The perils of politically-correct capitalism

By Tom Quiner

A couple of weeks ago, Washington Redskin Quarterback, Donovan McNabb, was benched with two minutes left in the game.

If you’re not a football fan, stick with me. There’s a connection to this event and a larger American issue.

There were rumblings that Redskin coach, Mike Shanahan, was racist for benching the African-American McNabb.  I think not.

The National Football League (NFL) cares about one thing:  money.  The teams themselves, their coaches, their players, and their front offices care about two things: winning and money. I think winning even trumps money at the individual level in a professional sport like football where most of the players are already earning in excess of a million dollars a year.

The NFL believes in capitalism. They will pay more money to athletes who are the best to help them win more games.  It doesn’t matter if they’re white, black, purple, straight, or communists, they will pay you a ton of money if you can help them win more games and make the playoffs.

In other words, the NFL believes in equality of opportunity rather than equality of outcome (redistribution).

Ultimately, it comes to this: the NFL makes economic decisions based on merit.

I refer to the NFL in light of the sharp economic downturn that has afflicted America for a couple of years now.  There are many causes for the downturn. One of the causes is surely the impact of “politically-correct capitalism” on the mortgage industry, that is, the impact of economic decisions based on politics, not merit.

Community activist groups like ACORN successfully pressured Washington to relax “discriminatory” lending practices in the 1990s.  Our local paper, The Des Moines Register, ran dozens of stories in the 1980s about the practice of “redlining” where mortgage lenders would not lend money to people who lived in certain sections of town.

Lenders maintained they wouldn’t lend to people who were bad loan risks; activists claimed it was pure discrimination at work because so many of the folks not getting loans were bunched in the same neighborhoods.

So in 1992, new laws were passed directing new “affordable housing mandates” on Fannie Mae and Freddie Mac.

When I purchased my first house in 1979, I had to have around 20 percent to put down on the house. According to the former Chief Credit Officer for Fannie Mae, Edward Pinto, HUD made it clear that more liberal lending policies were now required:

“Lending institutions, secondary market investors, mortgage insurers…..should work collaboratively to reduce homebuyer downpayment requirements.”

According to Peter Wallison of the American Enterprise Institute, by 2008 …

“almost 50% of loans…were subprime…and two thirds of them were held by government agencies or firms required to buy them by government regulations.”

By 2006, 30 percent of homebuyers were putting no money down.

These lax lending standards were specifically targeted to assist the African-American community in purchasing homes.  I believe the intent was honorable. Easier access to mortgages would increase the percentage of home ownership in America, and there is pride in ownership.

In my own marketing business, we began developing more marketing materials for mortgage companies throughout the country who touted nothing-down mortgages. Many mortgage brokers told me they didn’t need any marketing, because they had a backlog of clients standing in line waiting to borrow money with little down and low interest rates.

Of course you know what happened. The industry collapsed like a house of cards. And the very people we tried to help, the African-American community, suffered the most.

As columnist Star Parker said in her column today:

“Black’s, whose home ownership rates skyrocketed during the government stoked boom, now have foreclosure rates twice that of whites. And, of course, black unemployment in this economic slowdown following the collapse is double that of whites.”

The desire to cheat the laws of supply and demand are irresistible. You know the mantra:

Let’s ratchet up the minimum wage and pay people what they need rather than what they’re worth.

Let’s liberalize lending laws and lend to people on the basis on what they desire rather than what they can afford.

It never works. As this blog has stated on more than one occasion, you end up hurting most the very people you’re trying to help the most.

What the politicians are really doing is making themselves feel good as they hurt good people through the mock benevolence of politically-correct capitalism.

The record speaks for itself. It’s time to take a lesson from the NFL. Let’s pay people what they’re worth. Let’s let people borrow money on their ability to repay.

Politically-correct capitalism has taken a deadly toll on America.