Capitalism Hasn’t Failed Us: Star Parker,the Housing Crisis,and Moral Hazard

Abstract

According to legal scholar Sumi Cho, an important role conservatives of color play in the larger conservative movement is functioning in the role of racial mascots. Racial mascotting is when conservative individuals of color are embraced by their white peers with the purpose of helping to deflect charges of racism from critics. Conservative social activist Star Parker contends that the practice of welfare capitalism, as illustrated by the Community Reinvestment Act’s mandate to banks to provide services to underserved minority and low income communities, was one factor that contributed to the subsequent housing crisis. Parker also asserts that mortgage relief programs, similar to other domestic social programs like welfare, produce a form of moral hazard among its recipients because both programs appear to reward an individual’s poor behavior instead of making them accountable for their actions. I argue that in addition to Parker’s analysis of the housing crisis being empirically flawed, her idealized construction of an American society functioning under the rule of laissez-faire capitalism where racism’s impact on the opportunity chances of African Americans is minimal ultimately allows for the maintenance of an American social structure where ‘whiteness’ and racial inequality reign supreme.

Keywords

capitalism ideology political sociology welfare state housing crisis African Americans moral hazard conservatism

Introduction

For conservatives, the continuing economic crisis has served as a shining example of what happens when there is too much interference in the operations of the free market system. At the center of the crisis was the collapse of a once red hot housing market, where it seemed home values would endlessly rise, and the accompanying meltdown in the subprime credit market produced from massive defaults by homeowners no longer able to pay their mortgages. As various conservative media figures saw it, the problem started when the government took it upon itself to make owning a home a right or entitlement instead of something Americans should earn through their toil and sacrifice. Conservatives of color are no exception in their arguments concerning the ‘evils of expanded government’ and the ‘unintended consequences’ that arise from it. One such conservative is social activist Star Parker.

To many African Americans and those on the left, some of these black conservatives come across as what legal scholar Sumo Cho calls ‘racial mascots’. According to Cho (1998), racial mascotting is the adoption of a racial group, or an individual of color, by white politicians or groups as a means to repel charges of racism and preserve the redeemed status of whiteness. In this essay I argue that African American conservatives like Star Parker serve dual purposes rather than just solely functioning as ‘racial mascots’ for a conservative movement looking to counter charges of racism. On one hand, Parker inhabits the role of a racial mascot through her ideas and arguments, which allegedly provide a ‘fairer and balanced’ perspective on race; on the other hand, she stridently advocates that Americans, particularly African Americans, need to adhere to notions of American traditionalism. These concepts of American traditionalism are ideals that give American society its sense of exceptionalism while also providing an ideological justification for the continuance of white racial hegemony (Neubeck and Cazenave, 2001)¹ by defining the thoughts, practices, and processes that have provided white Americans as a group with advantages over other groups, as the normative, American, standard ways of being.

This is important on several fronts. First, as the late sociologist Seymour Martin Lipset (1996) points out, African Americans have been the ‘great exception to the American Creed, to American ideological exceptionalism’ because their treatment has been ‘the foremost deviation from the American creed throughout the history of the republic’ (1996: 113). According to Lipset, the bedrock of American society is the valuation of individualism and the expectation by American citizens to have society honor and protect their rights on an individual basis. Historically, the African American experience in the United States has been the direct opposite – being judged and mistreated because of society’s devaluation of their group characteristics (Lipset, 1996). Therefore, to have certain African Americans professing a deep uncritical connection with and belief in American exceptionalism lends credence to some, particularly white conservative, views that America’s opportunities are available to those who are willing to just try. Second, the historical role conservatives in particular have played in making America’s exceptionalism work in theory but not in practice for African Americans gets obfuscated when African American conservatives like Parker construct American society in these idealized ways. Finally, while the right’s history with African Americans has been contentious at best, it is one that is also complex. Exploiting racial anxieties and tensions among whites towards blacks has been a successful strategy in aiding conservatism’s elevation to America’s social and political mainstream. As conservatives gained control over the Republican Party, giving up or jettisoning African American support was seen as a prudent tactic to achieve electoral success (Boyd, 1970). With Latinos surpassing African Americans as the largest minority group in the United States, a continuation of the approach Barry Goldwater articulated over 50 years ago as ‘we ought to go hunting where the ducks are’ (Tandy-Shermer, 2013: 263) seems logical.

And yet, conservatives continue to search for ways to cultivate a relationship with African Americans. Part of the motivation stems from the acknowledgement of some on the right that conservatism needs to make up for its racist past (Kemp, 2006), and for others the recognition that conservatives were on the wrong side of the civil rights battle:

Civil Rights are a problem for the American Right: a political problem, an intellectual problem, and a moral one. In the civil-rights debates of the 1950’s and 1960’s many conservatives – including William F. Buckley, Jr., … and Barry Goldwater – took positions that the vast majority of conservatives now reject. Most contemporary conservatives who know this history regret it and find it embarrassing. (Ponnuru, 2010: 16)

Most importantly, because America’s history is so closely intertwined with its ‘original sin’ (slavery), making the black–white conflict the defining racial conflict in the nation, to have the descendants of slaves validating America’s heralded traditions while putting the nation’s reprehensible treatment of their group behind them symbolizes to the right a closure of the nation’s ignominious racial history, thus truly validating America’s greatness. Furthermore, for white conservatives the embrace of conservative ideology by African Americans is an indication of conservatism’s universal appeal, especially since it is commonly assumed, by their overwhelming support for the Democratic Party and the center-left agenda of the Civil Rights movement, that African Americans are an inherently liberal group.

