Wall Street Meltdown-John McCain Blames Minorities
Posted: Saturday, September 27, 2008
by Calvin Johnson
Home Pro, Inc.
The importance of American real estate values is now being witnessed as major banks around the world have joined the U.S Federal Reserve to pump cash into our banking system, in hopes of preventing a worldwide economic catastrophe. Wall Street's meltdown has resulted from declining real estate values precipitated by our foreclosure crisis.
The Wall Street Journal did a study confirming what experts like Martin Eakes at the Center for Responsible Lending has been saying for so long - a majority of subprime borrowers had credit scores worthy of a prime conventional mortgage. By the end of last year that percentage rose to over 61 percent. According to their study many subprime borrowers may have been tricked into unaffordable loans by unscrupulous brokers.
On the real estate side, appraisal methodology has long failed to adjust for racial discrimination, selective bias, and since George W. bush has been in office his administrations version of Supply Side economics. Does, "The human condition" explain why current real estate appraisal methodology fails to recognize and adjust for the lower values caused by the effects of Selective Bias, Supply Side economics and racial discrimination on the appraisal process? Can lower appraisals, for properties in minority communities, primarily be attributed to these factors and, if so, can the loss be measured in real dollars? Is the failure of appraisers to adjust for these factors responsible for the slow or non-existent growth of real estate equity in these communities? Was this failure a contributing factor in the misrepresentation of value in Wall Street's mortgage backed securities and therefore shares blame for the recent meltdown?
The phrase, "The Human Condition" is well worn and refers to the ages old conflict of accepted ideals like cooperation, loving and selfless behaviors contrasted with human nature which is invariably competitive, aggressive and selfish. We are capable of immense love and sensitivity, but we have also been capable of greed, hatred, brutality, rape, murder, slavery and war. The human race demonstrates a collective sense of guilt and agony from being unable to explain our duel personality. This has been seen by many scholars as the burden of human life or, "The human condition."
A great deal of what we believe is true depends on our perceptions; the first part of my analysis begins with a brief examination of the economic theories which currently dominate our national political debate. I will later contrast the dominate theory espoused and implemented by our current President and his Party with those of his political rivals. In part two of the analysis the role of racial discrimination, selective bias and Supply Side Economic Theory as primary reasons for lower real estate appraisals in African American communities is discussed. In part three, I will attempt to measure the economic loss to the minority community specifically and to the larger society generally, which suffers a far greater loss in societal peace, wasted talent and loss of credibility around the globe. It is not surprising the inability of American leaders to create a fair and just society has dimmed the beacon of hope among the economically disenfranchised people of the world.
Since what we believe in affects our perception of reality this discussion begins with my (the author's) statement of why I believe in the realities or truthfulness of the conclusions derived from this analysis.
My personal search for truth in answering the question, "why current appraisal methodology fails to recognize and adjust for the effects of racial discrimination, Selective Bias and Supply Side Economics on the appraisal process" begins with a brief examination of my beliefs, as an individual in American society, and the role culture and upbringing has played in helping to formulate those beliefs.
I have been a principle, either Senior Appraiser, Chief Appraiser or owner operator in small real estate appraisal companies for the past 28 years. I was born during the administration of Harry Truman a Democrat and a man my dad vilified for dropping the atomic bomb on the Japanese when, according to him, World War II was essentially, over. Truman was the author of the famous, "Fair Deal" a 21 point program he presented to Congress which expanded Social Security, created a full-employment program, a permanent Fair Employment Practices Act, and provided for public housing and slum clearance. Even though Truman's "Fair Deal" helped the poor, we were poor as dirt, my father and grandfather remained devout Republicans.
My grandfather was born a slave and my dad was born, in 1902, just 39 years after President Lincoln signed the Emancipation Proclamation, which freed slaves in the United States. Dad was a sharecropper (a free slave) on the land of the family who had owned his father when news of Henry Ford's promise of equal pay for equal work came to him; he made the decision to move to Detroit.
Through work in the automobile factories of the northern United States my parents and many thousands of the descendant children of former slaves were able to become homeowners, buy automobiles and send their children to college. Freedom meant everything to my dad and grandfather and they felt indebted to the Republican Party for the rest of their lives. When I asked my father, during the 1961 Presidential campaign, why he favored Nixon over Kennedy, his response was, "the Republican Party is the Party of Lincoln." The example of my father and grandfather partially explains why I've only voted for one Democrat in my entire voting life. My parental examples are only a partial reason since the political beliefs I hold now have been formulated by my perception of the larger culture and my lifelong role as a small business owner.
