Pre-Inventing History

Alan Jenkins

You’ve got to admire the conservative echo chamber. In the shadow of a financial meltdown that McCain and Obama both (correctly) agree stemmed largely from a lack of governmental oversight of irresponsible corporate behavior, conservative spinmeisters are blaming the meltdown on too many loans to minorities, the Community Reinvestment Act, and the heavy hand of…wait for it…community organizers.

As reported by Media Matters for America, the communications drumbeat is clear, consistent, and growing:

  • On The O’Reilly Factor, Laura Ingraham claimed that changes to the Community Reinvestment Act instituted by President Clinton thirteen years ago “pushed all these institutions to lend to minorities, many were very risky loans.”
  • In a column headlined “They Gave Your Mortgage to a Less Qualified Minority,” Ann Coulter tried to draw a connection between the financial crisis and lending to people of color.
  • On The Radio Factor, Bill O-Reilly chastised Rep. Barney Frank, saying “Who’s the guy that was “oh, if you don’t lend money to poor people, you’re a bigot?”
  • On Your World with Neil Cavuto, Cavuto wondered aloud why no one had pointed out that “loaning to minorities and risky folks is a disaster.”
  • In a different variation on that theme, Michele Malkin argued that “illegal immigration, crime enabling banks, and open borders Bush policies fueled the mortgage crisis.” And in a post entitled “Cause and Effect?,” Mark Krikorian noted that Washington Mutual became the largest bank failure in American history just as the bank’s last press release was touting its success in reaching out to Hispanic potential employees, consumers, and communities. Coincidence?

    The community organizer strand of the argument has been built more slowly. Bill Conerly wrote that, along with easy money from the Fed and “politicians trying to increase home ownership…[a]dding to the problem were community activists insisting that banks weaken credit standards for poor people.” Conerly concludes that [r]emoving these stimulus factors will pretty much solve the problem for the next couple of decades.”

    Stanley Kurtz was more direct, writing in the New York Post not only that “the seeds of today’s financial meltdown lie in the Community Reinvestment Act,” but that the CRA “provided an opening to radical groups like ACORN (the Association of Community Organizations for Reform Now) to abuse the law by forcing banks to make hundreds of millions of dollars in ‘subprime’ loans to often uncreditworthy poor and minority customers.” Kurtz credits Barack Obama with personally “training the army of ACORN organizers who participated in [Chicago ACORN’s] drive against Chicago’s banks.”

    The twisted narrative is patently false, but highly strategic. It is designed simultaneously to (1) shift perceived responsibility for the crisis from lack of market regulation to rabid overregulation; (2) blame Obama and his community organizing ilk for planting the seeds of the crisis; (3) assure working and middle classed white homeowners—who represent the majority of home foreclosures—that the crisis was actually caused by an irresponsible “other” rather than systemic and regulatory breakdowns; and (4) head off the kind of future, long-term regulation that the next administration (whatever its party) will be rightfully called upon to consider. Now that’s spin you can believe in!

    Never mind the facts of the matter. Never mind that most U.S. foreclosures have befallen native-born white folks. Never mind that the Community Reinvestment Act neither includes a racial equity component nor encourages (much less requires) loans to unqualified buyers. Never mind that the CRA does not even regulate many of the practices or financial instruments at the heart of the fiscal crisis, or that the Bush Administration backed away from aggressive enforcement of the Act throughout most of the last decade.

    Race is, of course, relevant to the subprime mess, but not in the ways that the conservative pundits would have us believe. African-American and Latino homebuyers were heavily targeted by subprime lenders, irrespective of their income, and disproportionately sold predatory loans. Racial targeting and predatory lending were illegal practices that serious enforcement of fair lending laws can prevent. People of color face stiff barriers to the opportunity for fair credit at market rates. But that’s a far cry from the claim that they got too much credit and, as a minority of distressed borrowers, somehow caused the financial crisis.

    The idea that low-income and minority borrowers are either inherently “risky” or the cause of the mortgage meltdown is further belied by the success of Community Development Financial Institutions like Self-Help Federal Credit Union in Durham, NC. These institutions, known as CDFIs, provide credit to people in underserved, low-income markets, including disproportionate numbers of people of color. They combine reasonable interest rates with borrower education, credit counseling, and individualized service, and have exceedingly low rates of default. Unfortunately, however, neither the industry nor federal regulators have applied the lessons of CDFIs to the larger credit sector.

    So the far right-wing claims are false. But that doesn’t mean that they’ll be dismissed by a jittery public, especially in the midst of a chaotic and confusing media and political maelstrom. And the conservative drumbeat is a gift that keeps on giving; months from now when Congress and a new Administration sit down to hammer out a 21st century rulebook for the financial sector, the far-right will have laid the groundwork for the argument that extending fair credit opportunity to people who have been irrationally and unfairly excluded from the American Dream somehow hurts the entire economy, as well as the intended beneficiaries.

    That’s why it’s so important to tell the real story. Simply debunking myths can have the unintended effect of reinforcing the myth itself (and, yes, I realize that I’ve spent most of this column debunking conservative myths, but I know my audience). Americans are ready to hear and internalize the story of how the real cause of the financial crisis was a disinvestment in the enforcement of basic rules, and the discredited idea that the sector can regulate itself.

    Another crucial part of the story is that the Community Reinvestment Act and fair lending laws—combined with rigorous governmental oversight—are part of the solution, not part of the problem. Discrimination against minority homeowners and neighborhoods is real, and addressing that problem will expand opportunity while creating strong communities and growing the economy.

    The success of community development financial institutions is another important part of the story. We know from that experience how to foster successful borrowing and homeownership. Doing so is in our entire nation’s interest because, as the financial crisis has made clear, we’re all in it together when it comes to our economy. Expanding opportunity leads to greater shared prosperity for all.

    We need to tell that story with twice the discipline and consistency that the far-right is using to tell theirs. In doing so, we’ve got at least one clear advantage. Our story is true.

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