By analyzing Star Parker’s ideas articulated in her autobiography Pimps, Whores, and Welfare Brats and her other book, Uncle Sam’s Plantation, I argue that embedded within her critiques of racial and economic liberalism, as they relate to welfare and the housing crisis, are Parker’s warnings of the dangers of moral hazard and unintended consequences. Parker asserts that the practice of racial and economic liberalism produces the problematic phenomenon of moral hazard and unintended consequences, which violates hallowed traditional ideals of small government, individual responsibility, and self-sufficiency that contribute to American exceptionalism. I further argue that by doing this Parker mistakenly places blame on African Americans for their circumstances, while omitting the complex interaction between individual choices, structural impediments, and societal racism that help determine African American life chances and opportunities. In addition, Parker’s emphasis on limited government and personal responsibility overlooks how institutional racism plays a role in marginalizing African Americans, particularly in housing, while leaving white racial hegemony intact. As I will show more fully, her facts do not match the historical or contemporary record.

Literature on Black Conservatism

African American conservatives have, on one hand, viewed themselves as providing an alternative to a black perspective that allegedly is steeped in perpetual victimization (McWhorter, 2000), and they provide various rationales for the numerous shortcomings that stunt African American personal, occupational, and economic growth. For instance, African American conservatives strongly emphasize the power of the individual and attributes of individualism (Smith, 2002). As they see it, the establishment of a collective consciousness is an unintended byproduct of racial oppression that forced black subjects to see themselves as belonging to a ‘community’ where interdependence was necessary. Even with the dismantling of systematic overt racism there is still an unhealthy nostalgia among African Americans to look favorably on the days where racial oppression forced living in a ‘communal’ state. This nostalgia manifests itself in the declaration of the failure of integration and desires to achieve ‘black unity’ through forms of separatism (Steele, 2006: 25–26). Therefore, according to some African American conservatives, the adoption of a mindset that values individualism and moves away from a collective consciousness holds many benefits for African Americans. For example, it can allow African Americans to be more ‘honest’ with themselves and others about their realities instead of feeling the pressure to adhere to a form of ‘group think’ (Wortham, 1981).

This honesty includes admitting that what really holds African Americans back from being fully successful in American society is not racism but forms of self-doubt (Wortham, 1981; Steele, 1990). According to various African American conservatives, in order for African Americans as a group to follow the path to a more successful existence in the United States they must first confront some painful and harsh truths in regards to such issues as black criminality, out-of-wedlock births, chronic poverty, and academic underachievement (Hamblin, 1996; McWhorter, 2000, 2003; Elder, 2001; McGlowan, 2007). Others argue that cultural behaviors and values have just as much of an influence in an ethnic or racial group’s success and can explain why other groups of color (Asians, Africans, and West Indians) tend to do better in the United States than African Americans (Sowell, 1981; McWhorter, 2000). The ‘tough love’ approach many African American conservatives adopt, according to Ronald Suresh Roberts (1995), has become their raison d’étre, for they see themselves speaking ‘truths’ that do not get voiced among African Americans. In fact, these ‘toughs’, as Roberts (1995) calls them, construct themselves as ‘truth tellers’ to rationalize the fact that they lack a substantive constituency. Dillard (2001) asserts that the only way African American conservative politicians can get beyond the depictions of them as ‘sellouts’ or ‘flunkies’ for the powerful white establishment is when they can demonstrate that their agenda appeals to a sizable number of African American voters (p. 173).

On the other hand, while claiming to be the ones courageous enough to face off with the realities that hold African Americans back in American society, particularly the community’s inability to move away from a victimized identity, these same conservatives tend to portray themselves as victims (insulted, censured, and mocked) of the reigning liberal ‘civil rights establishment’ orthodoxy within the African American community. Often African American conservatives will recall memories of growing up in the pre-civil rights era (Hamblin, 1996; Parker, 1997; Sowell, 2000), or experiencing the harsh racism of the segregated South (Foster, 1995; Peterson, 2003; McGlowan, 2007; Cain; 2011), or experiencing racism in today’s contemporary era (McWhorter, 2000; Phillips, 2006) as counters to charges they are ‘uncle Toms’ or out of touch with the African American majority. African American conservatives often charge that the grip the liberal left African American leadership has on the African American community prevents their ideas from getting a fair hearing and that there are more African Americans like them, referred to as the ‘black silent majority’, that share their views (McWhorter, 2003).

In addition to combatting the supposed hegemony of the liberal left African American leadership, African American conservatives also point to their struggles against a mainstream media that is biased towards liberals (Conti and Stetson, 1993: 27, 181; Elder, 2001; West, 2013). African American conservatives often speak of the challenges that come from articulating a conservative viewpoint, for example, experiencing feelings of loneliness (Steele, 1998). Roberts points out the irony of these conservatives proclaiming their outsider status while being ‘sustained by the culture’s most powerful institutions’ (1995: 3). Asante and Hall (2011) charge that at the core of the African American conservative agenda is a ‘self-hating turnkey’ (2011: 79), which is reflexively opposed to any of the gains achieved by the civil rights movement, the same movement they have also benefitted from. According to Ronald Walters (2003), African American conservatives will continue to experience limits in winning over the hearts and minds of the African American masses due to the fact that from ‘the Black perspective, radical conservatism evokes a sense of the intent to harm through public policy and a sense of betrayal by Blacks who adhere to that philosophy’ (Walters, 2003: 247). Still others, such as Christopher Alan Bracey (2010), optimistically argue the need for African American conservatism to be taken seriously as a viable political avenue for African Americans because the rise of conservatism within ‘African American politics, culture, and society will influence policy that will impact the social, political, and economic futures of African Americans’ (2010: 196). This is the context in which Star Parker’s voice has grown in influence within the conservative movement.

