Might


To view the original art, please travel to Might

copyright © 2008.  Andrew Wahl.  Off The Wahl Perspective.

copyright © 2009 Betsy L. Angert.  BeThink.org

On November 8, 2004, Artist and Political Essayist Andrew Wahl, penned his thoughts on “Might.” Then, the current war in Iraq may have been on his mind.  Fiscal policies that ruled in favor of the wealthy could have evoked his visual essay.  Way back then, religious factions, each of which was ready to deem the others wrong, were engaged in combat.  That thought, coupled with the rest, may have brought this toon to be.  Today, all these realities remain true.

Four and five years ago, bombs blasted abroad.  Bullets whizzed past the heads of innocent mothers, fathers, sons, and Iraqi daughters.  The same is true today.  Had the acclaimed Andrew Wahl sketched the same political cartoon in 1996, it would have been no less accurate.  

Then, a Democrat reigned in the White House.  Nonetheless, innocent Iraqis were victims of the American Superpower.  Sanctions were put in place.  The “mighty” United States government gave no money or aid to children who starved in the streets of the Middle Eastern nation.  Americans offered no medicine to the ill or injured young ones who would ultimately die in their homeland, Iraq.  It seemed the sentiment of sanguine Americans was, “Might makes right.”  

In the 1990s, then Secretary of State, Madeline Albright spoke to this truth on 60 Minutes.  When Reporter Lesley Stahl asked of the more than half-million Arab children left to die in Iraq, the American Ambassador declared; “I think this is a very hard choice, but the price – we think the price is worth it.”  

Worth can be a woeful venture.  There was a time, when the rich certainly thought, what they may do to increase their income was right.  The affluent had the might.  Profits, made persons more powerful.

Years ago, the Puget Sound Business Journal published an article titled, As the rich prosper, low-income jobs multiply. In April 2008, Peter Gillespie, a Toronto Star Journalist opined, Rich prosper, as society suffers.  Yet, while that was true then, ultimately many learned, when money is seen as the “might” many fall.  

More recently, as the economy crumbled worldwide more realized, the rich lose more. Surely dollars do not deliver the might countless believed they would.

Perhaps, devotion to a deity is the source of greater supremacy.  Pious persons often deem they or those who follow the will of the Lord are the mightiest.  Moral ethics can be the only omnipotent guide.  However, Oliver “Buzz” Thomas, a minister, lawyer, and author cautions religions may be killing us.  For the writer Thomas, the proverb, “Be fruitful and multiply,” from the book of Genesis, has caused the planet much harm.  Three hundred (300) million individuals in the United States and more than 6 billion abroad, he says, may be our global doom.

Cleric Thomas sites scientific reports from the Intergovernmental Panel on Climate Change as reason for grave concerns.  He notes, the might of virtuous copulation has created a population too vast to be supported by natural resources.

Other observers of the holiest warn religious war may be our disastrous destiny.  These battles raged when Artist Andrew Wahl wrote of might, just as they did centuries ago.  Religious Wars never resolve the question, who is the mightiest.  Today, the tide has not turned.  The seas have yet to part.  Peace, anywhere in the world is still threatened by religious differences.  One only needs to consider the Middle East.  In 2008, Zbigniew Brzezinski, National Security Adviser to President Jimmy Carter, reflect as he might today.  There must be a The Smart Way Out of a Foolish War, or the many foolish fights for control.

Might each of share and care rather than rule militarily.  Might mankind realize money is not the power.  Might we ponder moral efficacy does not eliminate Earthly resources; nor do the ethical kill their brethren?  Might is more than dominance.  The mightiest live, let live and love.

References for right, might, and reason . . .

The Stonecutter

copyright © 2009. Jerry Northington.  campaign website or on the blog.

Much may be made of what seems like permanent material when a stonecutter takes his tools and begins to work.  The stonecutter aiming to break off a piece of a larger stone block hits the stone time and time again with his mallet and chisel.  A final blow is struck and the stone breaks.  The stonecutter knows the final blow was not the one that broke the stone.  It was instead the accumulation of patient effort and many blows that led to the final changing of the stone.  So it is with a nation trying to restore itself in the name of liberty and justice for all.

Many steps must be taken to insure the proper outcome.  Some are already in progress with the administration’s order to close the detention center at Guantanamo Bay.  Detainees are humans who deserve the same rights and privileges as any other human being.  Under our system of laws a person is presumed innocent until proven guilty in a court of law.  If we are to restore our lost standing in the eyes of the world we must begin to give the detainees the same access to trial we ask for ourselves.  Those declared innocent must have their freedom restored.  Those found guilty of crimes may serve their appropriate punishment under our laws.

If we are to become again a nation of laws rather than a nation of rules put forth by people ignoring the law we have much work to do.  President Obama has already reversed many of the executive orders left in place by the last administration.  Rules promulgated without adequate public notice are being reviewed and changed as the days continue to pass by.  Like the stonecutter working at his task, the administration continues to strike one blow at a time in the name of justice and liberty.

We, the people, are the ones who will in the end be served best of all by a return to our founding principles.  We must continue to be patient, but we need not allow these days to be the best we will enjoy.  There is always a better nation right around the corner so long as we keep pushing for change and for real improvement.

Peace.

Quote of the week:

Violence is an admission that one’s ideals and goals cannot prevail on their own merits.

~ Edward M. Kennedy

250 Million

copyright © 2009 Forgiven. The Disputed Truth

I recently heard that there are an estimated 250 million guns in the United States. There are an estimated 111 million households in America. Using these numbers that would mean there are 2.2 guns for every household in America. That seems like a lot of guns to me. As I began to ponder these numbers I wondered with all of these guns are we a safer nation? Have all of these guns provided us with the security many of us are seeking?

??I began researching the facts concerning gun violence in America in relation to the rest of the industrialized world. What I found was shocking not in what it said about guns but what it said about our culture. With or without guns we live in a violent culture. Confrontation and violence seems to be ingrained in our national psyche. In America, violence appears to be the first remedy to situations both by the government and its people. Do I believe there are too many guns in America? Yes I do, but I don’t believe that the problem for all the violence in America is guns.  

I believe in trying to reduce the number of guns not because I believe it will make us less violent of a society but because guns make killing and violence too easy. Guns make killing too quick and too efficient. People kill today without thinking and without remorse and with guns you can do that. Imagine if there were fewer guns killing would become more difficult. Guns make killing too detached. Without guns you would have to face down your intended target and it would be messier.

I want to provide some figures to illustrate but the problem with the NRA and other gun lobbyists is that any talk of restricting guns is immediately met with hyperbole and demagoguery. The problem with not considering the arguments and opinions of others is that you begin to seem irrational and foolish. By the way the armed militia argument being necessary to prevent tyranny is wrong on many levels. We aren’t providing arms to minutemen soldiers but to any idiot that can get one.

Also an armed society has proven to be no safer a democracy than a non armed society. The US has 90 guns for every 100 people making it the most heavily armed country in the world. (1) The second most armed nation is Yemen, that bastion of democracy. Are the people in England, Canada, or Greece more in danger of losing their democracies because they are not as armed as the US?

On the list of murders per capita in the world the United States ranks 24th. We rank higher than any of the industrialized nations except Russia. We trail countries like Columbia, Mexico, and Zimbabwe; not bad company for the richest nation on earth.??· In 2005 there were 30,694 gun deaths in the US. (2) In 1998 gun homicides in the rest of the industrialized world were as follows (3)

  • 373 – Germany?
  • 51 – Canada?
  • 57 – Australia?
  • 19 – Japan?
  • 54 – England?
  • 11,789 – US??

More guns have obviously not made us safer. However guns alone are not the problem. We must begin to adopt ways to reduce the level of violence in our culture and in our society at large. This will be extremely difficult in a society that glamorizes violence and disseminates it through all forms of media. The economic crisis and the election of Barack Obama have led to an increase in the number of requests for background checks for gun purchases. In November they were up 40% over the previous year and in December they were up by 25%. People are feeling less secure about the future and showing this unease by purchasing more guns.

We have made killing too easy in our country and have not addressed the underlying culture of violence. You cannot glorify violence and then have easy access to guns. Somehow we must tone down the aggression and teach our children that violence is not the answer to all of life’s challenges and difficulties.

We must develop a responsible and comprehensive way of reducing the number of guns or none of us will be safe. Just as the drug kingpin Carlos Escobar was held responsible for flooding our streets with dangerous drugs so the gun manufacturers must be held accountable for flooding our streets with guns. We can no longer decide arbitrarily which dangers we seek to address and which ones we don’t. Where there is arbitrary power, there is tyranny.??

Nip the shoots of arbitrary power in the bud, is the only maxim which can ever preserve the liberties of any people.

~  John Adams

References . . .

1.  U.S. most armed country with 90 guns per 100 people, By Laura MacInnis.  Reuters. August 28, 2007 1:57pm EDT

2.  CDC Mortality Report 2008

3.  Brady Campaign to Prevent Gun Violence.

Green Zone handover: The farce of Iraqi sovereignty?

© copyright 2009 Michael Prysner.  Party for Socialism and Liberation

Originally Published, Thursday, January 8, 2009

Only end of occupation can restore self-determination!

