The banking system and community reinvestment

The following comment was filed today with the Board of Governors of the Federal Reserve:

Board of Governors of the Federal Reserve System

Docket No. 12-1723 and RIN 7100-AF94

Comment

Introduction

The following comment is filed in response to an Advance Notice of Proposed Rulemaking (“ANPR”) issued by the Board of Governors of the Federal Reserve System (“Board”).  This comment addresses Question 1 in the ANPR which asks the following:

“Does the Board capture the most important Community Reinvestment Act (“CRA”) modernization objectives? Are there additional objectives that should be considered?” 

The answer to this question is no, the Board does not capture the most important CRA modernization objective and that an additional objective should be considered.  The most important objective this modernization initiative should capture is to expressly define what is meant by the word “community.”  Neither rule or statute defines the word “community”, and the Board should use its rulemaking to expressly define the term.  By expressly defining “community”, targeted credit will be created leading capital to flow to its most productive use, generating returns for community resources and the lending banks, and aiding the Board of meeting its dual mandate of price stability and full employment.

Argument

No amendment to 12 CFR Part 228 Community Reinvestment (Regulation BB) can be made until the term “community” is properly defined.  The lack of clarity in the definition could result in capital not flowing to entities that can leverage capital to produce income, employment, and returns to and of capital. 

To create a sustainable, stable, and prosperous Caribbean American community in the United States, it is important that banks, as information search agents and intermediaries between savers and entrepreneurs, be able to identify the resources that can be employed to generate stable income and returns to capital. Race, ethnicity, and even income itself should not be the prime information targets for banks.  Banks should be targeting communities that are built on resources i.e., mining, farming, creative associations, manufacturing, etc., where the controlling interests of these resources or activities are controlled primarily by minority groups and employment resulting from exploitation of these resources or activities flow to members of minority groups with controlling interest in the resources or activities.

Targeting capital and credit merely toward income groups will dilute the impact capital and credit can have on increasing income for and employment of minority groups tied directly to resources and activities that generate income.  In other words, it would be a waste of capital merely to approve credit for any borrower who does not have an ownership interest in the resource that the community relies on.

In addition, from a cost-benefit perspective, there would be less waste of funds where credit is targeted to a resource based on present value of a future income stream from a community-owned asset.  The Board would be able to better quantify returns on the investment by accounting for jobs created by the exploitation of a community-owned asset.  By accounting for returns to the investment and jobs created, the Board has another factor to consider when meeting its mandate of full employment and stable prices.

Conclusion

To get to this point, where the Community Reinvestment Act of 1977, helps the Board meet its dual mandate, the Board should recommend changes in the statute that expressly defines community as an association of ethnic minorities built on the ownership or control of an income-generating resource or asset.  This stricter definition would better target credit and capital to an activity that is generating income and employment for an ethnic group on a whole.  

Joe Biden can’t do anything about racism. He has to know what it is first.

With all the attempts by the far left and the far right to resurrect the year 1968, racism is again at the forefront of the national political discussion. Joe Biden is campaigning in part on a platform asserting that he rather than Donald Trump is capable of stitching up America’s social fabric. Can Joe Biden do anything about racism in America? Having offered nothing of policy substance on the issue to the liking of American Blacks after 47 years in national politics, it is unlikely that he can. Beyond his apparently ineffective Washington tenure, I offer three reasons why Mr Biden can’t do anything about racism.

First, Mr Biden cannot even define racism. Mr Biden has not provided a clear, cogent definition of what racism is. Mr Biden hopes that people view racism the way U.S. Supreme Court Justice Potter Stewart described pornography: “I know it when I see it.” Unfortunately, the definition of racism has gone from the use of political, legal, and economic systems to keep a certain group oppressed due primarily to their phenotype and lineage to an individual not liking another individual because of bias against their looks, language, and culture.

It is easier in the 21st century to call any individual a racist. This ease of identity attack, where racism has been dumbed down to name calling on steroids, makes it easier for candidates to push the emotional button and extract the black vote. Mr Biden has shown that he will not hesitate to push the button to get blacks in line.

Second, Mr Biden doesn’t understand the philosophy of America’s creation. Mr Biden is listening to his vote aggregators who have been using the narrative that America was built on slavery and racism. This narrative is false. America was built on a world view of manifest destiny, a world view that was refined over a four century period of western civilization’s expansion. Western man’s pursuit of global economic and political domination used non-western European human resources i.e. enslaved Africans as tools, but his reason for expanding was to spread his value system, ensuring that his philosophy flowed through the world via trade in goods, services, and ideology.

Given this world view, the only role the African played was that of chattel property. The African was so different that the western European could see no other use for him but to use his physicality as a tool for helping bring the vision into reality. Again, America was built on a philosophy. Slavery was just a tool.

Third, blacks were not and will never be fully incorporated as Americans because they contribute no value to the western European world view. Mr Biden hopes to govern over a social-political-economic construct that only incorporates groups that, at a minimum, have a lineage that traces its history to Europe; to the characteristics that make the lineage European. The lineage of blacks do not include original European characteristics. Any European characteristics exhibited by blacks today are merely imitation.

When the American black was freed from chattel slavery, he lost any value that the American social-political-economic system sought to extract. No executive action on Mr Biden’s part or legislation proposed by Mr Biden and sponsored by a fellow Democrat in the Congress can legislate a fabricated value that blacks can claim to then provide. In other words, legislation cannot create “whiteness” in blacks.

The closest blacks come to wrapping themselves in whiteness is through consumerism. I won’t expound here, but American blacks have overextended themselves on credit merely to keep up with white America much to the economic detriment of blacks.

So, how will Mr Biden use the narrative of racism to buy the American black vote? Fortunately for Mr Biden, blacks have not done the critical thinking necessary to deconstruct the definition of racism. The current state of mind of blacks finds it difficult to fathom their status as black in America as merely the result of a trade transaction that merged distinct African tribes into an economic asset. In telecommunications we call this multiplexing, where multiple signals are combined onto a single frame, making communications more efficient to manage.

It is not in Mr Biden’s interest to share this reality about being black in America. As long as Mr Biden proposes legislative packages that address basic needs i.e. healthcare, food stamps, affordable housing, etc., or, in the case of American black elites, more affirmative action set aside programs and government hiring, Mr Biden won’t have to do much.

Otherwise, for those hoping for a solution to the problem of racism, they are in for another multi-generational wait.