Star Parker’s Transformation from Welfare Queen to Media Pundit

Star Parker became known within right-wing circles for her autobiography about her experiences as a welfare recipient, a recollection that was as caustic as it was detailed, a point I will address further below. Ironically, the passage of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) one year before the release of Parker’s memoir provided further validation for those on the right of Parker’s descriptions and claims in her book about the harmful aspects of welfare. Parker’s conservative activism spans two decades, starting in 1991 when she became involved in a movement, spearheaded by the conservative social organization Traditional Values Coalition, to protest the Los Angeles school district’s distributing condoms in public schools. Parker has also worked with the Christian Coalition and other conservative Christian organizations. Parker’s visibility on the right increased tenfold when she landed on radio talk show host Rush Limbaugh’s radar after he saw a feature about her on ABC’s 20/20 news program. In addition to having Parker on his show, Limbaugh wrote the introduction to her book and heavily promoted it on his radio show (Prisock, 2003). With Limbaugh’s imprimatur Parker became an established African American figure on the right. She also founded the organization Center for Urban Renewal and Education (CURE), a think tank based in Washington DC, whose mission is to ‘Address issues of race and poverty through principles of traditional values, limited government and free markets’ (Parker, 1995).

While Star Parker does not have the same Ivy League educational background and professional credentials as her white counterparts Ann Coulter or Laura Ingraham, Parker’s presence in the national punditry is testimony to the right’s effectiveness in creating ‘talking heads’ from a variety of backgrounds to help influence the national discourse on various policy issues. With the assistance of a highly organized conservative media and intellectual infrastructure² (Brock, 2004; Lieberman, 2000; Ricci, 1993; Smith, 1993; Stefanic and Delgado, 1996), Parker was transformed from a popular social activist on the rise in conservative circles to a commentator called on by national media outlets such as CNN News to provide her thoughts and views on race and other issues. Parker’s rise was greatly assisted by her frequent appearances on various programs within the conservative media network. In addition to appearing on Rush Limbaugh’s radio show, Parker has also appeared on Fox News’ Bill O’Reilly and Sean Hanarity television shows, as well as various appearances on Christian Right programs such as Pat Robinson’s 700 Club. As Parker built up her exposure within the conservative community it was only a matter of time before she garnered the attention of liberal left media outlets such as MSNBC looking for an appropriate person to provide a counterview. Parker has also been able to penetrate mainstream entertainment, as she was once a co-host on ABC’s The View, a show aimed at women. As scholar David Ricci points out, television not only plays a significant role in how information is delivered but also how it is understood:

Moreover, with regard to public affairs, it is not just the intentional thrust of broadcast news and programs that affects viewers’ understanding of social reality. Comprehension and conviction are also shaped by ways in which television as an instrument conveys information. (Ricci, 1993: 84)

It is important to note that the right’s media network alone has given Parker a sizable audience, as Fox News regularly captures more viewers than CNN and MSNBC. This is the national stage on which she simultaneously performs in the role of a racial mascot and also reinforces the notion of America’s exceptionalism by imparting insights on various public policy matters in which she has no known formal training to validate her expertise. The right’s communications apparatus has also played a role in providing Parker with the opportunity to host a radio program in Los Angeles, to have a nationally syndicated column, and to author three books.³ Interestingly, the intellectual and media infrastructure of the right transformed Parker not just from an activist to media pundit, but also into a version of Antonio Gramsci’s organic intellectual. An organic intellectual has the main purpose, as Gramsci points out, of establishing or maintaining ‘social hegemony’ by winning the hearts and minds of the masses to the dominant group’s positions and interests:

The intellectuals are the group’s ‘deputies’ exercising the subaltern functions of social hegemony and political government. These comprise: The ‘spontaneous’ consent given by the general masses of the population to the general direction imposed on social life by the dominant fundamental group; this consent is ‘historically’ caused by the prestige (and consequent confidence) which the dominant group enjoys because of its position and function in the world of production. (Gramsci, 1999: 145)

The social hegemony Parker works toward maintaining is an idealized vision of American society where opportunities flourish best under a free market system that is liberated from government interference, while racism plays a minimal role in the continuing racial inequalities present in American society today. Finally, it needs to be pointed out that there is no left equivalent of Parker today. No progressive African American female grassroots activist has the exposure and access to as many media outlets as Parker does to provide a counter message.

Conservative Criticism of Welfare Capitalism

According to Parker, it is important to make the distinction that what is the root cause of the economic crisis, as she sees it, is not capitalism but a particular practice of capitalism:

But in fact, what we are watching is not a failure of markets, but the latest failure of the welfare state. … we see how government created one more entitlement – the right to own a house – and then advised an array of programs to subsidize in various ways ‘affordable housing.’ Like all welfare programs, the subsidies succeeded in influencing behavior, but the wrong behavior. (Parker, 2008)

According to Parker and other conservatives, various problems arise with a government that manipulates its economic system, such as capitalism, in a manner to provide solutions to an individual’s every need. First, the overarching reach of the state into every aspect of an individual’s life robs that individual of their liberty and freedom. Second, a government that promises to solve every problem people face in their journey through life establishes a distorted expectation from its citizenry, who now look towards government to do for them what they should do for themselves. In other words, society gets transformed into what is derisively known as the ‘nanny state’ where government is seen as the solution to all problems. This creates a heightened sense of entitlement and a reduced sense of individual agency. Finally, an expanded government not only drags down the productivity of the economy but it also produces and influences problematic behaviors from recipients of government largesse. This perspective of what constitutes welfare capitalism is what economist Gøsta Esping-Andersen identifies as a narrow view of welfare capitalism. According to Gøsta Esping-Andersen, ‘those who take the narrower view see it in terms of the traditional terrain of social amelioration: income transfers and social services, with perhaps some token mention of the housing question’ (Esping-Andersen, 1990: 1).