The author is an Iraq war veteran.

On the heels of the Status of Forces Agreement, the Iraqi flag was raised for the first time since the 2003 invasion in a symbolic handover of the Green Zone to the Iraqi government.

The Green Zone is a 5.6-square-mile community along the west side of the Tigris River in central Baghdad. It is home to roughly 30,000 residents, including 14,000 U.S. and coalition forces. For nearly six years, the Green Zone has been used to paint a picture of stability and U.S. success in Iraq. When U.S. and foreign politicians visit occupied Iraq, they stroll around the Green Zone, being shown beautiful gardens and lavish palaces that paint a picture of a safe and successful occupation.

But the Green Zone itself is nothing more than a public relations prop and a headquarters for the military brass, private military contractors, and Western corporations to conduct their affairs in luxury. It is off limits to most Iraqi citizens.

Its relative safety is due to a 13-foot concrete wall, miles of barbed wire, machine gun nests every few hundred meters and tightly controlled entry points. Anyone entering the Green Zone is searched thoroughly with high-tech devices such as body scanners. While the Green Zone is frequently attacked from outside with rockets and mortars, there have been few attacks within its walls due to the overwhelming security measures.

The situation just outside the walls of the Green Zone is drastically different. The Green Zone sits in one of the areas where the Iraqi resistance is strongest. Residents outside its walls must cope daily with the severe manifestations of the occupation-extreme poverty and violence.

With U.S. officials coordinating every aspect of Iraqi governance from within its walls, the Green Zone has long been a symbol of U.S. colonial occupation in Iraq. But now, in a move to further tout the occupation, the Green Zone is being manipulated to become a symbol of Iraqi sovereignty.

The handover of the Green Zone, in fact, does nothing except place Iraqi guards in charge of security. Essentially, the “sovereignty” heralded by the handover only gives the Iraqi security forces backed by Washington the sovereignty to protect their occupiers as they continue business as usual within its walls.

Public spectacle changes nothing

Still, Iraq’s puppet president, al-Maliki, declared Jan. 1 a national holiday titled “Sovereignty Day.” A banner at the transition ceremony read in Arabic, “Receiving the security of the Green Zone is a major step toward full independence and the withdrawal of foreign troops from the country.” Once the ceremony concluded, the banner was taken down, and behind it was a sign listing a set of rules created by the U.S. military. (Washington Post, Jan. 1)

While the Iraqi security force in the Green Zone-the “Baghdad Brigade”-has supposedly been put in charge, that too is a farce. The Baghdad Brigade is under direct control of President al-Maliki-a U.S. puppet whose government would collapse without Washington’s backing. Furthermore, U.S. forces will continue to be in direct control of security for the next 90 days, at which point the arrangement will be “re-evaluated.” While the Status of Forces Agreement mandates that U.S. forces in the Green Zone come under Iraqi control, U.S. officials have acknowledged that how and when that will happen is uncertain, and unlikely for the time being.

Even if the Baghdad Brigade does officially control security in the Green Zone, it will only be under the strict watchful eye of the U.S. forces. Baghdad Brigade commander Brigadier General Emad al-Zuhairi said, “The Americans will supervise us.” (Washington Post, Jan. 1)

Majid Mola, a resident of Baghdad, commented on how he viewed the newly gained “sovereignty”: “Where are the government services? Where is the electricity? People want practical things.” (Reuters, Jan. 1)

The handover of the Green Zone serves only to improve the public image of a brutal occupation that has killed more than 1 million Iraqis, displaced 4.5 million more, and plunged the Iraqi population into deep poverty. The symbolic handover should be seen for what it is: a public-relations ploy detached from the reality on the ground. While the Iraqi flag now flies over the hub of the occupation, nothing has changed for the Iraqi people.

Raising the Iraqi flag is a symbolic step that brings Iraqis no closer to sovereignty, but is a real step towards cementing U.S. imperialism’s geopolitical and economic goals. Real sovereignty requires an immediate end to U.S. occupation and intervention-a goal the Iraqi people have bravely been fighting for, and for which they deserve our full support.

Black History: The Greensboro Sit-Ins

© copyright 2009 Storm Bear Town Called Dobson


To view the original, please travel through Black History: The Greensboro Sit-Ins


Birth Of A Notion Disclaimer

From Wikipedia:

The Greensboro sit-ins were an instrumental action in the African-American Civil Rights Movement, leading to increased national sentiment at a crucial period in American history.

On February 1, 1960, four African American students – Ezell A. Blair Jr. (now known as Jibreel Khazan), David Richmond, Joseph McNeil, and Franklin McCain – from North Carolina Agricultural and Technical State University, a historically black college/university, sat at a segregated lunch counter in the Greensboro, North Carolina, Woolworth’s store. This lunch counter only had chairs/stools for whites, while blacks had to stand and eat. Although they were refused service, they were allowed to stay at the counter. The next day there was a total of 28 students at the Woolworth lunch counter for the sit in. On the third day, there were 300 activists, and later, around 1000.

This protest sparked sit-ins and economic boycotts that became a hallmark of the American civil rights movement.

According to Franklin McCain, one of the four black teenagers who sat at the “whites only” stools:


Some way through, an old white lady, who must have been 75 or 85, came over and put her hands on my shoulders and said, ‘Boys, I am so proud of you. You should have done this 10 years ago.’

In just two months the sit-in movement spread to 15 cities in 9 states. Other stores, such as the one in Atlanta, moved to desegregate.

The media picked up this issue and covered it nationwide, beginning with lunch counters and spreading to other forms of public accommodation, including transport facilities, art galleries, beaches, parks, swimming pools, libraries, and even museums around the South. The Civil Rights Act of 1964 mandated desegregation in public accommodations.

In 1993, a portion of the lunch counter was donated to the Smithsonian Institution. The Greensboro Historical Museum contains four chairs from the Woolworth counter along with photos of the original four protesters, a timeline of the events, and headlines from the media.

Several documentaries have been produced about these men who sparked the sit in movement, including PBS’ “February One.”

The sit-in movement used the strategy of nonviolent resistance, which originated in Gandhi’s Indian independence movement and was later brought to the Civil Rights movement by Martin Luther King. This was not the first sit-in to challenge racial segregation. As far back as 1942, the Congress of Racial Equality sponsored sit-ins in Chicago, St. Louis in 1949 and Baltimore in 1952.

In a pre-cursor to the Woolworth sit-ins, on June 23, 1957, seven students organized by a local pastor were arrested in Durham, North Carolina at the Royal Ice Cream Shop for staging a sit-in in the “whites only” section.  After being convicted in North Carolina courts, the seven appealed their case all the way to the United States Supreme Court, which refused to hear their case.

On August 19, 1958, the Oklahoma City NAACP Youth Council began a six-year long campaign of sit-ins at segregated lunch counters, restaurants, and cafes in Oklahoma City. The Greensboro sit-in, however, was the most influential and received a great deal of attention in the press.

Birth of a Notion Wallpaper is now available for your computer. Click here.

Obama and Biden in Wilmington, Delaware

( – promoted by Betsy L. Angert)

copyright © 2009. Jerry Northington.  campaign website or on the blog.

Yesterday I was among the many who went to the Wilmington train station to greet President-elect Obama and Vice-President elect Joe Biden as the train headed toward Washington, DC.  Four of us (two Pennsylvania friends accompanied the teen and me) went down.  We drove straight into town, parked, and headed down the street without any event.

As we approached the venue, we saw many vendors selling all the usual paraphernalia (buttons, T-shirts, sweat shirts, and various other souvenirs).  We went thinking we’d be lucky to get within a block or two, but security was open and in we went.  Harriet Tubman Park was the location and we were in the fenced area before we really knew what was happening.  We were dressed for the cold and wind, but the weather was not so bad and the crowd blocked any wind there may have been.  

(Please ponder the pictures. Walk the streets of Wilmington.  Wait at the train station.  Reflect on a reality that Jerry, Joe, Barack, and many more experienced on a day that will live large in history.  Travel through this link.  May you enjoy the reveries.)

The crowd was ready for the festivities.

We found a fine viewing spot without realizing that bright light in the distance was a flood lamp and not a reflection.  

We were standing about 100 feet from the central portion of the stage.  Other neighborhood friends were near us.  They were the only other people we saw who we knew.

The crowd stretched far behind us and along the top of the nearby parking garage.

There were American flags flying all around

There were children in trees to get a better view.

Excitement began to mount with the appearance of a youth choir.  Soon there was Jack Markell, Governor-elect.

Followed by the centers of attention, Biden and then Obama.

Both wives joined their husbands on the stage.

Obama and Biden both gave inspiring speeches.  The crowd near us was as enthusiastic as could be.  Everyone was uplifted as we stood in that group watching history be made.  The excitement of the entire event was palpable every minute.

As we await the inauguration on Tuesday, the memory of yesterday will live long for those of us not going to DC.  Missing Tuesday will be made so much easier by the experience of the day.

Peace.

All pictures are personal collection.

