In the summer of 2020, the Smithsonian Institution created a chart meant to condemn what it calls “whiteness,” and it listed a number of characteristics it claimed were essential to “white culture.” Among the so-called characteristics it described in pejorative terms was delaying gratification, or saving for the future, what Austrian economists would call low time preference.
The chart, which was withdrawn after widespread protest, sought to identify the characteristics needed to build not only an economy but civilization itself with a racist culture. Thus, the kind of lifestyle and values that might culminate in someone having high credit scores and saving up for a significant down payment for a house were something not to be emulated or praised, but rather to be called out and declared shameful.
Although the chart no longer is found on the Smithsonian website, the mentality that created it lives on in the policies of the Biden administration. To show its commitment to equity—equal outcomes—the Federal Housing Finance Agency (FHFA) implemented a new policy on May 1, 2023, that punishes homebuyers with high credit scores who can put down at least 15–20 percent on a mortgage by making them pay higher interest rates and extra fees. Declares a Wall Street Journal editorial:
According to calculations by Evercore ISI, buyers with strong credit scores between 720 and 739 who make 15%–20% down payments will see their rates increase by 0.750%. Borrowers who put down 20%–25% will see rates increase by 0.500%.
The winners are borrowers with weak credit scores—that is, riskier borrowers. Under current FHFA policy, a borrower with a weak credit score below 620, who is borrowing more than 95% of the value of their home, pays 3.750%. Under Ms. Thompson’s new plan, those borrowers will see their fees decrease by 1.750%.
Not surprisingly, commentators like James Bovard have rightly attacked this policy as one that imposes perverse incentives, turning the rewards for creditworthiness upside down. Bovard writes:
Starting May 1, The Post exposed last week, a Biden administration decree will require adjusting mortgage calculations to penalize homebuyers with a FICO credit score of 680 and above—almost two-thirds of the population.
This levy will be used to reduce costs for people with low credit scores—i.e., risky borrowers more likely to default on mortgages.
However, this is not merely another version of the Law of Unintended Consequences, in which well-meaning government officials implement a policy without looking at the so-called bigger picture.
The consequences here are intended. The Biden administration officials know full well the implications of this new policy and is sending the message that the notion of creditworthiness itself is implicitly racist.
As Newsweek points out, the racial gaps in home ownership and credit scores are significant:
Only about 25 percent of homebuyers with Federal Housing Administration loans are people of color, according to the White House. Black and Hispanic people, on average, have fewer savings to use as a down payment on a home and tend to have lower credit scores, according to David Stevens, former CEO of the Mortgage Bankers Association (MBA) and a former FHA commissioner during the Obama administration. The current policy is being rolled out by the FHFA.
He told Newsweek that this can be attributed to factors like distrust in the banking system or being a first-generation American. He added that low credit scores can be a significant barrier to homeownership.
But in order for the FHFA to close the gap by bringing down LLPAs [loan-level price adjustments] for those borrowers, the agency will compensate for the reduction in borrowing fees by raising the LLPAs of borrowers with higher credit scores, who tend to be white.
The average credit score in white communities was 727 in 2021, compared with 667 in Hispanic communities and 627 in Black communities, according to data analyzed by FinMasters, a personal finance blog.
Not surprisingly, the Biden administration blames the homeownership gap on racism, so its proclivity is to punish the people who saved their income and engaged in forward-looking behavior, something the Smithsonian condemned as a product of “whiteness.” However, as Bovard points out, black homeownership rates relative to white rates are lower today than they were more than fifty years ago: “Federal Housing Finance Agency Director Sandra Thompson testified to Congress last year that the racial homeownership gap ‘is higher today than when the Fair Housing Act [of 1968] was passed.’”
That is hardly insignificant. In 1968, the United States was just beginning to shed Jim Crow laws, and prospective black homeowners had far fewer financing opportunities than they do today. Furthermore, homebuyers were expected to put at least 20 percent down, with only some exceptions, so one might consider lending policies at that time to have been far less friendly to black borrowers than they are today.
Furthermore, the Bill Clinton, George W. Bush, and Barack Obama administrations had policies explicitly aimed at increasing homeownership among blacks and other minority groups. Bush claimed his administration had put a record number of black Americans in their own homes by helping to provide down payments and lowering interest rates, among other policies.
Andrew Cuomo, the Clinton administration’s housing and urban development secretary, declared that the homeowning gap between blacks and whites was due to discrimination and ordered mortgage lenders to lower lending barriers for black households. Cuomo wrote:
The American Dream of homeownership is not reserved for whites. We will not tolerate a continued homeownership gap as wide as the Grand Canyon that divides Americans into two societies, separate and unequal. Eliminating housing and lending discrimination is vital to making the opportunity for homeownership a reality for all Americans.
Of course, the Bush administration’s all-out push to increase black and Hispanic homeownership rates had its own unhappy ending: the 2008 financial meltdown. All the Bush administration’s efforts to increase minority home ownership blew up as home prices plunged and many homeowners defaulted on their mortgages and lost their homes. Writes Bovard: “Thanks to the housing crash, the median net worth for Hispanic households declined by 66 percent between 2005 and 2009 and the median net worth of black households declined by 53 percent.”
Moreover, in a 2004 article in Barron’s, Bovard warned that the Bush housing policies were going to have an unhappy ending:
One of the proudest elements of President Bush’s “compassionate conservative” agenda has been government financial support to home buyers for down payments. Bush is determined to end the bias against people who want to buy a home but don’t have any money. But he is exposing taxpayers to tens of billions of dollars of possible losses, luring thousands of moderate-income families into bankruptcy, and risking the destruction of entire neighborhoods.
Bovard’s words were prophetic. But at least Bush didn’t blame borrowers with high credit scores and large down payments for the racial housing gaps.
The Biden administration, on the other hand, has expanded the definition of “intersectionality” to include the claim that whites (along with non-whites who have high credit scores) are to blame for minorities’ low credit scores and shakier finances. The Biden administration’s policies continue what Bovard called “wrecking ball benevolence.” Former federal Judge Janice Rogers Brown concurred, writing: “Whether the road was paved with good intentions or greased by greed and indifference, affordable housing turned out to be the path to perdition for the U.S. mortgage market.”
Economically, none of this makes sense, but one must understand that the Biden administration is not looking to promote working markets in housing. Instead, it is claiming that the only cause of the gap in homeownership between blacks and whites is white racism and that the government must engage in extraordinary means to eliminate this gap, even if this requires turning economic logic upside down.
One does not have to be a seer or have a doctorate in economics to know that this latest iteration of federal housing policy will end in failure just like all the other housing initiatives for minorities. But don’t blame the Law of Unintended Consequences. This new policy is deliberate, and when it fails (as it surely will), look for Biden or whoever else is in the White House to call for even more drastic measures.
About the Author
William L. Anderson is Senior Editor at the Mises Institute and professor emeritus of economics at Frostburg State University in Frostburg, Maryland.
Article cross-posted from Mises.
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