Star Parker and the Welfare Queen

It is not a surprise that Parker is a vociferous critic of all things related to welfare as she gained notoriety on the right with her ‘frank’ exposé of her experiences as a welfare recipient in her biography Pimps, Whores, and Welfare Brats. Parker’s book has all the elements to attract an eager conservative audience: Parker’s beginnings in a stable middle-class home where traditional values were stressed, her experiencing racism and developing a mistrust and hatred towards whites and, most importantly, her becoming adrift from her traditional upbringing and engaging in a wayward life. Parker’s description of her wayward lifestyle verifies all of the suspicions her conservative audience have about women on welfare: drug use, criminal activity, engaging in unprotected casual sex which produced multiple unplanned pregnancies that led to having a number of abortions, and the most notable one – the ability to, as Parker states, ‘quit my job at the Fotomat store, which paid $90 a week, and live on the county for three months until I had my abortion’ (Parker, 1997: 19). Parker has no problem portraying herself as the stereotypical ‘welfare queen’ Ronald Reagan spoke of in his cautionary tales about ‘big government’ during his campaign runs and tenure in the White House (Harris, 2009).⁴ One example of this is Parker describing the time she was out at a night club with her girlfriends and expressing anxiety about being pregnant, their response being, ‘Oh darling, don’t you know welfare will take care of you?’ (Parker, 1997: 16). Parker’s redemption provides further validation for conservatives, as she explains that her life turnaround came about through the influence of her pastor, conservative African American mega church minster Fred Price (Price admonishes both black racism and reliance on welfare), practicing abstinence, eschewing labor unions, getting her college degree, and becoming attracted to entrepreneurship. Parker is shrewd enough to have a full understanding of the audience she speaks to, as when asked why she has become so popular with white conservatives Parker responded, ‘One of the reasons I am so popular with those Republican people is that I validate some of the things they have been thinking for a long time now: Welfare is a waste’ (Prisock, 2003: 6). In Parker’s world, validating means presenting herself in the most stereotypical fashion of an African American woman whose own personal choices and behavior led to her becoming economically marginalized.

While this may have been Parker’s experience, research illustrates that the experiences of women on welfare are more nuanced and varied. For example, sociologists Kathryn Edin and Laura Lein illustrate in their study that single women on welfare do not automatically forsake work to live ‘high off the hog’ from welfare, or that welfare dulls the initiative to work, as many welfare recipients often take under-the-table jobs to augment the meager funds they receive from their welfare payments (Edin and Lein, 1997). The women in Edin and Lein’s study did not embody the stereotypical spendthrift, non-caring, sexually promiscuous, welfare queen characteristics Parker so readily embraces in her book. What is most problematic about Parker’s depiction and understanding of her life is that it reinforces the demonization and racialization of women of color on welfare. For example, Arizona’s Superintendent of Public Instruction found himself in the center of a controversy for a blog comment he made referring to welfare recipients, who he erroneously pointed out were mainly African American and Latina, as ‘lazy pigs’.⁵

There has been a long history of welfare being associated with African Americans and the denigration of African American women who receive assistance. As scholar Deborah Ward states, the media plays a centralized role in this by depicting welfare recipients ‘as African American, regardless of the group’s actual representation on the AFDC rolls’. In addition, the coverage of ‘poor African-Americans was usually negative compared to that of whites’, further reinforcing the mistaken notion that welfare is a ‘black thing’ (Ward, 2005). Parker’s castigation of welfare capitalism fits within the larger critique many conservatives have about social welfare in general, as the right dislikes any program that leads the recipients to think that what they are receiving is a ‘right’ or ‘entitlement’ rather than a handout they should be grateful for, and working hard not to be in the position of having to continue to receive. In addition, conservatives such as Parker are often concerned that social welfare programs not only produce false expectations but also diminish the need for personal responsibility from their recipients. The rationale behind this perspective is that, by having a program in place that will protect an individual from experiencing the consequences of their choices, they are more likely to continue engaging in the problematic behavior. For instance, as Parker sees it, welfare provided a cushion from the harsh realities of her poor choices, which allowed her to not fully deal with the consequences of her bad decisions. Or as Parker states, ‘I would have either been a financial burden upon them [her family] or the family of the man who impregnated me. … Now along comes Uncle Sam with my get-out-jail-free welfare card, and like magic I’m spared from the natural consequences of my reckless behavior’ (Parker, 2010: 94). This is a very narrow and distorted perspective on the realities of welfare recipients, but through this example what Parker is actually referring to is the problem known as moral hazard, which I address in the following section.

Star Parker, the Housing Crisis and the Problem of Moral Hazard

While on the surface it appears that Parker’s assertion of welfare capitalism’s responsibility in the housing crisis is race neutral, in that she does not explicitly point to African Americans or other groups of color as being the main cause of the housing bubble deflation, the inference that people of color are a causal factor comes from the strong association our society has with African Americans and any form of welfare. In a section of her second book, Uncle Sam’s Plantation, Parker rails about the mortgage bailout program put forth by the Obama administration, stating that the housing crisis is not a ‘failure of capitalism’ but instead could have never taken place if the ‘concept of private property was respected’ and ‘people were not subsidized by government to buy what they could not afford’ (Parker, 2010). Here Parker is embodying the defender of American exceptionalism by asserting that the problem does not lay at the feet of the American capitalist system, allegedly the best economic system in the world, to provide its participants the opportunity of social mobility. Instead, the culprit is the ever-intrusive government with its various policies and regulations that purportedly reduce American capitalism’s efficiency while also creating such dynamics as moral hazard, which produces counterproductive incentives and behaviors.