In 1981 Ronald Regan began his presidency. He ushered in the," Reagan Revolution", which aimed to reinvigorate the American people and reduce their reliance upon Government. "Reagan was able to push through legislation to stimulate economic growth, curb inflation, increase employment, and strengthen national defense. He cut taxes and Government expenditures, refusing to deviate from it when the strengthening of defense forces led to a large deficit. In 1986 Reagan obtained an overhaul of the income tax code, which eliminated many deductions and exempted millions of people with low incomes. At the end of his administration, the Nation was enjoying its longest recorded period of peacetime prosperity without recession or depression. Overall, the Reagan years saw a restoration of prosperity, and the goal of peace through strength seemed to be within America's grasp." (whitehouse.gov)
Unfortunately, many in the Republican Party ascribed Regan's success to "Supply Side" or "trickle down" economics. This economic theory is based on the belief that reducing tax rates, especially for businesses and wealthy individuals, stimulates savings and investment for the benefit of everyone. Supply Side economics only works if you have an economically strong middle class, because consumer spending by a healthy middle class is, undeniably, the engine that drives our economy. Regan understood this fact as his overhaul of the tax code reflects.
Supply Side economic theory is the direct opposite of Keynesian Economic Theory, which appears to be a basis for the Democratic Party's economic plan. Keynesian Economic theory, which is named for economist John Maynard Keynes, advocates government intervention, or demand-side management of the economy, to achieve full employment and stable prices. (investorwords.com)
The current economic platform of the Republican Party failed because it did not adjust for the lack of quality job creation, as a necessity to maintaining strong consumer spending, in the Supply Side equation. Add to this their past and current tax proposals to provide billions more in tax benefits to Big Oil and Pharmaceuticals while proposing little relief for the middle class. Another good example is the fact the Republican Party has no plan for national health insurance except to offer more choices beyond employer-based health insurance coverage. Under McCain's health insurance proposal families not receiving employer-based coverage will receive a direct refundable tax credit - effectively cash - of $2,500 for individuals and $5,000 for families to offset the cost of insurance. With Michigan families averaging $1600 per month for private insurance coverage (not through an employer) and health insurance premiums rising 4 times faster than wages, over the past 6 years, McCain's offer of $5,000 a year is grossly inadequate. Source: National Coalition on Health Care. Catlin, A, C. Cowan, S. Heffler, et al, "National Health Spending in 2005." Health Affairs 26:1 (2006).
In contrast, the Democratic Party has proposed a health insurance plan that will provide affordable premiums, co-pays and deductibles with guaranteed eligibility. No American will be turned away from any insurance plan because of illness or pre-existing conditions. Financial subsidies will be provided to individuals and families who do not qualify for Medicaid or need financial assistance. These families will receive an income-related federal subsidy to buy into the new public health insurance plan or purchase a private health care plan. This proposal goes much further toward helping the middle class because the reason millions of Americans lack health insurance is cost, not availability. Source: National Coalition on Health Care. Catlin, A, C. Cowan, S. Heffler, et al, "National Health Spending in 2005." Health Affairs 26:1 (2006).
Additionally, employers that do not offer or make a meaningful contribution to the cost of quality health coverage for their employees will be required to contribute a percentage of payrolls toward the costs of the national plan. Small businesses will be exempt from this requirement, and will receive a new Small Business Health Tax Credit that will help to reduce their health care costs. In 2007, employer health insurance premiums increased by 6.1 percent - two times the rate of inflation. The annual premium for an employer health plan covering a family of four averaged nearly $12,100. The annual premium for single coverage averaged over $4,400.These costs are expected to rise at similar levels for the next decade. Source: National Coalition on Health Care. Catlin, A, C. Cowan, S. Heffler, et al, "National Health Spending in 2005." Health Affairs 26:1 (2006).
The Republican Party has been successful in defeating the Democratic Party, in the past, by labeling them as the tax and spend Party. However, under the current Democratic tax proposal only those with annual incomes over $250,000 will experience a tax increase. They will pay at the same rate they paid during the Clinton Presidency of the 1990's, a period of economic prosperity for most Americans.
