Getting in the way of a good scapegoat

So what just happened with the world-wide financial system? According to blogger Alex Blaze (whose credentials are unknown), perhaps it was because:

Massive deregulation caused an explosion in the buying and selling of arcane and opaque securities, creating a huge bubble (bigger than all the money in the whole world put together!) that burst as real wages dropped, bad loans stopped being paid, and investors started to ask for real money on their investments.

But that explanation is woefully inadequate to a certain segment of Americans for several reasons:
1. It finds fault with free market fundamentalism, the foundation of conservatism
2. It places the blame on Republicans and a smaller group of "fiscally conservative" Democrats
3. It might usher in an era of increased regulation and raise class consciousness to where Americans are less willing to accept income inequality

So conservatives have started a counternarrative, blaming the current housing crisis on any of a number of factors, such as Fannie Mae, Freddie Mac, the Community Reinvestment Act, and poor people who couldn't repay their loans. By extension, the assault is on Democrats, social justice, and racial minorities.

The Community Reinvestment Act was designed to end "red-lining," where banks discriminated because of where the borrower lived. It requires banks to give money to low-income borrowers. And, of course, "low-income" borrowers are really people who are so messed up they can't hold a job and can't afford a house and are certainly incapable of repaying a mortgage. Which means the mess was caused by Democrats and affirmative action for mortgages. But don't let the facts get in the way of a good scapegoat.

And those facts?

Only a quarter of the faulty subprime mortgages came from institutions subject to the CRA. And those that were under the law made fewer dangerous loans.

Fannie and Freddie weren't allowed to take part in subprime mortgages. They can only work with loans with down payments and documented income.

If a bank makes a loan to a borrower they know cannot repay the loan, why does the borrower get the blame and not the bank? Doesn't that prove the bank's incompetence? For the record, the bank makes the loan because they get a fee for creating the loan. The loan is sold to someone else so the bank doesn't care whether the loan is repaid or not because they already have their fee.

While bad loans are at the heart of the problem there were other things that magnified it: deregulation and credit default swaps that hid the value of loans.

So why is that other story being pushed? The pushers can claim (other than "It's the Democrat's fault") such things as the problem isn't deregulation, but over-regulation, or the problem is dangerous minorities.

That last bit resonates when we might be electing our first black president while Palin stokes the fires of racism. Those pushing this particular story can claim the country will be screwed if Obama is elected (meaning we're not now?).

Stir that brew and add a bit more seasoning: McCain, the war hero, is being humiliated -- by black man -- and some people are taking that humiliation personally. As Obama pulls us out of Iraq (and a conservative goal of using Iraq as an American base to subdue the rest of the region is discarded) there will be calls that America was stabbed in the back by liberals (a claim that was made in Germany at the end of WWI and set the groundwork for WWII). The coming recession will be long and hard. All that means the racial hatred will bubble for most of the first term of an Obama presidency.

America used to be above such things. But the temptation to abuse racism to advance politics may be too strong to resist. In the second debate McCain hit most of the counternarrative points mentioned above. Will he do it in the third? (I'm not going to watch and will only hear about it in tomorrow's news).