The theory of moral hazard states that if an individual is shielded from the consequences of their actions then they will continue to make poor choices. Instead, remove the protective mechanism and expose the individual to the risks of their actions and the individual will not only have to grapple with the consequences but, most importantly, this experience will cause them to change their behavior. The origin of the concept of moral hazard comes from the 19th-century insurance fire trade. For the insurers of that period moral hazard represented a mixture of poor character and temptation, which they saw themselves as having an obligation to eradicate from the industry. By electing not to provide insurance to those that were deemed as possessing bad character and by constructing their polices in a manner that did not encourage poor behavior or temptation from those they viewed as being of good character, insurers felt this was the best way for their industry to control moral hazard, the undesirable side effect of providing insurance (Baker, 1996; Rowell and Connelly, 2011). Legal scholar Tom Baker aptly sums up the crux of the moral hazard argument by stating, ‘the conventional lesson taken from the economics of moral hazard is that “less is more”’ (Baker, 1996: 238). According to the ‘less is more’ logic, reducing or eliminating welfare will decrease poverty because those who previously depended on the provisions to survive will have to do what everyone else does, which is to look for work in order to meet their basic needs – or else starve. The same reasoning presumably follows with health insurance; less health insurance will cause individuals to be more mindful about their well-being and less inclined to make use of health services, knowing they will have to bear the majority of the costs, therefore reducing the costs of health care. This perspective is not only counterintuitive it is also counterfactual, as a study by the Rand Corporation showed that individuals who had less insurance did not take better care of themselves (Brayen, 2014: 37).

Parker’s Mis-assertion of Moral Hazard

Parker’s declaration that government intervention is at the crux of the housing crisis and accompanying credit market collapse is mistaken on a number of fronts. First, history has shown that government intervention in housing has been more of an asset than hindrance. The New Deal of the pre and post Second World War era has been recognized as invigorating both the demand and supply side of housing, while also viewed as a key mechanism in not only elevating millions of, mainly white, Americans to the middle-class but also shoring up the legitimacy of the capitalist state.⁶ Second, Parker’s inference that the trouble with government’s involvement in making homeownership accessible to Americans began around 1977,⁷ when the federal government established the Community Reinvestment Act, is inaccurate. This is important to point out as many conservatives view this piece of legislation as a prime example of ‘activist governmental overreach’, an instance when the government interferes with the mechanism of the free market to address a social issue. The Community Reinvestment Act of 1977 was created to address the chronic problem of financial institutions systematically underserving the credit needs of low to moderate-income communities. These communities were often disproportionally of color and victims of the practice known as redlining, the use of a schematic layout of urban neighborhood census maps by lending institutions to determine areas that were consider safe to provide loans to and those that were not. The areas coded in red were deemed too risky, and thus residents in those areas were often denied home loans. Because mortgages that originated with CRA banks went to a disproportionate number of minorities and the emergence of anecdotal stories from bankers that they felt they were under extreme pressure from the government to provide loans to minority homeowners, even if they were not eligible, or face sanctions, led various conservatives to label the CRA another problematic affirmative action program created by liberals. For example, outspoken conservative pundit Ann Coulter said as much in an article titled, ‘They Gave Your Mortgage to a Less Qualified Minority’:

Before the Democrats’ affirmative action lending policies became an embarrassment, the Los Angeles Times reported that, starting in 1992, a majority-Democratic Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains. (Coulter, 2008)

And the problem with this particular so-called affirmative action program is the lowering of standards, as Coulter sarcastically states. ‘instead of looking at “outdated criteria,” such as the mortgage applicant’s credit history and ability to make a down payment, banks were encouraged to consider nontraditional measures of credit-worthiness, such as having a good jump shot or having a missing child named “Caylee”’ (Coulter, 2008). Yet, the main purpose of the Community Reinvestment Act, as the Board of Governors of the Federal Reserve System states, is to ‘encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations’ (Board of Governors, 2011; emphasis added). As a way to ensure that banks and other lending institutions who were covered under the CRA were in compliance with its mandate, the act required that the financial institution’s lending records were to be periodically reviewed to see if it was meeting the community’s lending needs, and when the institution looked to do such things as open new branches its lending record was one of many criteria used by the federal government in deciding whether to give authorization. For conservatives this is an example of the problems with ‘big government’: instead of the government staying out of the way and letting the mechanism of the free market operate in the way it was intended, the federal government has to interject itself in the process to produce an outcome that it deems is socially desirable.

The Community Reinvestment Act of 1977 was not the main cause of the housing crisis, as many conservatives such as Coulter and Parker like to claim. The majority of toxic mortgages that produced the crisis actually came from mortgage lenders that were not covered under the Community Reinvestment Act. To illustrate this point, the majority (75%) of subprime mortgages responsible for the credit market meltdown were from institutions not affiliated with the CRA, such as Countrywide, an independent mortgage lender, who was a major participant in the subprime mortgage catastrophe. The remaining 25 percent of those loans came from CRA-affiliated banks (Barr, 2008). The data also illustrates that banks operating under CRA guidelines were 66 percent less likely to offer applicants high-cost loans (Traiger and Hinckley, 2008). As the Center for Responsible Lending maintains, ‘the predominant players in the subprime market – mortgage brokers, mortgage companies and the Wall Street investment banks that provided the financing – aren’t covered under CRA’ (Center For Responsible Lending, 2008; Park, 2008). Other studies, such as the joint study commissioned by the Federal Reserve Banks of Boston and San Francisco (Kroszner, 2009;⁸ Laderman and Reid, 2009), the study by the Federal Reserve Bank of St. Louis (Hernández-Murillo et al., 2012), and the study by the University of North Carolina’s Center for Community Capital (Reid et al., 2013), also refute the claim that the CRA was responsible for the subprime crisis. Therefore Parker’s moral hazard logic is misplaced and inconsistent because, first, if the ‘people were not subsidized by government to buy what they could not afford’ Parker speaks of is in reference to the Community Reinvestment Act then, as illustrated above, the data shows loans distributed under the CRA were less likely to turn toxic than those handed out by financial institutions not covered under the CRA. Consequently, the CRA was not the enabler that conservatives, such as Parker, like to claim as the cause for Americans to overreach in purchasing homes. Therefore moral hazard was not in play in this instance.

