Friday, October 10, 2008

Capitalism/Financial crisis Tutorial 12

Now you must focus on and understand the "housing for those who cannot afford it" disaster. It is being totally mischaracterized by both conservatives and liberals. The problem is not that "banks were forced to give loans to people who cannot afford their houses." That is a symptom of a deeper, systemic problem, not the problem itself. That's conservative psycho-babble, to blame Freddie and Fannie per se. However, it was liberal psycho-babble that led to a failed national housing policy that created entities like Freddie and Fannie in the first place. Here is the explanation of how the path to hell was paved with good intentions.

During the Civil Rights movement, Afro-Americans correctly mistrusted their local governments (state, county, city and town) because who were the oppressors? Their neighbors and their governments. Relief, when it came, seemed to come only from Washington, via the Supreme Court, via Congress, via the President, via Federal law authority. Thus, Afro-Americans and other disenfranchised people came to think of the Federal government as being the only source of resources and fairness.

This was reinforced by the Great Society policies of President Lyndon Johnson. Now, I happen to think that when it came to Civil Rights, Johnson deserved a lot of credit and was a visionary. However, he lacked capitalist advisers to explain how to extend capitalism to the disenfranchised, and not create an artificial set of entities and philosophies in Washington that would eventually stunt and doom the very good things everyone hoped for.

Where are houses and jobs? Where the people live, not in Washington. Here is an analogy. Suppose that you bought a car from your local car dealership, and it was a horrible lemon that never worked. And suppose that because of local laws, you could not get a replacement or refund, so you are stuck with the car, and you need it for your job. You need a good car mechanic. Now, would you refuse to take your car to a local mechanic, just because you were treated unfairly by the local car dealer and the local laws that allowed him or her to screw you over? Would you instead call a car mechanic in Washington, and with him or her hundreds of miles away, tell them how your car needs repairing and to send you money, but never actually have a car mechanic open the hood and fix your car? This is what happened when justifiable wounding and suspicion by those whose rights were curtailed for so many years motivated them to reject local solutions to local problems, especially housing.

Time heals all wounds and elections take place and minds are changed. Many Afro-Americans have been elected to offices for several decades now. Yet the country is stuck with a boat anchor of "housing policy" coming from Washington that is a legacy of past times and one that never worked. Who thinks that Section 8 and other housing has worked out real well? Provided the poor with good homes in safe neighborhoods? Duh, of course not.

Lyndon Johnson should have been educated by true capitalists (should any have existed) and then twisted arms to empower (and fund where necessary) state and local governments to have healthy and individualized housing plans and programs. What does Washington know of fair housing in Birmingham, Alabama, or Chicago, Illinois, for example? And is fair housing paying for people to live in either "too much" house or worse, "too little" house in crack neighborhoods?

There should never have been a HUD (Department of Housing and Urban Development) and if I had been President (or the wise advisor behind the scenes) it would never have been created, and if it had been, I would certainly have dismantled it.

If states had their own "HUD" responsibilities, partnered with ethical private capitalists, New Orleans would have been rebuilt twice as fast as it is plodding along now, because the mechanisms for rebuilding would already have been locally in place; they would just have needed Homeland Security type of special funding. Further, the government could have maintained focus on truly federal projects that are locally sited (such as the levees in New Orleans) through a modernized and well funded Army Corps of Engineers. That agency became demonized by environmentalists and as a result, they receive very mixed messages and mandates. And whenever a message is mixed and you have "two masters," you end up with half baked disasters.

If capitalism had been stimulated (even arm twisted) on the local level, we'd have a different society today. We'd already be on our second generation of well capitalized aspiring Afro-Americans living in their own housing, under their own control, just like everyone else. They and other aspiring poor would not be prisoners of federal concrete jungles called "housing," or equally bad, the "justification" for disastrous looting such as the creation of the so called Freddie and Fannie programs that are now "coming home to roost" by dragging down the entire country's economy.

This entire country would be so different, as I pointed out before, if only a few dozen genuine capitalists (not looters) had stepped forward in the 1960's-1980's and had solved the low and moderate income housing problems on a color blind basis within the states, meeting their own individual needs of their people. Instead we have a multi-billion dollar disaster that never even achieved its objectives for now two generations.

I hope you find this helpful and eye opening. Nothing like knowing the real reasons why the ship sank.