10.15.2008

Essay on Economics

Alright, my friends: there's no funny way to tell you this -- widespread economic growth is opposed to racial justice. And I can't decide which is more important.

I found a good link here after being directed to that site by a Google search for "Clinton 1992 Housing Bill." That site sent me to just what I was looking for: a 1999 article published in the Los Angeles Times that applauded the Clinton administration's policies and credited those policies for expanding minority home-ownership. Here's an excerpt:
In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains. It has aimed extensive advertising campaigns at minorities that explain how to buy a home and opened three dozen local offices to encourage lenders to serve these markets. Most importantly, Fannie Mae has agreed to buy more loans with very low down payments–or with mortgage payments that represent an unusually high percentage of a buyer’s income. That’s made banks willing to lend to lower-income families they once might have rejected.
So in 1992, the same year of the Los Angeles riots that were a direct response to the Rodney King beating (and probably an indirect response to pervasive racial injustice), Congress "made banks lend to lower-income families they once might have rejected."

The result? Seemingly not bad -- the 1999 article in the LA Times sums it up this way:

It’s one of the hidden success stories of the Clinton era. In the great housing boom of the 1990s, black and Latino homeownership has surged to the highest level ever recorded. The number of African Americans owning their own home is now increasing nearly three times as fast as the number of whites; the number of Latino homeowners is growing nearly five times as fast as that of whites.
Fine and dandy. Indeed, an evident success for Progress and racial harmony and human equality... right? I mean, there haven't been any widespread "race riots" (as the 1992 riot was described) since that time. Maybe things are getting better.

And then, early this month, the hope bubble -- I mean the housing bubble -- finally burst. As the housing boom was underway in the 1990s, "underqualified buyers" (a euphemism for African Americans and Latinos, no doubt) who could not afford to keep making payments could always sell their houses. A house they bought for $130,000 might have increased in value to $135,000, and if they couldn't make the monthly payments, no loss: they simply sold and moved on.

But when the housing market became "surplussed," or bloated -- when too many houses had been built and prices weren't low enough anymore -- people who could not make payments could ALSO not simply sell their houses. Banks stopped bringing in money. Financial collapse ensued.

Now, some people are blaming the housing crisis on the market economy -- and more specifically, on the GREED that's endemic to the laissez-faire situation. But look at their language, and compare it to the language of the 1999 LA Times article above. The 2008 article, the first thing that comes up on Google when you search "What caused the economic crisis?," goes like this:

I think we can sum up the cause of our current economic crisis in one word — GREED. Over the years, mortgage lenders were happy to lend money to people who couldn’t afford their mortgages.
Really? Mortgage lenders "were happy to lend money to people who couldn't afford their mortgages?" Hmmm... were they happy? Or did Bill Clinton make them?: "In 1992, Congress mandated [i.e., regulated] that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers." Sound familiar?

Now all of this would be partisan bickering and would qualify as "who-cares" if it didn't have everything to do with what kind of country we want to have in ten years. The Huffington Post would have you believe that de-regulation has been the cause of the current economic collapse. I hope I've made a case for precisely the opposite.

Without a doubt, economic recession hurts those who can't afford to be hurt more than it hurts the bluebloods. So we are faced once again with the same question: widespread economic prosperity or racial justice? I know, I genuinely understand, that all of you who might read this wish that we could have both. But Clinton's experiment in 1992 (since I cited The Huffington Post, I'll mention: Ann Coulter describes Clinton's initiative of 1992 as "an affirmative-action time bomb") with very well-intentioned social engineering ought to reveal the danger of market regulation.

So we're back where we started: America's fate is tied to the fate of its poorest. As Melville put it: "I seemed distinctly to perceive that my own individuality was now merged in a joint stock company of two: that my free will had received a mortal wound." The hour of our judgment is upon us again: riots and fire in the streets, or continued expansion of credit at an ever-accelerated pace that will lead, inevitably, to worsening economic "crisis" that will eventually culminate in a Great Depression?

Any votes?

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