Also, at the time when the economic crisis began the financial services industry was operating under less, not more, government regulation. For instance, the passage of the Financial Services Modernization Act, also known as the Gramm-Leach-Bliley Act of 1999, repealed the Glass-Steagall Act of 1933 that outlawed the co-mingling of commercial banking with securities firms, thus allowing for the creation of ‘too big to fail banks’ like the merger between Citicorp and Travelers. The financial industry received more than enough from the politicians in Washington to protect and enhance their interests, such as the timid conditional terms the Obama administration put in place for the recipients of TARP to receive bailout money, and the vigorous lobbying by Wall Street lobbyists that produced a weakened final version of the Dodd-Frank Act that passed (Rivlin, 2013).

If Parker’s ‘subsidized by government’ remark is in reference to the home mortgage refinance programs put forth by the Obama administration, her charge here is equally dubious. For those homeowners who knew the mortgage terms they agreed upon would be a financial stretch could not have known with any certainty that if they should run into trouble meeting their payment obligations there was going to be a government program created to provide them with relief. Instead they fell prey to what I call the fallacy of ‘we’ll cross that bridge when we get to it’ thinking. Assuming that the housing merry-go-round of ever increasing prices and value would not end anytime soon, many of these homeowners did not have in place contingency plans to deal with the reality that the housing ride would eventually stop, or the possibility of some unforeseen development such as unemployment. Instead, many planned on having the option of refinancing which, to their dismay, some homeowners discovered was not a viable option for them because they either could not get refinancing or the refinancing terms only made their problems worse.

Second, the mortgage rescue program established by the Obama administration has only provided relief to a small segment of Americans with troubled mortgages due to a variety of issues (Associated Press, 2009; Delany, 2012).⁹ Therefore it does not appear that it was in the best interest of ‘irresponsible homeowners’ to knowingly enter into unsound financial obligations with the expectation of the government coming to the rescue. Finally, the money that was allocated from the Trouble Assets Relief Program (TARP) for mortgage relief in no way matched the huge monies provided by the government to bailout the large financial institutions, such as Bank of America, whose actions brought on the crisis in the first place. Of the US$700 billion distributed by the government in its TARP program, US$594 billion was directed towards banks, insurance companies, automakers, and an assortment of other entities. Yet, of that US$594 billion only US$50 billion was earmarked for mortgage relief for homeowners (Ericson et al., 2012). This raises an interesting question: why isn’t Parker railing about the moral hazard produced by the government’s bailout to the banks and other financial institutions? Clearly this is an instance where financial institutions are not being brought to bear the full brunt of their actions but instead being rescued, at the expense of taxpayers.

In the same manner, as scholar Deborah Stone points out, advocates for streamlining our health care system argue that an overly generous system encourages insured individuals to overindulge by subsidizing their actions without regard to the impact their behavior has on everyone else (Stone, 2011), especially taxpayers. The same, and more justifiable, argument can be put forth for the selfish action taken by those on Wall Street to expand their profit margins without any regard to the deleterious effects it would have on the national and global economies. Yet Parker’s response to this issue is to put forth a feeble defense of the financial institutions with the rationale that those on Wall Street were ‘confused’ about where to place their allegiance.

The greedy part, or, if one wishes to be forgiving, the confused part, of the Wall Street guys is their willingness to play ball with politicians over these years in turning our free country into a welfare state. … But instead of recognizing basics – the principles of limited government and traditional values – and fighting political pressures to undermine these basics, our financiers were happy to support the welfare state model. (Parker, 2008)

Because Parker is so devoted to the free market and its virtues, the only problem she can have with the financiers is that they fell prey to working against their interests or having a moment of false consciousness by supporting politicians that heralded the welfare state.

To keep up her attack on ‘big government’ Parker repeats a favored charge by conservatives by laying blame squarely in the laps of Freddie Mac and Fannie Mae, the government sponsored enterprises (GSEs) that are public traded companies whose main role is in securitizing mortgages. Parker asks the question, ‘Why would a mortgage originator sell a mortgage that couldn’t get paid back?’ One answer is the great motivation of potentially accumulating huge earnings. As sociologist John Bellamy Foster and scholar Fred Magdoff point out, the main incentive for the creation of risky loans by mortgage providers was the enormous monetary earnings as ‘the purchase costs covered by these subprime mortgages included a rich rake-off in the form of commissions and fees to a vast predatory swarm of intermediaries in the brokerage and mortgage generating “industry”’ (Foster and Magdoff, 2009: 96). Parker argues the main reason mortgage originators created the problematic loans is because these companies knew that the GSEs would come to the rescue. In essence, Freddie Mac and Fannie Mae are, in Parker’s view, the enablers of moral hazard. This is a misleading argument on a number of grounds. First, the majority of the toxic subprime loans were backed by the private sector because the loans did not meet the standards set forth by Freddie Mac or Fannie Mae (Pressman, 2008). Second, the mortgages that originated for securitization by private companies had higher default rates than those securitized by Freddie Mac and Fannie Mae (Min, 2011; Elul, 2009; Ashcraft and Schulermann, 2008). Third, while both Freddie Mac and Fannie Mae definitely had problems that put them into trouble when the housing bubble burst, a study by the Federal Reserve Bank of New York identifies several causes of the crisis that point to lenders, borrowers, credit rating agencies, and investors but ‘no blame for Freddie Mac or Fannie Mae which had little or nothing to do with the entire situation’ (Pressman, 2008).

