If the election of Barack Obama — a 47-year-old black man with a political resume as ephemeral as a Mets pennant drive and a governing philosophy as dubious as Paris Hilton’s choice of boyfriends — accomplishes nothing else, it should illustrate the peculiar distorting effect on American society of white liberal guilt.
The final nail in the coffin of John McCain’s presidential candidacy, it now seems clear, was the fact that the American economy tanked in the months before the election. Fairly nor not, voters blame such downturns on the incumbent party. Whatever caused the current fiscal crisis, therefore, must be considered a prime factor in McCain’s defeat. The seeds of the crisis date back the Community Reinvestment Act of 1977 — which initiated a concerted, decades-long effort by the federal government to coerce banks into making loans to lower-income borrowers.
The sentiment was noble, albeit rooted in a desperate race consciousness: If more black families owned their homes, the theory went, they’d accumulate wealth as the properties increased in value. They would pass that wealth down to their children, and the financial inequalities stemming from America’s sordid racial past would gradually diminish.
The problem, of course, is that mathematical probabilities don’t bend to noble sentiments. The reason banks weren’t lending to black borrowers as frequently, or on as good of terms, as to white borrowers, had nothing to do with racism. It had to do with risk analysis. Writing loans to lower-income, lower-collateral borrowers means more defaults.
With the rise of subprime lending, lenders were able to make up for the increased risk by charging higher interest rates. To further mitigate the risk, lenders sought to reformulate and repackage the riskier loans, share their exposure, and tap into other sources of revenue. Congress paved the way with various forms of deregulation. The price of real estate soared because of new demand from those who’d otherwise have been unable to buy a house; speculators naturally moved in, because there seemed no way to lose; and then, well, here we are. In a mortgage meltdown, with grotesque foreclosure rates, on the precipice of a deep global recession and credit crunch, because sooner or later mathematical probabilities have their way.
Ironies abound. The most bitter is that a disproportionate number of foreclosures have affected black homeowners, because they were riskier buyers to begin with. But the most profound is that the fiscal crisis precipitated decades ago by the Community Reinvestment Act has contributed decisively to the election of the first black president, Barack Obama.