low, always low, interest rates to drive asset prices ever higher. This and astute manipulation of terrorist narrative have delivered a string of presidential and congressional elections to the Republicans, and colossal amounts of rewards and welfare for their corporate sponsors.