"Housing is the basic criterion for joining the middle class. And for a century, blacks were excluded, not only by banks but from the government mortgage-insurance programs dating from FDR’s reforms in the 1930s. That’s what made black buyers “more risky” and hence charged higher interest rates.
I grew up in Hyde Park, in Chicago. The University of Chicago and its property management companies were among the worst abusers. For them, a “free market” meant a market free of blacks. But in the late 1950s they saw that they could do “block busting,” that is, selling a home in a white neighborhood to a black buyer. This panicked the neighboring owners, who sold their homes. The buyers were largely the speculators, who flipped them to black buyers at marked-up prices.
That happened on my block, on 48thand Dorchester, a block from where Obama has bought his home. Once a few houses had changed hands, Mayor Daley condemned the block. My house was torn down, as were others, and the land is not gentrified.
To put the issue in perspective, think of the situation in 1945. That is when the great increase in middle-class wealth – today’s middle-class net worth – took off. It was limited to white people, because they were the only people who qualified for the great increase in net worth created by the house-price boom over the past 75 years.
The norm was that banks limited their mortgages to a level that would absorb up to 25% of a buyer’s salary. The buyer would get a self-amortizing mortgage, to be paid off in 30 years free and clear. This limit on debt leveraging kept housing affordable.
You and I have spoken about the issue of black reparations before. It’s very hard to pay reparations for slavery, because the enslaved families have died long ago. The reparations need to be paid to the living – and after all, it’s the living blacks who remain injured.
There is one way to make the black population economically as resilient as the white population has been. That is to give it the same deal that created most white middle-class wealth. The government should buy or build homes – private homes, just like white neighborhoods, not public housing. They should offer buyers the same deal that was given in 1945. Any black family would be given a home, with a mortgage of 25% of the household head’s income, to be amortized over 30 years.
Suppose the black buyer earns the minimum wage, or about $25,000 a year. Then 25% of this would be $6,250 – just about $500 a month. Over 30 years, the buyer would pay $187,500 – much of it in interest, guaranteed by the FHA.
As a practical political matter, of course, such a windfall would have to be offered to all Americans across the board. Hispanics and white poor would qualify.
That is the only way to create economic resilience of a class that has been excluded on racial lines, and which remains excluded today.
Without special subsidy of this sort, there cannot be any serious talk of equality. Minority buyers were the great victims of the junk-mortgage run-up and the Obama evictions.
In a recent N.Y. Times piece, David Leonhardt raises the question of why the U.S. economy has fared so much better under Democratic presidents than Republicans? In fact, he argues the gap is “startlingly large” when one measures annual growth rate, Gross Domestic Product growth rate, jobs, incomes, productivity – even stock prices.
Well, the New York Times has been the leader in “fake news,” not least for its support of real estate and financial interests, and of the Democratic Party.
The focus on growth rates as measured by GDP is a travesty of reality. Since 2008, GDP for 95% of Americans has actually declined. We are still in the Obama Depression – that was the state of affairs when the covid-19 crisis hit. Pavlina Tcherneva at the Levy Institute at Bard College has produced the statistics.
When debtors fall behind and have to pay penalty interest rates to banks and credit card companies, this is counted as an “increase in GDP,” classified as “financial services.” As if the banks are providing a service by charging higher fees to indigent debtors who are unable to keep current on their living costs.
About 7% of GDP is hypothetical “homeowners rental value” – what homeowners would have to pay themselves if they rented out their homes to themselves as tenants. As rents have risen (largely by absentee owners who bought homes that were foreclosed), this increases GDP. It leaves out minority owners, whose home ownership rate is much lower than that of whites.
What The New York Timesand others looking at GDP leave out of account is how unequal the distribution of wealth and income have become since 2008, and indeed since the 1980s. Economists are now talking about a K-shaped recovery: up for owners of stocks and bonds (about One Percent of the population owns something like 80 percent of these securities), and real estate. But wage earners are being squeezed. The “recovery” is not a recovery for them. It’s a boom for the wealthy, for the rentierclass, mainly in the Finance, Insurance and Real Estate (FIRE) sector.
That sector is the main audience for The New York Times. And most of the Democratic Party’s donor class comes from the FIRE sector. Despite this, the Democratic success at identity politics has created a political situation in which only the Democrats can enact anti-labor and anti-black policies, because their politicians are able to deliver the labor and black votes.
I don’t see how there can be real progress unless the Democratic Party is replaced, at least with the DNC leadership that has turned its politics into demagogy. Its identity politics is based on every identity exceptbeing a wage-earner."
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And on Sept. 1, 1997, Strong wrote in National Review,
Regarding PCR, he just today sent me an email linking to this very article by Mike Whitney.
Your complacency and minimization is one of the frightening things about 2020-2021.
https://en.wikiquote.org/wiki/Maurice_Strong#:~:text=Maurice%20Strong%2C%20September%201%2C%201997%20edition%20of%20National,an%20agreement%20reducing%20their%20impact%20on%20the%20environment."