I was especially inspired to participate in this debate when, starting in 2007, some parties decided to blame the banking crisis on federal efforts to overcome banks’ resistance to lending in neighborhoods with significant racial minorities- redlining.
Too many plot lines were missing in this narrative:
- government origins of redlining
- It’s very likely that the unregulated sources of most “toxic” mortgages that broke the international system was the “shadow banking system”
- The legislative history of anti-redlining (Community Reinvestment Act of 1977)
- The most generous government community development largess went to segregated suburbs between World War II and 1970.
In short, when it came to helping families, federal spending was not handed out fairly.
I have spent most of my professional life at New York commercial and investment banks in various forms of real estate finance watching the real estate bubbles evolve fairly intimately.
My career has included:
- 1970s construction loan workouts from the 1974 recession
- 1980s quantitative mortgage bond research and product development during the S&L crisis
- 1990s consulting for OFHEO (the regulator for the GSEs, and predecessor to the Federal Housing Finance Agency) helping write the capital adequacy regulations
But for me there is an even more personal tie to this story. I spent my childhood in a Harlem NYC public housing project and my teen years witnessing white flight as well as bank branch flight from my North Bronx neighborhood in the late 1950s and 1960s.
I was part of that early crest of junior high school students that played the role of experimental subject for the Sputnik-inspired “new math” and other science and language curriculum upgrades. This was in the old days when the national government thought that K-12 education for even poor kids was part of the national security agenda. We are now faced with a very different attitude that argues that not only is government intervention on behalf of the poor bad for the poor, it could destroy capitalism for everyone.
My basic motivation here is equity in how taxpayer funds are spent. If we decide to address a domestic problem, it should be done in a way that is likely to apply to those with the worst case of the problem. The location, size or relative wealth of your family, business, or community should not exclude you from benefiting. Otherwise, we probably shouldn’t be doing it.
I’m worried that the ability of a child born in a low income community to attend very good free public schools and live in decent even if uninspiring affordable housing is diminishing steadily but quietly.
The only part of my story that seems to have remained intact are the prospects for receiving a higher education from private elite institutions with very generous financial aid as I did from Yale, Stanford and the federal government.
I’m currently working on a book with the working title “The Unfair Game of Government Spending”. I’m hoping this site will help focus more attention on this aspect of domestic politics and policy.
