In my recent Utah Law Review piece, Racial Coding and the Financial Market Crisis, I painstakingly lay out the underlying causes of the 2008 mortgage crisis. I identify fourteen (14) primary causes of the crisis, noting that the complexity of the forces that gathered to nearly derail the global economy, should not be piece-meal identified as singular causes of the crisis, because doing so fails to recognize the true nature of the collapse and is simply dangerous partisan politicking. Among the fourteen causes of the collapse, I identify (a) the Commodity Futures Modernization Act; (b) predatory lending; (c) credit rating agency failure; (d) predatory borrowing; (e) the Gramm-Leach-Bliley Act; (f) governmental cover (including HUD and the GSEs); and (g) Fed policy failure, amongst several others.
As if from a script of "what not to do in the face of financial failure," and as identified by nobel laureate Paul Krugman in his "Rabbit Hole Economics" NY Times Op-Ed, the Tuesday, October 11th Republican Presidential debate highlighted a series of candidates who are attempting to "piece-meal" identify a singular cause of the crisis and it is this: The Government. Failing badly to deliver economic messages of job creation and recovery, instead the candidates appear hell-bent on tasking the government with the fault of the financial crisis. Nothing proposed even begins to deal with the underlying causes of the crisis, and how to protect against one in the future. In addition, the same policy positions that led to the mortgage meltdown in the first place are now being touted as economic messages of hope (i.e., more tax cuts, less regulation of the capital markets, etc.).
In my Utah piece, I name this governmental blaming as "racial coding." If we can deflect attention from the failures of deregulation, shadow markets, unregulated over-the-counter trading of derivatives, and Wall Street executive recklessness, and instead, shift the blame onto our nation's minority poor, entering into loans they had no business purchasing through "governmental social engineering," then we will forever fail to deal with the true causes of the crisis and will bind ourselves to a repeat performance of economic failure.