The ultimate purpose of Parker’s insinuation that the federal government’s involvement before and after the housing crisis produced the problem of moral hazard is twofold. First, she aims to discredit the legitimation of government providing assistance to Americans by putting into question the morality of such governmental action and thus undermining public support for such programs (Dembe and Boden, 2000: 266). For example, her suggestion that the mortgage relief program is an instance of an overprovision of insurance is meant to construct this policy as being a moral problem or moral danger (Hale, 2009: 2). Second, her focus on the government’s alleged role in the enabling of homeowners ‘immoral’ behavior diverts attention away from the actions of other social actors and how their actions contributed to creation of the crisis (Dembe and Boden, 2000: 264). This is a point I address in an upcoming section.

Conservative Meaning of ‘Unintended Consequences’

When Parker states, ‘Like all welfare programs, the subsidies succeeded in influencing behavior, but the wrong behavior’ (Parker, 1997), in addition to moral hazard she is also referring to the problem of ‘unintended consequences’. The term ‘unintended consequences’ refers to a development or outcome that was not planned by a specific action. This unanticipated development can be either a positive or negative outcome, but as legal scholar Martha McCluskey insightfully points out, by the end of the 20th century the term unintended consequences ‘signaled declining faith in the 20th-century regulatory state and its welfare policies’ (McCluskey, 2012). An unintended consequence is a term conservatives have accumulated plenty of rhetorical capital from in their arguments against equalitarian policies. One prime example is conservatives’ argument that the War on Poverty caused more problems than it fixed. Conservatives like to point to the 1960s, when they claim the creation of ‘social engineering’ programs by social scientists, particularly sociologists and liberal policy-makers, to combat poverty and inequality in American society ended up creating more problems such as increased dependency and reduced work ethic among welfare recipients, and helped support a ‘culture of poverty’ among its recipients. But, more importantly, conservatives’ use of the term ‘unintended consequences’ helps to revive the view that inequalities brought about through the vicissitudes of market operations are natural and only so much can be done to either reduce or eradicate them. Therefore, according to Parker’s logic, the emphasis by the government to increase homeownership among groups of color and lower-income Americans is noble in its intention but flawed because of the alleged pressure government placed on financial institutions to make loans to many in the aforementioned groups. While this did not qualify them, it produced a mentality among individuals seeking to own homes to do ‘whatever it took’ to acquire a house. As a result, honest law-abiding homeowners end up bearing the costs of others’ malfeasance.

This argument is directly parallel to the argument used against welfare. In both arguments conservatives, like Parker, criticize the government for being the main cause of the problem by enabling or encouraging bad behavior or a dysfunctional culture by the receivers of its largess while also castigating the recipients (African Americans, groups of color, and low-income Americans) for needing the assistance in the first place, which comes at a sacrifice to the law-abiding tax-paying solid American citizens (whites). This is exactly the sentiment business reporter Nell Cavato expressed on air when he stated, ‘I’m just saying, I don’t remember a clarion call that said, “Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster”’ (Kane, 2009). In this instance, groups of color, particularly African Americans, get equated with being poor loan risks and therefore the cause of the housing crisis. This is similar to the manner in which African Americans get associated exclusively with welfare.

Blaming the Victims, Racism, and the Housing Crisis

The unintended consequences and moral hazard narratives direct blame to the victims while, unfortunately, also deflecting attention from the harm institutions and processes inflict that further enhances inequality and marginalization (McCluskey, 2012). For example, Parker and Cavato are so concerned that the overall economic system was derailed by ‘misguided affordable housing’ policies that they overlook the manner in which racism played a major role in the subprime meltdown. Like welfare, while the majority of homeowners who ran into trouble with their mortgages were white, African Americans and Latinos were disproportionately impacted. The prominence of African Americans and Latinos in euphemistic (risky candidates for loans, irresponsible homeowners) conservative discourse places undue focus and blame on them for the situation instead of directing criticism towards the practices of the financial industry.¹⁰

For example, nowhere in Parker’s thoughts on the housing crisis and critique of welfare capitalism does she talk about the impact reverse redlining practices played in evaporating accumulated wealth from African American neighborhoods. By reverse redlining I mean the specific targeting of predatory loans (subprime loans that come with usurious interest rates, high fees, and punitive measures for missing a payment) to African American and Latino neighborhoods by lenders. According to former Wells Fargo loan officer Elizabeth Jacobson, African American neighborhoods in cities like Baltimore were prime targets for the bank’s subprime loans. Wells Fargo’s management would ‘encourage the loan officers, the subprime loan officers, to go into Baltimore city and target the churches, the African American churches, to get a relationship going with the minister or the reverend at the church and try to get that person to schedule some sort of meeting’ (Goodman and González, 2009). A culture of racism permeated institutions like Wells Fargo, as stated in affidavits by Wells Fargo employees where ‘they called subprime mortgages “ghetto loans”’ and were instructed by their supervisors to solicit in heavily African American areas where residents ‘weren’t savvy enough’ to ‘understand their exploitation’ (Rothstein, 2012). In other instances, subprime loan officers amongst themselves referred to their African American customers as ‘mud people’, and one branch manager went further by calling them ‘niggers’ (Gottesdiener, 2013). Given the presence of an internal racist culture in financial companies such as Wells Fargo, it is not surprising to see data showing that African American homeowners, in comparison to their white counterparts, are twice as likely to be forced out through actions taken by the banks (Gottesdiener, 2013).

