Debt as Wealth

Here’s an observation, maybe a truism: a truly ill-conceived policy — one whose results are manifestly perverse — usually indicates some broad and deep social consensus. We are never so true to ourselves as when we are screwing things up royally. This seems worth keeping in mind as we try to sort through the question of whether racially targeted lending preferences contributed to the meltdown of the banking system.

Steve Sailer has compiled the prosecution’s brief, showing how much rhetorical and financial support the government gave to the use of cheap credit as a tool of social engineering. This is all worth noting, especially inasmuch as it proves the “ownership society” to have been built on indebtedness.

Steve’s article describes the effect of diversity-based government lending pressures as “non-negligible,” which is a modest enough claim, but I think Steve still overstates the case, and that the impact was swallowed up in the broader orgy of borrowing (and of refinancing, courtesy of commenter rortybomb). Racial equity pressures were the three-knot tailwind behind a boat on an eight-knot current. The intuition that debt could serve as a substitute for wealth had already permeated our political, economic, and social thought, so it’s only to be expected that credit would serve as the medium for all kinds of redistribution efforts. ACORN and the CRA played their parts, but their script was handed to them by the massive demand for housing-based speculative investments, and by the grand illusion that easy credit was the same as wealth.