Hamas, Israelis, Palestinians; People and Peace

As the world watches the combat in Israel and Gaza, in every corner of the Earth, people await peace, or at least the prospect of a cessation.  However, it seems harmony is not likely.  Be it in the Mediterranean or here in the States, persons are quick to pounce.  Caustic conversations fill the airwaves.  In the ethereal sphere, the Internet, one might hear, ‘Palestinians must be our priority.’  Others say, “No.  Israel is right.  It is possible to respect the Arabs who reside in Gaza and still bomb Hamas into oblivion.”

Each stance denies a truth Joe Goedereis expresses in what I believe is a brilliant essay.  We are all people.  For Mister Goedereis, peace is not possible if we, individuals on either side of the issue, exclaim “Enough is enough!”  Joe Goedereis invites us to ponder the conflict from another perspective, a humanitarian truth.

I am honored and privileged to present . . .  

copyright © 2009 Joe Goedereis.  Webmaster, Boca Peace Corner

Sorry, but I’ll take the words of Naomi Klein and Graham Greenwald any day over the sentiments of one who endorses the actions that brought about an unnecessary war.  I firmly believe that the Western media is not reporting this whole conflict fairly and is biased in favor of Israel.  It has been biased in favor of Israel for years because of our close friendship and international relationship with this country and finally the world community is calling Israel out for its actions – something it should have done long ago for the treatment of the Palestinian PEOPLE.  Notice I said PEOPLE, not Hamas.  There seems to be this sentiment that Hamas are the only people in the Palestinian territories and that is not the case at all.  

The notion that Israel accepted the terms of the cease-fire proposal is not correct.  The United Nations [U.N.] has proposed several cease fire agreements and the United States has blocked one proposal and then Israel just today decided not to honor a cease fire proposal.  Israel allowed a whopping 3 hours for the borders to be opened yesterday to allow humanitarian aid into the Gaza.  This is not first grade negotiations and it is much more complicated than the media is reporting.  I have friends from Gaza and the West Bank and another who was raised in Lebanon.  They are regular people just like you and me.  They are not Hamas or Hezbollah and they don’t support these groups.  Their families have suffered nearly their entire lives under the occupation of the IDF and have been ripped apart by the violence of Hamas and Hezbollah.

Just 2 days ago, the IDF BOMBED a U.N. school.  They claimed that Hamas had embedded its forces inside the school so they bombed it.  The emergency room doctors have reported no Hamas militants among the women and children who were killed or injured by this bombing.  The school’s GPS coordinates were registered with the Israeli government so it would not be bombed and they bombed it anyway!  This has prompted the U.N. to release a statement condemning these actions and they have put Israel on notice that it will be investigated for possible war crimes.  I don’t care if Hamas was embedded there or not.  You cannot tell me that bombing a school where women and children are likely to reside is the Israeli Defense Force’s [IDF’s] way of taking “any and all necessary precautions to prevent unnecessary civilian casualties.”  Under any conduct of war that is considered a war crime.

So, what can Israel do to stop the rocket attacks?  Well they can start by not making the very same mistakes we have made in Iraq by thinking that everything can be solved at the tip of the sword or the barrel of a gun.  What are they going to accomplish by driving a wedge through the heart of the Gaza other than prevent humanitarian aid from reaching the innocent victims of this violence?  Once they “conquer” Hamas, what will they gain?  Do you really think that an entire generation of impressionable children are going to forget all of the violence perpetrated upon their mothers and fathers?  Israel has just created the next generation of terrorists by conducting this operation.  Children tend not to forget the deaths of their family and friends on a large scale – something Israel itself should realize by now.  

What else can Israel do?  How about seriously trying to work to achieve the Oslo accords of 1988 and start working towards a true two state solution that allows Palestinians to control their OWN borders and not the Israeli Defense Force [IDF]?  Or allow the U.N. to control the border – something Israel has opposed.  What about supporting the right of return on BOTH sides of the border as ordered by U.N. resolution 194?  There are nearly 750,000 refugees that live in abject poverty every day who would like to return to their homes in Israel.  

These were people who either fled or were expelled by Israel during the war of 1948.  There is almost an equal amount of Jews who fled Arab lands who would also like to return as well.  There are now 4 million refugees living in the occupied territories and it is a humanitarian crisis.  Israel is afraid to let these people return to their homes because it threatens their country’s status as a Jewish state.  

Western media outlets also don’t report on the repression inflicted on Palestinians by the IDF.  The IDF has limited the flow of Palestinian workers to Israel to prevent infiltration of terrorists, and by strict checks at border checkpoints.  The border closings and checkpoints drastically reduced the Palestinian standard of living because many cannot travel to work outside of Palestine.  This action has contributed to the horrible conditions of poverty that exist to this day.  

Palestinians are often subjected to humiliating searches and very long waits at checkpoints.  Nervous IDF soldiers sometimes are too quick to open fire on suspicious vehicles, killing innocent civilians.  Checkpoints around Jerusalem make it difficult for Palestinians to get to work in Jerusalem and to travel between Palestinian towns.  In some parts of the West Bank, these people are literally walled in by massive defense walls erected by the IDF.  When a whole people’s movements are controlled to the point where they can’t even work to make a living to put food on the table you’re going to have violence.  So how about working to reduce some of repression inflicted by the IDF on a daily basis.

If the Oslo Accords are not acceptable then Israel should work for peace with Palestine based on the Geneva Accords which were drafted by Mahmoud Abbas and Shimon Peres.  The basic agreement is as follows:

  • Palestinians give up Right of Return of Palestinian refugees
  • Israel gives up sovereignty over the Temple Mount/Haram Al-Sharif, and evacuates Ariel, Efrat, Kiryat Arba, Ofra, Elon Moreh, Bet El, Eli  Har Homa, the Hebron settlement and many others.
  • Access to the Temple Mount/Haram Al-Sharif would be regulated at the discretion of the Muslim Waqf committee as at present.
  • Israel gets to keep the wailing wall, the Jewish quarter of Jerusalem, Mt. Scopus and the Mt. of Olives in Jerusalem, as well as Ma’aleh Edumim and the Gush Etzion settlement block and settlements around East Jerusalem.
  • The implementation of the accord will be overseen by an international committee, which would also ensure access to holy places,   and security will be the responsibility of a multinational force.
  • Under the agreement about half of the 220,000  Jewish settlers in the West Bank would have to evacuate their homes while the other half live in settlements that would be incorporated into Israel.
  • The agreement makes no provisions whatever for Israeli Arabs living in portions of Jerusalem that will be given to the Palestinian authority.
  • The Geneva Accord apparently intends to say that Palestinian refugees will be compensated and will be resettled in Palestine or other countries, with only a few coming to live in Israel.
  • A specific stipulation states that the number of refugees returning to Israel will be determined by Israel alone.

This agreement caught the attention of then Secretary of State Colin Powell and had the support of nearly 50% of both Palestinians and Israelis but was killed by right-wing Zionist elements of the Israeli political establishment and the Likud party lead by Benjamin Netanyahu as they felt Israel would be giving up way too much to the Palestinians.

Sorry for the rant, but the point of all of this is that Israel is NEVER going to get a peace settlement with the Palestinians, or stop the violence, if they continue to respond disproportionally to Hamas rocket attacks from rockets that have killed far fewer people in Israel, in lesser populated areas, than the Hellfire missiles (missiles that the U.S. sold to Israel) they are firing upon densely populated areas.  Areas that Israel has created by occupying millions of people in the Gaza onto a tiny strip of land.  They are never going to win the hearts and minds of the Arab street by driving tanks into their city and blowing the hell out of people.  Have we not learned that from Iraq?

Look, no one here is in favor of Hamas or Hezbollah.  I think they have brought terror to their own people just as much as they have to the people of Israel.  However, they filled a void that Israel created when they ignored the advise of the U.N. and the international community when they unilaterally pulled out of Lebanon and the Gaza.  Israel was told not to pull out all at once and was advised to do this in progressive steps so a power void was not left behind in the Gaza and Lebanon.  They didn’t listen to the international community and instead listened to George W. Bush and company who demanded  immediate elections with a conditional withdrawal.  Now you have Hamas and Hezbollah running the show in both of these territories.  

I don’t know what the answer is, but I know it should not include the IDF invading the Gaza and killing hundreds of innocents.  What we need right now is for the United States to get up off of it’s backside and be a strong voice for an immediate cease fire from BOTH sides and get the Arab League, the U.N., and both sides of this conflict to talk to one another.  Standing by and blindly, supporting aggression by EITHER side does no one any good.  Unfortunately, I have my doubts that any of this will happen before January 20th because our lame duck excuse for a President is more than willing to dump this in Obama’s lap instead of handing it like a true leader should.

Peace,

Joe Goedereis

“It is necessary to help others, not only in our prayers, but in our daily lives.

If we find we cannot help others, the least we can do is to desist from harming them.”


~ H.H. the 14th Dalai Lama

References . . .