Bank of America reached a settlement brought on by the Obama administration’s discrimination lawsuit that charged that the bank’s Countrywide mortgage subsidiary had discriminated against African American and Latino homeowners by charging them higher interest rates for their mortgages than similarly qualified white counterparts (Gottesdiener, 2013). In fact, many African American homeowners who were eligible for prime loans were often shifted into the riskier subprime loans in comparison to their white counterparts (González-Rivera, 2009).¹¹ Lack of financial literacy may seem like a plausible cause for this discrepancy, but when it comes to mortgages Americans of all stripes demonstrate a low level of substantive knowledge about them. Indeed, in her study economist Annamaria Lusardi found that one-fifth of her respondents did not know if they had an interest only or an interest only option mortgage (Lusardi, 2011). As Lusardi states, ‘This type of confusion is worrisome as mortgages, in particular mortgages that have been issued recently, are rather complex contracts and borrowers need to have a full understanding of the mortgage contracts they engage in’ (Lusardi, 2011).

Another explanation that has been given is that African American homeowners were either not diligent enough in doing the research beforehand to know what type of loan they should have been offered, or they were just too indulgent. What this critique misses is the deliberate manner in which mortgage companies committed fraud on their customers. For example, the terms of some loans were created in such confusing language that it became impossible for many homeowners to decipher what the terms actually meant. Or in other cases brokers lied to the applicants outright about what the actual loan would be, only for the applicants to discover after they had signed the contract that they had been misled. And finally, to the dismay of some homeowners, they discovered later that the broker had included terms in the contract that were not agreed upon during the negotiations process (Gottesdiener, 2013).

One other important aspect that Parker and other conservatives overlook in their analysis of the housing crisis is the role historical processes like residential segregation played in creating vulnerable African American neighborhoods. As sociologists Doug Massey and Jacob Rugh observe, the historical legacy of residential segregation produced through redlining and other institutional discriminatory practices created black neighborhoods that are often underserved by mainstream financial institutions. Instead, payday lenders, pawnshops and check-cashing places tend to dot the landscapes of black neighborhoods, particularly poorer neighborhoods (Rugh and Massey, 2010). When the housing boom took off this made black neighborhoods very attractive for aggressive marketing by subprime lenders. As Rugh and Massey point out, past actions producing housing inequality helped produce the housing inequality we see today. Because African Americans had been previously denied access to more affluent urban and suburban areas, they were denied access to opportunities of acquiring safer and fairer loans. This in turn led to the creation of highly concentrated black areas lacking in access to more conventional lending providers. In essence, old discriminatory practices help create a captured market ripe for subprime lenders and riskier loans (Rugh and Massey, 2010). In short, race was central to which communities were hit the hardest and treated unfairly, as ‘the large racial differentials in subprime lending, segregation structured the causes of the crisis, as well as the geographic and social distribution of its costs on the basis of race’ (Rugh and Massey, 2010).

The combination of a legacy of historical housing discrimination, banks targeting neighborhoods of color with predatory loans, fraudulent practices by mortgage companies, and the housing downturn has led to a decimation of African American personal wealth and the wealth embedded within their neighborhoods. For instance, according to a study conducted by the Pew Institute, the wealth holdings of African Americans dropped by more than half during a four-year (2005 to 2009) period (Kochhar et al., 2011). In Parker’s analysis institutional discrimination and its concomitant developments never occurred; instead, the main culprit of the economic crisis and housing downturn is an over-reaching government that ‘enables’ homeowners whose behavior equates to that of the omnipresent ‘welfare queen’ she comfortably confesses she once was.

Conclusion

Although Parker has no formal social science training or financial expertise, her viewpoint on social issues like welfare and the housing crisis has not hindered her from garnering attention from many on the right. In fact her lack of credentials is viewed as an attraction because the ‘common sense’ manner in which Parker presents her thoughts adds to the belief that Parker speaks to and for the ‘everyday’ American. In addition, Parker’s disbelief in the continuing presence of racism and admiration for an idealized American society reaffirms conservative views on the present-day realities of life in the United States. Yet, as long as Parker continues to overly focus on the shortcomings of African Americans while also chastising them for not fully ‘embracing’ principles that make America ‘exceptional’, she will continue to be viewed by her peers as a ‘racial mascot’. For conservatives the advancement of African Americans has been problematic, not in the fact that it has happened but how. Conservatives have capitalized politically from the racial tensions around policies like affirmative action, anti-discrimination employment laws, and busing by proclaiming these policies come at the cost of whites’ well-being. In their view, by government intervening in the practices of the free market system to assist African Americans in achieving social mobility, African American advancement happens in zero sum contexts where black gains mean white loses. Unfortunately, the views of African American conservatives like Star Parker only further this belief rather than help refute it.

Footnotes

Acknowledgements

I would like to thank Michelle Stephens, Dean Robinson, Douglas Porpora, Gayle Tate, and Edward Ramsamy for their valuable feedback on earlier versions of this article. I would also like to extend my gratitude to the editor and reviewers for their insightful suggestions. Any errors or oversights remain the sole responsibility of the author.

Funding

This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.

Notes

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