Reparations and Obama

The writer Ta-Nehisi Coates has rendered a remarkable service to Americans with his essay in the June Atlantic Magazine, "The Case for Reparations." I don't think a white American of decent conscience can airily dismiss the issue of reparations for the descendants of slaves after reading Coates.

The essay is so powerful that it's best to let it speak for itself, but here are a few lines that should stay with you:

"Having been enslaved for 250 years, [emancipated] black people were not left to their own devices. They were terrorized."

"Planter: 'You lazy nigger, I am losing a whole day's labor by you.'

Freedman: 'Massa, how many days' labor have I lost by you?'"

Coates reports that by 1840, cotton produced by slave labor constituted 59 percent of America's exports. The prosperity of the nation was literally built on labor stolen from black slaves.

"America was built on the preferential treatment of white people -- 395 years of it. Vaguely endorsing a cuddly, feel-good diversity does very little to redress this."

Coates does not go into detail about how reparations would work. He just believes we should start talking about the subject. He writes, "The idea of reparations is frightening not simply because we might lack the ability to pay. The idea of reparations threatens something much deeper -- America's heritage, history and standing in the world."

He notes that the chancellor of postwar West Germany, Konrad Adenauer, courageously embraced reparations for Jews. "Reparations could not make up for the murder perpetrated by the Nazis. But they did launch Germany's reckoning with itself, and perhaps provided a road map for how a great civilization might make itself worthy of the name."

In the 20th century, the pride of liberal America, the New Deal, the GI Bill, the FHA programs to expand home ownership, were all carefully crafted to exclude or marginalize blacks.

As Coates points out, no matter how much a black family tried to emulate the values and virtues of the middle class, that family was still likely to be punished, humiliated and to falter. Against that history, the claim of conservatives like Charles Murray that the crisis of black poverty can be explained as the moral failing of individuals is the worst kind of smugness.

But to me the most appalling part of Coates' story was not the brutality of 1840, or the broken promises of 1940, or the story of how blacks to sought to become homeowners after World War I were cheated by speculators selling houses "on contract" and denying buyers legitimate mortgages, so that no equity would be accumulated and the buyer could lose the house for missing a single payment.

The story that troubles me is what occurred under America's first African-American president, in our own time. I refer to the preventable catastrophe of the wipe-out of black home equity.

Beginning in the 1970s, when the Federal government finally stopped colluding in racial redlining, black families at last got a reasonable shot at accumulating wealth via the dream of homeownership -- assets for one's old age and something to pass along to one's children.

One of the most disgusting slanders by the right against low-income people and especially African Americans is the claim that the subprime collapse resulted from the government pressuring lenders to loan to unqualified borrowers. The vast majority of subprime loans were written by mortgage companies not even covered by federal law. Subprime was a scheme originated on Wall Street to profit from deceiving borrowers.

But quite apart from where the subprime bust originated, a scandal that pre-dated the Obama administration, take a close look at the aftermath. When the housing bubble turned into a bust, poor neighborhoods, black and Latino communities, took the worst hit. Two generations of painstaking accumulation of black home equity wealth were all but wiped out.

The Obama administration, at the time, was advancing nearly a trillion dollars to bail out America's biggest banks -- the very banks that had colluded with corrupt mortgage companies to market, peddle, and resell subprime mortgages that were almost certain to blow up. The administration had more than a little leverage with said banks, had it chosen to use it.

But instead, the government came up with feeble programs of mortgage relief that did not significantly slow the rate of foreclosure in African American communities. The programs were written by and for the bankers.

And when it came out that in the rush to securitize mortgage loans, the bankers had committed fraud and screwed up the chain of title, once again instead of using the available leverage to halt the catastrophic epidemic of foreclosures, the Obama Treasury and the state attorneys general came up with slaps on the wrist, expressing far more solicitude for the bankers than for the devastated homeowners.

The epicenter of the contract buyer scandal, as Coates eloquently writes, was Chicago. Black Chicago was particularly hard hit by the mortgage wipe-out. The pioneering inner-city financial institution that helped blacks become homeowners, ShoreBank, was another needless casualty of the crisis. ShoreBank did not go in for subprime, but did everything it could to help subprime's victims. Yet at the very moment the administration was advancing hundreds of billions to Wall Street, it refused even $100 million help to ShoreBank.

ShoreBank operated in the very neighborhoods where the young Barack Obama was a community organizer, the same communities where blacks could not get mortgages at all in the 1930s, 1940s and 1950s.

What are we to make of this? Was Obama so closely allied with Wall Street that he turned his back on his own people? Was he just another opportunistic politician, who found it expedient to serve the community just long enough to gain the necessary credibility to run for office?

I've been very critical of Obama and I think his administration's handling of mortgage relief was a disgrace, but I will offer a more charitable interpretation of why the Administration turned its back on the victims of the mortgage bust. Race is still such a divisive issue that America's first black president did not dare to look as if he was extending special help to blacks.

That's his failure, but more deeply it's America's failure. Please read the essay and think hard before you reject these ideas.

Robert Kuttner's new book is Debtors' Prison: The Politics of Austerity Versus Possibility. He is co-editor of The American Prospect and a senior Fellow at Demos, and teaches at Brandeis University's Heller School.

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