Did Racism Help Cause the Mortgage Crisis? Part One

I am honored to present the work of Ralph Brauer.  For some time I have marveled as I read his research and reflected upon his work.  Today, this author of note shares with readers at BeThink.  I welcome Ralph Brauer.  May I invite you to peruse his prose.  Please ponder; then share your thoughts.

copyright © 2008 Ralph Brauer. The Strange Death of Liberal America

There is an elephant in the room no one wants to mention when you bring up the housing crisis.  It is the same elephant that has occupied the room since the very beginning of this nation.  Yes, it was there that hot Philadelphia summer when they drafted the Constitution.  Maybe that is what Ben Franklin is gazing at as he sits in the center of the famous painting of the signing of the Constitution by Howard Chandler Christy that hangs today in the House of Representatives east stairway.  Certainly the elephant had haunted Franklin much of his life causing him to call it “a constant butchery of the human species” in an anonymous letter written in 1772.  That elephant that haunted Franklin and continues to haunt us today is racism.

The economic crisis we face today has produced countless essays analyzing its origins and proposing all manner of cures, but almost no one has dared to mention the elephant in the room.  As I researched this topic I found only one person who seemed to be on to it: John Kimble, who wrote an excellent op ed piece in the New Orleans Times Picayune in October that should be required reading for everyone.  One sentence gets to the heart of the matter:

What few today remember is that one of the government’s central goals in undertaking mortgage market reform was to segregate American cities by race.

That such a piece should come from New Orleans does not surprise me; that few have sought to connect what to me seem rather obvious dots is more of a mystery to me.  But that is the power of that elephant in the room.

Perhaps now with an African American President we will finally have more open discussion of the elephant in the room and that discussion should begin by acknowledging that the elephant played a significant role in causing the mortgage crisis which in turn has toppled financial giants as if they were a row of dominoes.  To understand why we need to go back to the years immediately after the Second World War when the housing boom began.

The Creation of the Suburb

The discussion of the role of racism in America should begin by confronting the most important social, cultural and political reality of the past half century: the American suburb is largely a creation of racist loan policies that came from none other than the federal government.  The suburban migration stands as one of the largest freely-undertaken, government-subsidized mass social movements in history.  It accomplished by democratic means what dictators over the ages have tried to accomplish by force: alter the physical, economic, and social environment to create a unique culture.  As Kenneth Jackson writes in Crabgrass Frontier, his history of the American suburb:

Suburbanization was not an historical inevitability created by geography, technology, and culture, but rather the product of government policies.  (p. 293)

Through a variety of government subsidies, the creation of the suburbs allowed people of modest means to attain what real estate ads have christened the American dream.  The immensity of this achievement is only beginning to dawn on us, for it constituted the kind of land and social reform that governments everywhere still try to accomplish.  Kenneth Jackson notes:

Single family housing starts in this country rose from 114,000 in 1944 to 937,000 in 1946, 1,183,000 in 1948, and 1,692,000 in 1950.  (p. 233)

The federal government financed this growth through the Federal Housing Administration, an agency created during the New Deal to help spur the growth of home construction.  During the postwar housing boom Jackson points out:

The main beneficiary of the $119 billion in FHA mortgage insurance issued in the first four decades of FHA operation was suburbia.

Drawing the Color Line

A half century before the creation of suburban America, W.E.B. DuBois had written in the very first sentence of The Souls of Black Folk the immortal and prescient words:

HEREIN lie buried many things which if read with patience may show the strange meaning of being black here at the dawning of the Twentieth Century.  This meaning is not without interest to you, Gentle Reader; for the problem of the Twentieth Century is the problem of the color-line.

Little could DuBois have predicted that the color line would become a red line drawn around the American suburb by none other than the FHA.  The name redlining actually dates back to the 1930s when the FHA first began using color codes to designate areas where they should not invest.  Red areas were off-limits.  Jackson states:

FHA also helped to turn the building industry against the minority and inner-city housing market, and its policies supported the income and racial segregation of suburbia.

Even as the suburbs mushroomed across the American landscape, a few were asking questions.  In 1955 Columbia Professor Charles Abrams charged:

From its inception, the FHA set itself up as protector of the all white neighborhood.  It sent its agents into the field to keep Negroes and other minorities from buying houses in white neighborhoods.  (Jackson, pp. 213-214)

In what has become the classic source on FHA discrimination, The Politics of Exclusion, Michael Danielson quotes an FHA underwriting manual:

If a neighborhood is to retain stability, it is necessary that properties shall continue to be occupied by the same social and racial classes.  A change in social or racial occupancy generally leads to instability and reduction in values.(p. 203)

FHA policies also required appraisers to determine the probability of people of color moving into a neighborhood and even forced homeowners to agree not to sell their property to someone of another race.  According to one commentator,

“[T]he most basic sentiment underlying the FHA’s concern was its fear that property values would decline if a rigid black and white segregation was not maintained.

With the rise of the Civil Rights movement in the 1960s, the FHA began to make some attempt to right these wrongs, but with the election of Richard Nixon in 1968, the so-called “Southern Strategy” soon put a stop these efforts.  Chris Bonastia documented Nixon’s dismantling of FHA’s residential integration efforts in his paper, “Hedging His Bets: Why Nixon Killed HUD’s Desegregation Efforts.” Nixon’s refusal to back HUD’s reform efforts would have an impact on American society that ranks right up there with the decision by President Rutherford B. Hayes to abandon the South to the segregationists, essentially ending Reconstruction.

Yet to see one man and one decision as a historical lynch pin is to take an outmoded view of history, for the truth is that by 1968 the die had already been cast and DuBois’ color line had been drawn like a moat around the suburbs designed to keep people of color from entering. It would have taken considerable political will–and perhaps even federal law enforcement–to desegregate the suburbs by then.  Dr. Martin Luther King, jr.’s infamous march into the Chicago suburb of Cicero, where he was met with bricks and catcalls, showed the depth of that moat. There is a moment in the video of that march when you hear what sounds like a shot and King turns suddenly as if wondering where the shot came from.

This does not excuse Nixon’s actions, which at best were misguided and at worst cowardly and racist. While historians debate how much Richard Nixon personally bought into the Thurmond catechism, his elevation of Thurmond aide Harry Dent to the White House staff after the election sent a clear signal of his alliance with Thurmond. Dent was the one who sat outside the Senate chamber with a pail in case Thurmond needed a quick bathroom break during his record-setting filibuster. Nixon himself put it bluntly:

I am not going to campaign for the black vote at the risk of alienating the suburban vote.

For the federal government to go further than the law, to force integration in the suburbs, I think is unrealistic. I think it will be counter-productive and not in the interest of better race relations. [quoted in Charles M. Lamb, Housing Segregation in Suburban America Since 1960, p. 4, p. 9]

Still, as Lamb would point out in a footnote, two decades later a University of California study found that 44% of white Americans favored encouraging African Americans to move to the suburbs.

The Creation of the Subprime Market

Yet the FHA did not just discriminate against people of color who sought to live in the suburbs, it also made  it more difficult for them to obtain loans, period, by refusing to insure loans in areas with high concentrations of people of color.  The systemic impact of this is still reverberating through America’s inner cities.  Without FHA insurance, no reputable bank would issue a home loan to someone living on the other side of the “color line.” This in turn had a host of social and cultural impacts, from resource-poor schools to lack of jobs because businesses would not build where the FHA would not write loans.

You don’t need to be a systems modeler to see how each of these came to feed on each other. In the last decade scholars have begun to refer to this as “structural racism,” by which they mean a convergence of forces and policies that conspires to sustain the color line. Just imagine one systemic loop: you cannot get a good job because you live in a neighborhood with substandard housing and were educated in a substandard school and so you cannot qualify for a loan for better housing which in turn further reinforces the substandard housing. Structural racism is also not a bad metaphor, either, for it suggests the immense weight of these multiple factors that presses down on people living inside those red lines drawn by the FHA.

Where legitimate businesses and institutions are prevented from entering, illegitimate ones will grow. Since regular banks would not lend to people of color in inner city neighborhoods and FHA policies kept them from lending to the few people of color who could afford suburban housing, there obviously was a need for someone to supply these loans and so we have the growth of the so-called subprime market, only back in those days they were known as loan sharks and other unprintable words and had reputation to rival check cashing operations, greedy landlords and take and bake furniture renters. Anyone who has grown up in the inner city can tell stories not only about price-gouging home loans, but high-priced loans for everything from cars to buying furniture or clothes on credit.

What Is Subprime Lending

Subprime lending is a mixture of old-fashioned altruism and blatant thievery with an American twist. Some entered into the business of making loans to people of color because they genuinely believed people deserved an equal opportunity, others saw a chance to make a quick buck. The reality of the situation was that without FHA insurance even the most well-meaning lenders still had to charge more than they would have for a white suburban home-buyer.

A 2003 study for the Lawyers Committee on Civil Rights Under Law reported:

While red-lining has served to exclude poor and minority residents from the benefits of mainstream mortgage lending, purveyors of predatory lending (or so-called “reverse red-lining”) practices have targeted many of the same poor and minority households that traditional lending institutions have ignored or excluded.

In testimony before the House Committee on Banking and Financial Services in 2000 Bill Brennan of the Atlanta Legal Aid Society outlined how subprime lending works for lenders:

Here is what these companies do, the predators. They overcharge on interest and points, they charge egregiously high annual interest and prepaid finance charges, points, which are not justified by the risk involved, because these loans are collateralized by valuable real estate.

