Brad Miller's piece on mortgage finance ("Wayback Machine for Housing Finance Reform") linked in today's Economics Daily Digest is correct about Fannie's and Freddie's role in supporting a robust market for home lending. Yet it erases the larger story of federal financial policy and its legacy, which is equally important for understanding today's homeownership crisis. Fannie did not create that market by itself; it worked in tandem with FHA and FHLLB and VA programs to promote both the primary and secondary markets. Meanwhile--and here's the big omission--those same programs denied access to homeownership to generations of minorities and single women. Until 1968 they systematically denied mortgage credit to these populations; the racial proscriptions were outlined explicitly in the federal underwriting manuals for the private sector. And when minorities and single women were welcomed into the market, especially since the 1990s, they entered on comparatively expensive and risky terms, which helps explain why these same groups are overrepresented in the populations that have defaulted or remain "under water." This history is very well documented, and it is frustrating to see well-meaning commentators repeatedly ignore it. In short, yes, we need a government role in supporting and shaping the market for and supply of decent housing. But we don't need to blindly invoke "glory days" that didn't happen.
Just a brief follow-up to yesterday’s post, informed in part by other diaries and conversations ongoing at DK.
First, thanks to Daily Kos readers for recommending and commenting on “A simple message: ‘Stop pretending’.” I have not posted here in many years. Your interest and engagement in the diary was quite a welcome back, indeed! Wouldn’t know how to measure what I have learned from this community for over a decade. And not sure how I would have endured MSM coverage of American politics without the correctives, information, links, and commentary that this community continues to sustain.
The gist of the diary was this: if you read, view, or hear someone claim that government has always been “the problem,” tell them to stop pretending that THEY and countless other fortunate Americans have never relied on the federal government. Of course I’m not identifying something that countless progressive voices do not know, and not suggesting a larger strategy that activists and writers have not been pursuing for generations. Rather, I was suggesting a specific challenge—“stop pretending”—that would put opinion-makers on the defensive and thus demand a response. Politicians, pundits, and journalists who invoke the myth—or who tag any progressive policy as an unprecedented “intrusion” of the federal government into the marketplace—need to be put on the spot. We need to continue challenging them to prove that they have “made it” or that their industry has thrived without heavy lifting from federal programs, spending, oversight, or regulations. Force them to show us proof, because they can’t. And we need to encourage others to call these folks out in order to help expose this pernicious mythology.
Certainly we all agree that the U.S. government has an obligation to protect citizenship rights, human rights, and access to opportunity. The federal government has ALWAYS helped structure opportunity, but has long favored some populations over others. We know that the federal state has grown slowly and often begrudgingly more responsive (in fits and starts) to the needs and rights of more Americans, in response to their demands for recognition. Yet we also know that the backlash to this assertive federal role has fueled generations of political myth-making about the sanctity of free enterprise, individual rights, and the American “tradition” of “going it alone” (as well as the paradoxical embrace of the “rights” of corporations). My central point is about the political and media venues in which this myth is sustained. The voices who call for “getting government out our lives” and the journalists who are largely unaware of the history of real-life public policies—these people dominate public discourse and they refuse to acknowledge the government’s positive role, or, alternatively, they parcel it off, labeling only certain types of federal actions “interventions” and collapsing them into an amorphous category of “welfare.” One way to force their hand and help change the narrative is it to demand that they acknowledge THEIR deep debt, and the debt of millions of others, to the public sector. Of course many of these voices will continue to deny. But the challenge can help expose their ignorance and highlight the far more complicated legacy of the federal state.
Look forward to discussing this. And thanks again for listening and recommending.
Let’s respond to politicians, pundits, and journalists who sing a chorus about the threat of “big government” by telling them to stop pretending. Stop pretending that government is, by definition, an obstruction and a problem. Put them on the defensive. Challenge them to back up their claims, because they can’t. Their answers will be full of holes, easy to shoot down, and will only draw more attention to the story that few prominent voices are acknowledging.
Stop pretending that most Americans—including themselves—have thrived “on their own,” without government. Most Americans, and especially the economically stable and affluent, have long benefitted from and indeed depended on the federal presence and federal spending, both direct and indirect. Stop pretending that homeowners (those not underwater) have not received heavy subsidies from the federal government since World War II via powerful mortgage insurance programs and the tax code. Stop pretending that business owners, small and (especially) large have not relied on federal regulation and largesse, ranging from trade policies to generous spending on research and development to the direct federal purchases that have sustained countless markets (aerospace, synthetics, the computer industry, the internet. . .). Stop pretending that agribusiness does not sustain its profit margin thanks to significant federal subsidies that are regularly renewed by Congress. Stop pretending that the American financial sector is some kind of “free market” miracle, testament solely to the entrepreneurial spirit and creative powers of farsighted investors. Stop pretending that Americans with steady, well-paying jobs and health insurance have simply earned their good fortune, whereas those who struggle have not yet proven their worth.
The list goes on and on. Let’s challenge these commentators and policy makers to document their claims, to prove their argument. Let’s challenge them to stop pretending that the “market,” alone, picks the winners and losers. Let’s tell them to do their homework, to look at what actually happened and how government actions continue to shape the playing field. It’s clear, for anyone who looks, that the lines between the private and public sectors have never been so sharp. Challenge one of these voices to stop pretending, and demand that they make their case. Because they can’t.