Based on the Republican Party's current version of Supply Side economics, from a purely self-interest standpoint, no one earning under $250,000 a year should be voting Republican in the coming election. According to the U.S Census Bureau 2006 Economic Survey Income Data Report only 19.26% of American households had incomes exceeding $100,000. That means over 80% of American families earn less than $100,000 annually. The Census Bureau survey was completed in 2006 and overall incomes have declined since then. According to the Treasury Department and Congress' Joint Committee on Taxation, joint returns with more than $250,000 adjusted gross income and single returns with more than $125,000 adjusted gross income together are estimated to make up only 3.1 percent of households in 2009. Let that sink in... More than eighty percent of American families earn less than $100,000 a year and only 3.1 percent of American families earn more than $250,000.This means that roughly 97% of Americans are earning less than $250,000 and will receive a tax credit under the Democratic tax proposal.
The spreading failure of our largest banks and Wall Street brokerages suggests that the financial hardships of the middle class are trickling up to the wealthiest Americans. The goose that laid the golden egg in America was its strong middle class not it's wealthy. The result of Republican Supply Side economics has not only destroyed our middle class but eroded international confidence in the dollar. This is a fact that will make the road back more difficult.
Despite eight years of failed, Republican Party, Supply Side economics the Presidential election in November is seen as a toss-up by most political pundits. Why? What pre-conditioning convinces Americans to vote against their own economic self interest? For my father and grandfather it was their sense of being indebted to the Republican Party for their freedom. But why would Americans in the year 2008 vote against their own economic self interest? Put simply, its race.
I am aware that political observers with far more experience and scholarly study will argue that race is not the overwhelming reason the contest for the White House is a dead heat. These pundits and observers cite the fact that people have not warmed to Obama because he is unknown and comes off as an elitist. Anyone who was editor of the Harvard Law Review has to be an elitist, right? Obama's detractors also point out that he lacks experience, that he is a Marxist, a Muslim and the most liberal member of Congress. Most thoughtful, unbiased, voters don't believe any of these statements is true or can be given greater weight than his plan or Platform for America, obvious superior intellect, strong family values and pragmatism. He seems to understand, that in the volatile markets of today, all options must remain open.
I was bred to be a Republican but when I ask myself do I want four more years of the same failed economic policies, the answer is a resounding "NO". How could I vote for someone who offers more of the same economic and foreign policies that have brought us to this place in our history?
People do not knowingly choose to sow the seeds of their own destruction. Unless they are among the 3.1% of Americans who earn more than $250,000 a year, there must be another agenda that is more important to them.
Since many of the polls, as of September 16 th, had McCain with a lead, or the mathematical equivalent of a dead heat, most of his supporters, from a numerical standpoint, have to be Americans who earn less than $250,000 a year. This means that people who over the last eight years have lost all of their economic security, as a result of McCain backed economic policies, (he voted with Bush 90% of the time), are supporting a continuation of those policies. Many Americans revealed during primary exit polling they could not vote for Obama, a man of color, regardless of his apparent intellect, moral integrity and ability to lead. "About one in seven Pennsylvania voters said race was an issue and that group voted overwhelmingly against Obama." (David Wiessler, reuters.com)
Based on Census voter registration figures the one in seven extrapolation, if applied to the electorate as a whole, could translate to more than seventeen million votes. In a tight election that would ensure four more years of the same or similar policies that now define America's national economic landscape.
After my analysis of this election cycle and the clear choices presented to Americans it appears the Republican lead in the polls is a prime example of, "The human condition." The possibility that millions of American voters will choose to allow a continuation of policies that have robbed them of their homes, savings, jobs and the ability to provide a college education for their children as a result of hatred, fear and distrust of a worthy individual, because of his skin color, is numbing.
We Americans are demonstrating a collective sense of guilt and agony from being unable to explain the power of racial hatred and distrust in our politics and in every aspect of our day to day lives. The resultant emotional anxiety has created a duel personality in our national identity at home and to the rest of the world. The racial divide in America has been seen by many scholars as the burden of life in the United States or as discussed here, "The human condition."
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Top-level comments on this article: (1 total)Awesome! I absolutely loved and enjoyed reading “The Lighting Bug”.
Mr. Johnson’s historical analysis of the U.S. economy, “the human condition “ and the explanation of why many African Americans still vote republican transports the readers to the current economic conditions. It outlines the cause and effect of how we arrived at our current economic down fall.
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