Since they usually only lend at 70 to 80 percent loan-to-value ratios, they have a 20 to 30 percent cushion to protect them if they have to foreclose. They usually always buy at the foreclosure sale and pay off the debt and sell the house for a profit.

As for those taking out the loans, Gary Gensler, Undersecretary for Domestic Finance at the treasury Department, told the same Committee:

Borrowers in these markets often have limited access to mainstream financial services. This leads to two things, as the Senator said earlier. Some borrowers who really would qualify for prime loans-we estimate anywhere between 15 and 35 percent of the subprime market could qualify for prime and cannot get that prime loan. Second, the rate and term competition is limited. Subprime lenders don’t tend to compete as much on price.

Beyond preying on vulnerable populations, beyond the limited access to mainstream financial services, is that abusive practices tend to be coupled with high-pressure sales tactics, whether by a mortgage broker, a home improvement contractor, sometimes a lender themselves in the local community.

Perhaps the most extensive and longest longitudinal study of predatory lending practices has been the Woodstock Institute’s periodic reports on Chicago.  It’s 1999 report “Two Steps Back” was among the earliest to blow the whistle on predatory lending.  They found:

Documented cases of abuse include fees exceeding 10 percent of the loan amount, payments structured so that they do not even cover interest (resulting in increasing principle balances), and flipping a loan numerous times in a couple of years.

At the same time, lending to lower-income and minority communities is often viewed as an isolated line of business, in which the focus is on the short term transaction and associated fees. Lenders active in such communities tend to be mortgage and finance companies subject to much less regulation than banks and thrifts. The increased scale of the subprime industry itself has resulted in a larger number of abuses. Moreover, there has not been a proportionate increase in regulation or regulatory resources devoted to this new industry.

As usual, graphs and tables tell the story in black and white:





The date on the graph may be a little difficult to see. It is 1998. On the first table, the percentage of subprime loans going to African American communities is 53%. Only 9% went to predominantly white communities. The Woodstock study went on to deal with the obvious question: is it race or income that is the strongest determinant of who receives a subprime loan? They found it was the former:

Thus, whether a neighborhood is predominantly African-American explains the greatest amount of variation in subprime lending,

The Final Results

In 1997 Bill Brennan could tell the New York Times:

We have financial apartheid in our country. We have low-income, often minority borrowers,  who are charged unconscionably high interest rates, either directly or indirectly through the cover of added charges.

Three years later Census data would confirm Brennan’s charge. The Lawyers Committee on Civil Rights Under Law found:

The typical white person lives in a neighborhood that is overwhelmingly white, with a few minorities (80.2% white, 6.7% African American, 7.9% Hispanic American, and 3.9% Asian American), the typical African American lives in a neighborhood that is mostly black (51.4% black, 33.0% white, 11.4% Hispanic American, and 3.3% Asian American). By comparison, the typical Hispanic American lives in a neighborhood that is more evenly Hispanic American and white (45.5% Hispanic, 36.5% white, 10.8% black, and 5.9% Asian American); and the typical Asian American lives in a neighborhood that is mostly white (17.9% Asian American, 54% white, 9.2%  black, and 17.4% Hispanic American).

In a study released this year by United for a Fair Economy, the authors note:

According to federal data, people of color are more than three times more likely to have subprime loans: high-cost loans account for 55% of loans to Blacks, but only 17% of loans to Whites.

This is a decade after the Woodstock study identified a similar pattern in Chicago.

Reflections

This history makes you wonder what kind of country we might have become had racism not pervaded the home mortgage market. The United for a Fair Economy study puts it eloquently:

While the housing crisis has affected all sectors of society, it has disproportionately affected communities and individuals of color. For them, the dream that Martin Luther King, Jr. once spoke of has been foreclosed.

Now the injustices white America heaped on black America for half a century have come home to roost. The sobering thought to ponder is that what you have read so far is merely the very tip of a rather large iceberg, for there are literally dozens and dozens of books and countless articles on racism and housing. If you enter “racism” and “housing” in Google you will find over four million entries. Yet despite over half a century of studies, reports and papers about discriminatory lending, little was done about it.

The most damning piece of evidence in this entire story is not that racism fostered predatory loans, but that like organized crime going from petty bootleggers and drug dealers to big time operators, the practice of predatory loan sharking expanded and went mainstream– moving from being the providence of small-time shady operators to mainstream banks. Essentially, loan-sharking cast off its sleazy past and the bigger it became the more people looked the other way.

That is until it suddenly threatens to take down the entire American economy. Now like the figures in that painting of Constitution Hall, fingers are pointing and people are staring.

If racism played a big role in creating the mortgage crisis, the solution to our current problems will prove tougher to deal with than what the so-called experts have been telling us. We could be witnessing the fourth American revolution. The first was the war for independence, the second the Civil War, the third the Great Depression and now the present crisis which combines the themes of the previous two–race and economics.

The next essay in this series focuses on how we got here and why, for only by understanding that journey can we see a way out of the current morass. What is clear so far is that this crisis is not merely the fault of a few misguided CEOs, but rather the culmination of decades of discrimination in which all of us are culpable.

Now the time has come to stop pretending there is no elephant in the room and deal with it.

Resources

For a good bibliography on the subject click here.

Crossposts: The Strange Death of Liberal America, My Left Wing, Progressive Historians, The Wild, Wild Left

Did Racism Help Cause the Mortgage Crisis? The Rise of Sandy Weill and Citigroup



Photo: United for a Fair Economy The State of the Dream

copyright © 2008 Ralph Brauer. The Strange Death of Liberal America

Sandy Weill’s story tells how racially-biased predatory lending lies at the center of the economic crisis.  A third-generation American, Weill grew up on the streets of Brooklyn where for some the road to success was a place whose name came from a structure built to protect the city from Indians, pirates and other invaders and whose die was cast when a small group of men met in secret under a buttonwood tree: Wall Street.

Like the hero of a Horatio Alger tale, Weill began his climb to success not in the proverbial mail room but as a $35 a week clerk, eventually clawing his way to become second-in-command at American Express. But Weill had an itch for more so he cashed in his chips and set about looking for his own business. In 1986 he settled on a Baltimore loan company named Commercial Credit that specialized in predatory lending.

The tale of how Weill would use Commercial to build the financial empire that became Citigroup is the story of the financial crisis and at the heart of that story is racial discrimination and predatory lending. In short, predatory lending made Citi into one of the nation’s largest financial institutions and now is responsible for its downfall.

The Beginnings of Citi

If Weill did any due diligence at all, he knew quite well he was buying a company whose entire existence was predicated on ripping off people of color. Commercial already had a shady reputation when Weill moved in on it. In 1973 the FTC had issued an order demanding Commercial cease using deceptive and hardball tactics to entrap those in search of a loan. In his article “Banking on Misery Citigroup, Wall Street, and the Fleecing of the South,” Michael Hudson  relates that Weill’s assistant, Alison Falls, was appalled at the idea of buying Commercial:

Hey guys, this is the loan-sharking business. “Consumer finance” is just a nice way to describe it.

After Weill bought the company did he seek to curb these practices? Quite the contrary, Commercial became even more aggressive. After all, Weill’s whole business plan was predicated on using Commercial to launch a larger company and in order to do that he had to get as much as he could out of Commercial, which meant squeezing clients even more.

Some of Weill’s former employees tell stories of being pressured into steering clients into dubious deals. Hudson quotes Sherry Roller vanden Aardweg, who worked for Commercial in Louisiana from 1988 to 1995. She agrees there was “a tremendous amount of pressure” to sell insurance: That insurance was issued by another Weill acquisition American Health & Life.

We kept adding insurance that we could offer. It just kept growing. It was beginning to get a little bit ridiculous.

Frank Smith, who worked for Weill in Mississippi, put a perspective on ripoffs such as “closed folder closings” in which documents adding to the cost of the mortgage were kept from the client:

They need the money or by God they wouldn’t be at the finance company. They’d be at a bank.

Weill used the money milked from Commercial’s clients to acquire insurance and finance company Primerica. In 1990 he acquired Barclay’s Bank. Meanwhile the stories told by African Americans victimized by Weill certainly sound like loan sharking. Two Mississippi clients of Commercial signed on for Annual Percentage Rates (APR) of 40.92 and 44.14. Another client paid $1,439 for insurance on a $4,500 loan.

Ripoffs like this attracted the attention of attorneys and law enforcement officials, especially in the South, where Commercial had a large presence. Hudson reports:

In 1999, the company agreed to pay as much as $2 million to settle a lawsuit accusing Commercial and American Health Life of overcharging tens of thousands of Alabamans on insurance.

Jackson, Miss., attorney Chris Coffer says he obtained confidential settlements for about 800 clients with claims against Commercial Credit or its successor, CitiFinancial.

How much money African Americans probably overpaid Commercial can be glimpsed from one study by the Community Reinvestment Association of North Carolina. Testifying before a 2006 hearing of the Federal Reserve in Atlanta, CRA-NC Community Organizer Richard Brown cited the findings of the study, Paying More and Getting Less: An Analysis of 2004 Mortgage Lending in North Carolina:

Our key finding is that disproportionately, by a ratio of more than 4 to 1, African Americans pay more interest on home loans than whites do in North Carolina.

