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.
This is a good way to think about this; I’d still see a refocusing on credit as a means to survive the uncertainty of the current economic situation; borrowing to try and survive a middle-and-working-class squeeze. But that is an political position, that fits some data well and other data not-so-well.
It is worth repeating that the CRA, as far as I understand available data, was a success, and has made the current situation better. Because, as opposed to all the fly-by-night-banks, it actually had to hold onto it’s own loan instead of reselling them.
— rortybomb · Sep 26, 01:34 PM · #
I just think it’s perverse to look at a culture that has become utterly dependent on debt and imaginary money, and at every level— personal, corporate, governmental— and say “The problem is giving loans to Hispanics”. Yes, some of the loans were given to people who weren’t great candidates based partially on the desire to integrate black and Hispanics more thoroughly into the American dream. But many thousands of mortgages were given to undeserving candidates that weren’t white, or even working-class; and, in fact, CRA mortgages have performed significantly better than the national sub-prime average. None of this wouldn’t have happened if there had been no ACORN or CRA. And none of it would be possible without a culture of endless debt and credit that has come to pervade every facet of American financial life. You don’t blame individual people for being a part of that culture when absolutely no one is doing anything to work as a check against that culture.
By the way, I’m thinking that being able to better integrate black people and Hispanics into home ownership is the sort of thing we want to do, and it seems quite consonant with the kind of reformist conservatism that Reihan and Ross detail in their book. The problem is that the mechanism that we had in place to allow them to do that was faulty, and again, the guardians at the gates are the ones who failed us, not the people walking through them. Poor people want to be middle class. It just so happens that the two biggest status markers of middle class consciousness in America, college education and home ownership, required taking on massive debt. That’s a problem. But I will be good and god-damned before I begrudge working class people their attempts to better realize American abundance.
(How about the solidly middle-class white family that turned their prime mortgage into a sub-prime and then defaulted? There’s thousands of those people. Where’s the arm chair sociology about them?)
— Freddie · Sep 26, 07:40 PM · #
Freddie says: “By the way, I’m thinking that being able to better integrate black people and Hispanics into home ownership is the sort of thing we want to do …”
That’s exactly what George W. Bush wanted to do. Read his October 15, 2002 speech to the White House Speech on Increasing Minority Home Ownership, where he denounces “barriers” to homeowning by Hispanics and blacks such as down payments requirements.
This was all part of the Bush-Rove plan to turn Hispanics into Republican voters. Give them easy credit so they’ll become homeowners and thus vote Republican.
— Steve Sailer · Sep 26, 08:11 PM · #
Re: This was all part of the Bush-Rove plan to turn Hispanics into Republican voters. Give them easy credit so they’ll become homeowners and thus vote Republican.
You are missing the point entirely: the problem is not that just poor people were given too-easy credit terms, but that everyone was— the whole vast middle class and all the way up the ladder to some of the largest corporations. Credit became a substitute for income for too many people and businesses. Trying to narrow this down to the CRA is a classic case of straining at gnats and swallowing camels.
— JonF · Sep 27, 11:55 PM · #
Freddie said:
He’s probably not your cup of tea, but Dave Ramsey has been arguing against the debt culture for years on the radio. Not sure what his radio show’s audience is like but he has had several NYT bestsellers and now has a TV show on the Fox Business Channel.
— MikeD · Sep 29, 12:17 PM · #
The fact that the CRA program has a) been in place since 1977 and b) made loans that are currently performing better than average completely collapses the racist piffle clowns like Sailer (who never saw a problem he couldn’t blame on brown folks). To borrow the nautical metaphor, the CRA was a headwind if it was anything.
Why does anyone take racist fools like Sailer seriously at all?
— Justin K. · Sep 29, 08:35 PM · #