Cultural Impacts

Like some modern plantation, subprime lending was built on the enslavement of African Americans, only instead of being field hands or sharecroppers their lives were indentured to loan sharks. Like the infamous overseers who ruled plantation life with the crack of a whip, the loan sharks ruled the lives of African Americans with whips woven together with words the way real whips are woven from strips of leather. While these words might not have inflicted the physical wounds overseers specialized in, the mental scars inflicted by the words woven into loan sharking mortgages were socially and psychologically devastating.

Like slavery, loan sharking helped to turn the African American family into a hot-button issue whose implications are still the subject of volatile debates within and outside the community. Yet while the particular sociological and cultural impacts of loan sharking may be the subject of some debate, there is agreement about the big picture: the impact rippled through families and communities like a rogue wave bringing misery and destruction. In the inner city and some rural communities, especially in the South, African American families faced two equally devastating choices when it came to housing: deal with the loan sharks or deal with the slum lords.

Loan sharking also rippled through American culture. Call it apartheid or something else, whatever label you assign to it the forced separation of whites and people of color is the number one issue of post World War II America. As surely as South Africa carved out “homelands” for its black citizens, so FHA and others carved out the equivalent through redlining.

In the South African Americans and whites lived together but interacted through the elaborate codes and rituals of Jim Crow, but in the North the races were physically separated so a white suburbanite could grow up without having much association with people of color. As a result, while white Southerners saw African Americans as inferior, white Northerners saw them as abstractions.

The 90s Boom in Subprime Loans

Meanwhile Sandy Weill continued building Citi through mergers and acquisitions. In 1993 came the controversial merger with Travelers followed four years later by Citi’s acquisition of Salomon Brothers. At the same Weill was building Citi, the mortgage market was undergoing some dramatic changes. Researchers began identifying a huge spike in the number of subprime loans. Loan sharking had come from back streets and low budget store fronts to the center of America’s financial empire: Wall Street.

A graph from the Woodstock Institute tells the Story:

This graph raises two obvious questions: what was fueling the growth and who was providing those new subprime mortgages? The first is still the subject of some debate among economists and others.  For example, some have tied it to an increase in interest rates. In its explanation accompanying the graph Woodstock states:

Despite increasing rates in 1994, 1995, and 1997, however, subprime lenders continued to increase their refinance volumes. This suggests that subprime refinancings are not driven by homeowners refinancing to save money during times of declining rates and that subprime lenders are aggressively marketing loans regardless of the rate environment.

In part, the growth of predatory activity stems directly from the development of an increasingly specialized and segmented mortgage market, especially for refinance and home equity loans.

What was in it for others is the same thing that was in it for Sandy Weill–profits. Forbes reported that in the boom of the 90s, subprime companies enjoyed returns up to  six times greater than those of the best-run banks.

United for a Fair Economy put it more bluntly:

The subprime lending crisis has occurred because a financial product intended for limited use by a limited number of people has been parlayed into another ill-fated bubble by some mortgage lenders lacking in integrity, foresight, and any vestige of civic concern.

What made this possible was the packaging and trading of loans, which goes under the fancy name of securitization.  A Federal Deposit Insurance Company report describes how this process works:

Thirty years ago, if you got a mortgage from a bank, it was very likely that the bank would keep the loan on its balance sheet until the loan was repaid. That is no longer true. Today, the party that you deal with in order to get the loan (the originator) is highly likely to sell the loan to a third party. The third party can be Ginnie Mae, a government agency; Fannie Mae or Freddie Mac, which are government sponsored entities (GSEs); or a private sector financial institution. The third party often then packages your mortgage with others and sells the payment rights to investors. This may not be the final stop for your mortgage. Some of the investors may use their payment rights to your mortgage to back other securities they issue. This can continue for additional steps.

As usual a graph tells the story of the growth of these new investment vehicles.

The FDIC goes on to explain how various pooling tactics package subprime loans, taking you into a thicket of acronyms like (MBSs), collateralized debt obligations (CDOs), and structured investment vehicles (SIVs)–all essentially are ways of spreading the risk of pooled mortgages. Notice that the initial upswing in MBS begins in the late 1980s. That was due to the tax reform act of 1986.

Ginnie Mae (Government National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) had been involved with MBS before the 1986 bill, but the Reagan Administration’s gift to the home mortgage industry introduced another acronym into the mix: REMIC–Real Estate Mortgage Investment Conduit, which is yet another tool for pooling and packaging mortgages. None other than Freddie Mac described the importance of the 1986 bill:

The REMIC law was passed as part of the Tax Reform Act of 1986 and marked the beginning of the growth of the CMO [Collateralized Mortgage Obligation] market.

Once financial institutions began to catch on to this and entered the thicket of securitization in a big way, there was no turning back. The American economy would never be the same.  Put the two graphs above together and you have the story: the initial growth of the subprime market was enabled by the growth in MBS. There remained only one regulatory hurdle in place, one that had been there since the Great Depression.

The Repeal of Glass-Steagall

Had Carter Glass been alive in the 1990s it is doubtful any of this would have happened, but by the time he put his name on the Glass-Steagall Act during the Depression, Carter Glass was an old man. He had actually been a delegate to the 1896 Democratic National Convention when William Jennings Bryan gave his “Cross of Gold” speech and most of his political life he had a Bryan streak in him that included a distaste for banks. When he left Woodrow Wilson’s cabinet at the end of Wilson’s term he was already warning of the dangers of uncontrolled banking, particularly banks getting involved in the stock market and other financial dealings.

Carter Glass would not have liked Citi or Sandy Weill. Weill, in turn, had little use for what Glass had created, seeing it as an obstacle that stood in the way of his fulfilling his vision of the kind of “full-service” banking Carter Glass had feared.

The Glass-Steagall Act was designed to keep banks out of the securities business because Carter Glass and New Deal officials including President Franklin Roosevelt believed that one of the causes of the Depression was that banks had strayed too far from their original functions during the 1920s.  According to a paper by Jill M. Hendrickson:

in 1932, 36 percent of national bank profits came from their investment affiliates (Wall Street Journal 1933, p. 1).

Glass-Steagall built a wall between banking and other financial services and the ink on the paper was barely dry when the bankers and their allies in the Republican Party began howling.  Over the next half century there were numerous attempts to weaken or scuttle Glass-Steagall, but in the midst of the securitization boom the cries to tear down the wall of Glass-Steagall grew louder.  In 1990, the Fed, under former J.P. Morgan director Alan Greenspan, permitted guess who–J.P. Morgan–to become the first bank allowed to underwrite securities.

It would be none other than Sandy Weill who would put in motion the forces that ended Glass-Steagall when he essentially gave the federal government the equivalent of an upraised finger by proposing the most audacious financial merger in American history: he would merge one of the largest insurance companies (Travelers), one of the largest investment banks (Salomon Smith Barney), and the largest commercial banks (Citibank) in America. The problem was the merger was illegal in terms of Glass-Steagall.

Weill convinced Greenspan, Robert Rubin, and President Bill Clinton to sign off on a merger that was illegal at the time, with the expectation that Congress would repeal Glass-Steagall. That would happen with a big push from Sandy Weill. First, he spent over $200 million in lobbying fees to convince Congress to go along with his merger. It still ranks as the largest single amount spent by one firm on one bill over the shortest period of time in American history.

When the conference committee charged with reconciling the House and Senate versions of the repeal bill seemed stalemated, it was Sandy Weill who applied the final push needed to get the bill passed. Here is the now oft-quoted Frontline report of what happened:

On Oct. 21, with the House-Senate conference committee deadlocked after marathon negotiations, the main sticking point is partisan bickering over the bill’s effect on the Community Reinvestment Act, which sets rules for lending to poor communities. Sandy Weill calls President Clinton in the evening to try to break the deadlock after Senator Phil Gramm, chairman of the Banking Committee, warned Citigroup lobbyist Roger Levy that Weill has to get White House moving on the bill or he would shut down the House-Senate conference. Serious negotiations resume, and a deal is announced at 2:45 a.m. on Oct. 22. Whether Weill made any difference in precipitating a deal is unclear.

The Aftermath

With Glass-Steagall out of the way, Sandy Weill had his merger and the American financial industry now had a green light to enlarge on subprime lending. Some followed Weill’s model of consolidating loan and insurance companies as he had done with American Health & Life and Travelers, taking loan sharking to a level those who had engaged in it back when it was done in storefronts with peeling paint could have never imagined.

More money than any organized crime syndicate could have dreamed of flowed into the coffers of the subprime lenders. What had been an activity aimed mainly at people of color now became linked to complex financial instruments such as tranches and derivatives, that to an uninitiated mind resembled nothing so much as the old shell game. Where’s the mortgage? Under this fund? No. guess again. Inner city and suburb which had been separated by redlining became linked by acronyms–MBS, CDOs, CMOs. But as we shall see in the next essay, ripping off people of color would continue.

Postscript: The Revelations of Language

Some reading this essay might object to my linking loan sharking and subprime mortgages, but Sandy Weill from the streets of Brooklyn would get it. Subprime is perhaps one of the most misleading euphemisms ever devised, because it means exactly the opposite of what the term implies. The Investopedia offers a succinct definition:

A type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans.

As for loan sharking, a definitive definition is a little more difficult to come by. Investopedia says it is anyone who charges above the legal interest rate (which is set by some states). Several others add that it also involves an implied or real threat to injure the person who doesn’t pay off.  As if to throw a ringer into that definition there are dozens of references to “legal loan sharking.” Perhaps the broadest definition is at Wiktionary:

Someone who lends money at exorbitant rates of interest.

These definitional niceties represent not merely semantic nit-picking, but in fact provide a vital piece to understanding the cultural shifts that have accompanied the economic crisis. One of the unspoken theses in this series of essays is that by clothing loan sharking in the more respectable term of subprime, it suddenly made it not seem so bad to lend money to people–especially people of color–at higher rates. It is reminiscent of the semantic games segregationists used to play with strategies like the “literacy law.” CNN even named “subprime” the word of the year. Can you see them doing that for loan sharking?

In a fascinating article, Ben Zimmer explains how subprime came to have its present meaning, noting that the earliest use of the term was in industry to describe something below grade while in the 1970s banks used it to refer to loans below the market rate.

Something happened to the word in the 1990s, however. Now it was the borrowers themselves who were being classified as “less than prime” based on their shaky credit histories. [My underline]

Zimmer is on to something when he says the term was applied to people, because as we have seen, a high percentage of subprime loans were aimed at people of color.  So the phrase about borrowers being “less than prime” has more meaning than Zimmer perhaps realized when he wrote that sentence.

At the same time that subprime underwent a shift in meaning it is quite clear that so, too, did loan sharking. The earlier references clearly have a criminal tinge to them. In old crime movies “loan sharking” was always thrown in with other nasty activities gangsters perpetrated on the innocent and not so innocent. Yet the recent references seem to take the gangster and the “enforcer” out of the term, so loan sharks just charge higher rates without threatening to break your legs or worse.

This linguistic convergence of loan sharking and subprime reflects an economic and social convergence, for it seems to date from about the time Sandy Weill first bought Commercial. So as Weill took what his own assistant termed a loan sharking operation to the pinnacle of corporate success, the financial industry adopted the euphemism of subprime just as it was getting into this type of lending.

In truth it is the financial industry itself which has helped to blur the distinction between conventional lending at a higher rate and the hardball, card-sharp techniques of the loan shark. That in turn has given rise to a new term “predatory lending” which has largely replaced loan sharking in our vocabulary, creating a living for economists and others who write papers dissecting the differences between the two as if they mattered to those who have to pay exorbitant rates.

As we plunge deeper into the financial crisis, two things are clear: it takes a pretty good lawyer to decipher the standard mortgage agreement and an even better wordsmith to explain if an agreement charging more than the standard interest rate is an innocent subprime mortgage or predatory lending. For me I will continue to use loan sharking with its connotations of shady activity until the financial industry cleans up its act.

Zimmer ends his article by observing:

Here’s hoping that in the not-too-distant future we can look back on the current usage of subprime as a quaint artifact of the late 20th and early 21st centuries.

Twenty years ago the mainstream financial industry would have nothing to do with subprime lending.  Now they are using language much like the defenses of the original loan sharks to defend it, talking about how they are performing a service for people who cannot get loans any other way.

In the next essay we will look at the consequences of the Glass-Steagall repeal, the fall of Sandy Weill and Citigroup, and the growth of so-called subprime lending. Then you can make up your own mind about whether to call it loan sharking or continue to use that other euphemism.

Crossposts:  The Strange Death of Liberal America, My Left Wing, Progressive Historians, The Wild, Wild Left

Did Racism Help Cause the Mortgage Crisis? Part One

I am honored to present the work of Ralph Brauer.  For some time I have marveled as I read his research and reflected upon his work.  Today, this author of note shares with readers at BeThink.  I welcome Ralph Brauer.  May I invite you to peruse his prose.  Please ponder; then share your thoughts.

copyright © 2008 Ralph Brauer. The Strange Death of Liberal America

There is an elephant in the room no one wants to mention when you bring up the housing crisis.  It is the same elephant that has occupied the room since the very beginning of this nation.  Yes, it was there that hot Philadelphia summer when they drafted the Constitution.  Maybe that is what Ben Franklin is gazing at as he sits in the center of the famous painting of the signing of the Constitution by Howard Chandler Christy that hangs today in the House of Representatives east stairway.  Certainly the elephant had haunted Franklin much of his life causing him to call it “a constant butchery of the human species” in an anonymous letter written in 1772.  That elephant that haunted Franklin and continues to haunt us today is racism.

The economic crisis we face today has produced countless essays analyzing its origins and proposing all manner of cures, but almost no one has dared to mention the elephant in the room.  As I researched this topic I found only one person who seemed to be on to it: John Kimble, who wrote an excellent op ed piece in the New Orleans Times Picayune in October that should be required reading for everyone.  One sentence gets to the heart of the matter:

What few today remember is that one of the government’s central goals in undertaking mortgage market reform was to segregate American cities by race.

That such a piece should come from New Orleans does not surprise me; that few have sought to connect what to me seem rather obvious dots is more of a mystery to me.  But that is the power of that elephant in the room.

Perhaps now with an African American President we will finally have more open discussion of the elephant in the room and that discussion should begin by acknowledging that the elephant played a significant role in causing the mortgage crisis which in turn has toppled financial giants as if they were a row of dominoes.  To understand why we need to go back to the years immediately after the Second World War when the housing boom began.

The Creation of the Suburb

The discussion of the role of racism in America should begin by confronting the most important social, cultural and political reality of the past half century: the American suburb is largely a creation of racist loan policies that came from none other than the federal government.  The suburban migration stands as one of the largest freely-undertaken, government-subsidized mass social movements in history.  It accomplished by democratic means what dictators over the ages have tried to accomplish by force: alter the physical, economic, and social environment to create a unique culture.  As Kenneth Jackson writes in Crabgrass Frontier, his history of the American suburb:

Suburbanization was not an historical inevitability created by geography, technology, and culture, but rather the product of government policies.  (p. 293)

Through a variety of government subsidies, the creation of the suburbs allowed people of modest means to attain what real estate ads have christened the American dream.  The immensity of this achievement is only beginning to dawn on us, for it constituted the kind of land and social reform that governments everywhere still try to accomplish.  Kenneth Jackson notes:

Single family housing starts in this country rose from 114,000 in 1944 to 937,000 in 1946, 1,183,000 in 1948, and 1,692,000 in 1950.  (p. 233)

The federal government financed this growth through the Federal Housing Administration, an agency created during the New Deal to help spur the growth of home construction.  During the postwar housing boom Jackson points out:

The main beneficiary of the $119 billion in FHA mortgage insurance issued in the first four decades of FHA operation was suburbia.

Drawing the Color Line

A half century before the creation of suburban America, W.E.B. DuBois had written in the very first sentence of The Souls of Black Folk the immortal and prescient words:

HEREIN lie buried many things which if read with patience may show the strange meaning of being black here at the dawning of the Twentieth Century.  This meaning is not without interest to you, Gentle Reader; for the problem of the Twentieth Century is the problem of the color-line.

Little could DuBois have predicted that the color line would become a red line drawn around the American suburb by none other than the FHA.  The name redlining actually dates back to the 1930s when the FHA first began using color codes to designate areas where they should not invest.  Red areas were off-limits.  Jackson states:

FHA also helped to turn the building industry against the minority and inner-city housing market, and its policies supported the income and racial segregation of suburbia.

Even as the suburbs mushroomed across the American landscape, a few were asking questions.  In 1955 Columbia Professor Charles Abrams charged:

From its inception, the FHA set itself up as protector of the all white neighborhood.  It sent its agents into the field to keep Negroes and other minorities from buying houses in white neighborhoods.  (Jackson, pp. 213-214)

In what has become the classic source on FHA discrimination, The Politics of Exclusion, Michael Danielson quotes an FHA underwriting manual:

If a neighborhood is to retain stability, it is necessary that properties shall continue to be occupied by the same social and racial classes.  A change in social or racial occupancy generally leads to instability and reduction in values.(p. 203)

FHA policies also required appraisers to determine the probability of people of color moving into a neighborhood and even forced homeowners to agree not to sell their property to someone of another race.  According to one commentator,

“[T]he most basic sentiment underlying the FHA’s concern was its fear that property values would decline if a rigid black and white segregation was not maintained.

With the rise of the Civil Rights movement in the 1960s, the FHA began to make some attempt to right these wrongs, but with the election of Richard Nixon in 1968, the so-called “Southern Strategy” soon put a stop these efforts.  Chris Bonastia documented Nixon’s dismantling of FHA’s residential integration efforts in his paper, “Hedging His Bets: Why Nixon Killed HUD’s Desegregation Efforts.” Nixon’s refusal to back HUD’s reform efforts would have an impact on American society that ranks right up there with the decision by President Rutherford B. Hayes to abandon the South to the segregationists, essentially ending Reconstruction.

Yet to see one man and one decision as a historical lynch pin is to take an outmoded view of history, for the truth is that by 1968 the die had already been cast and DuBois’ color line had been drawn like a moat around the suburbs designed to keep people of color from entering. It would have taken considerable political will–and perhaps even federal law enforcement–to desegregate the suburbs by then.  Dr. Martin Luther King, jr.’s infamous march into the Chicago suburb of Cicero, where he was met with bricks and catcalls, showed the depth of that moat. There is a moment in the video of that march when you hear what sounds like a shot and King turns suddenly as if wondering where the shot came from.

This does not excuse Nixon’s actions, which at best were misguided and at worst cowardly and racist. While historians debate how much Richard Nixon personally bought into the Thurmond catechism, his elevation of Thurmond aide Harry Dent to the White House staff after the election sent a clear signal of his alliance with Thurmond. Dent was the one who sat outside the Senate chamber with a pail in case Thurmond needed a quick bathroom break during his record-setting filibuster. Nixon himself put it bluntly:

I am not going to campaign for the black vote at the risk of alienating the suburban vote.

For the federal government to go further than the law, to force integration in the suburbs, I think is unrealistic. I think it will be counter-productive and not in the interest of better race relations. [quoted in Charles M. Lamb, Housing Segregation in Suburban America Since 1960, p. 4, p. 9]

Still, as Lamb would point out in a footnote, two decades later a University of California study found that 44% of white Americans favored encouraging African Americans to move to the suburbs.

The Creation of the Subprime Market

Yet the FHA did not just discriminate against people of color who sought to live in the suburbs, it also made  it more difficult for them to obtain loans, period, by refusing to insure loans in areas with high concentrations of people of color.  The systemic impact of this is still reverberating through America’s inner cities.  Without FHA insurance, no reputable bank would issue a home loan to someone living on the other side of the “color line.” This in turn had a host of social and cultural impacts, from resource-poor schools to lack of jobs because businesses would not build where the FHA would not write loans.

You don’t need to be a systems modeler to see how each of these came to feed on each other. In the last decade scholars have begun to refer to this as “structural racism,” by which they mean a convergence of forces and policies that conspires to sustain the color line. Just imagine one systemic loop: you cannot get a good job because you live in a neighborhood with substandard housing and were educated in a substandard school and so you cannot qualify for a loan for better housing which in turn further reinforces the substandard housing. Structural racism is also not a bad metaphor, either, for it suggests the immense weight of these multiple factors that presses down on people living inside those red lines drawn by the FHA.

Where legitimate businesses and institutions are prevented from entering, illegitimate ones will grow. Since regular banks would not lend to people of color in inner city neighborhoods and FHA policies kept them from lending to the few people of color who could afford suburban housing, there obviously was a need for someone to supply these loans and so we have the growth of the so-called subprime market, only back in those days they were known as loan sharks and other unprintable words and had reputation to rival check cashing operations, greedy landlords and take and bake furniture renters. Anyone who has grown up in the inner city can tell stories not only about price-gouging home loans, but high-priced loans for everything from cars to buying furniture or clothes on credit.

What Is Subprime Lending

Subprime lending is a mixture of old-fashioned altruism and blatant thievery with an American twist. Some entered into the business of making loans to people of color because they genuinely believed people deserved an equal opportunity, others saw a chance to make a quick buck. The reality of the situation was that without FHA insurance even the most well-meaning lenders still had to charge more than they would have for a white suburban home-buyer.

A 2003 study for the Lawyers Committee on Civil Rights Under Law reported:

While red-lining has served to exclude poor and minority residents from the benefits of mainstream mortgage lending, purveyors of predatory lending (or so-called “reverse red-lining”) practices have targeted many of the same poor and minority households that traditional lending institutions have ignored or excluded.

In testimony before the House Committee on Banking and Financial Services in 2000 Bill Brennan of the Atlanta Legal Aid Society outlined how subprime lending works for lenders:

Here is what these companies do, the predators. They overcharge on interest and points, they charge egregiously high annual interest and prepaid finance charges, points, which are not justified by the risk involved, because these loans are collateralized by valuable real estate.

Since they usually only lend at 70 to 80 percent loan-to-value ratios, they have a 20 to 30 percent cushion to protect them if they have to foreclose. They usually always buy at the foreclosure sale and pay off the debt and sell the house for a profit.

As for those taking out the loans, Gary Gensler, Undersecretary for Domestic Finance at the treasury Department, told the same Committee:

Borrowers in these markets often have limited access to mainstream financial services. This leads to two things, as the Senator said earlier. Some borrowers who really would qualify for prime loans-we estimate anywhere between 15 and 35 percent of the subprime market could qualify for prime and cannot get that prime loan. Second, the rate and term competition is limited. Subprime lenders don’t tend to compete as much on price.

Beyond preying on vulnerable populations, beyond the limited access to mainstream financial services, is that abusive practices tend to be coupled with high-pressure sales tactics, whether by a mortgage broker, a home improvement contractor, sometimes a lender themselves in the local community.

Perhaps the most extensive and longest longitudinal study of predatory lending practices has been the Woodstock Institute’s periodic reports on Chicago.  It’s 1999 report “Two Steps Back” was among the earliest to blow the whistle on predatory lending.  They found:

Documented cases of abuse include fees exceeding 10 percent of the loan amount, payments structured so that they do not even cover interest (resulting in increasing principle balances), and flipping a loan numerous times in a couple of years.

At the same time, lending to lower-income and minority communities is often viewed as an isolated line of business, in which the focus is on the short term transaction and associated fees. Lenders active in such communities tend to be mortgage and finance companies subject to much less regulation than banks and thrifts. The increased scale of the subprime industry itself has resulted in a larger number of abuses. Moreover, there has not been a proportionate increase in regulation or regulatory resources devoted to this new industry.

As usual, graphs and tables tell the story in black and white:





The date on the graph may be a little difficult to see. It is 1998. On the first table, the percentage of subprime loans going to African American communities is 53%. Only 9% went to predominantly white communities. The Woodstock study went on to deal with the obvious question: is it race or income that is the strongest determinant of who receives a subprime loan? They found it was the former:

Thus, whether a neighborhood is predominantly African-American explains the greatest amount of variation in subprime lending,

The Final Results

In 1997 Bill Brennan could tell the New York Times:

We have financial apartheid in our country. We have low-income, often minority borrowers,  who are charged unconscionably high interest rates, either directly or indirectly through the cover of added charges.

Three years later Census data would confirm Brennan’s charge. The Lawyers Committee on Civil Rights Under Law found:

The typical white person lives in a neighborhood that is overwhelmingly white, with a few minorities (80.2% white, 6.7% African American, 7.9% Hispanic American, and 3.9% Asian American), the typical African American lives in a neighborhood that is mostly black (51.4% black, 33.0% white, 11.4% Hispanic American, and 3.3% Asian American). By comparison, the typical Hispanic American lives in a neighborhood that is more evenly Hispanic American and white (45.5% Hispanic, 36.5% white, 10.8% black, and 5.9% Asian American); and the typical Asian American lives in a neighborhood that is mostly white (17.9% Asian American, 54% white, 9.2%  black, and 17.4% Hispanic American).

In a study released this year by United for a Fair Economy, the authors note:

According to federal data, people of color are more than three times more likely to have subprime loans: high-cost loans account for 55% of loans to Blacks, but only 17% of loans to Whites.

This is a decade after the Woodstock study identified a similar pattern in Chicago.

Reflections

This history makes you wonder what kind of country we might have become had racism not pervaded the home mortgage market. The United for a Fair Economy study puts it eloquently:

While the housing crisis has affected all sectors of society, it has disproportionately affected communities and individuals of color. For them, the dream that Martin Luther King, Jr. once spoke of has been foreclosed.

Now the injustices white America heaped on black America for half a century have come home to roost. The sobering thought to ponder is that what you have read so far is merely the very tip of a rather large iceberg, for there are literally dozens and dozens of books and countless articles on racism and housing. If you enter “racism” and “housing” in Google you will find over four million entries. Yet despite over half a century of studies, reports and papers about discriminatory lending, little was done about it.

The most damning piece of evidence in this entire story is not that racism fostered predatory loans, but that like organized crime going from petty bootleggers and drug dealers to big time operators, the practice of predatory loan sharking expanded and went mainstream– moving from being the providence of small-time shady operators to mainstream banks. Essentially, loan-sharking cast off its sleazy past and the bigger it became the more people looked the other way.

That is until it suddenly threatens to take down the entire American economy. Now like the figures in that painting of Constitution Hall, fingers are pointing and people are staring.

If racism played a big role in creating the mortgage crisis, the solution to our current problems will prove tougher to deal with than what the so-called experts have been telling us. We could be witnessing the fourth American revolution. The first was the war for independence, the second the Civil War, the third the Great Depression and now the present crisis which combines the themes of the previous two–race and economics.

The next essay in this series focuses on how we got here and why, for only by understanding that journey can we see a way out of the current morass. What is clear so far is that this crisis is not merely the fault of a few misguided CEOs, but rather the culmination of decades of discrimination in which all of us are culpable.

Now the time has come to stop pretending there is no elephant in the room and deal with it.

Resources

For a good bibliography on the subject click here.

Crossposts: The Strange Death of Liberal America, My Left Wing, Progressive Historians, The Wild, Wild Left