Doug Bandow

The Unending Racial Spoils System

The federal racial spoils system was one reason for the financial crisis.  The Community Reinvestment Act was used to pressure banks to lend to people in inner-city neighborhoods irrespective of their ability to repay the loans.  In this way the CRA contributed to the cascade of bad mortgages, foreclosures, and housing price declines.

But the political hustlers who win votes by manipulating the federal government for racial purposes haven’t finished.  Leading members of the Black Caucus are opposing financial reform unless the Obama administration bails out well-connected firms owned by African-Americans.  So much for moving America towards a color-blind society.  Money and benefits are to be distributed along racial lines.

Reports the New York Times:

One of most intriguing mysteries here in recent weeks is why members of the Congressional Black Caucus have chosen to buck their party and president in trying to stall financial regulation reform.

The answer lies at least in part with an aggressive lobbying campaign by a troubled New York City-based radio broadcasting company, Inner City Broadcasting, whose co-founder is a prominent New York politician and businessman, Percy Sutton.

In a rare break with President Obama, the caucus, made up of black members of Congress, is holding back support for the legislation because it wants the administration to help minority-owned businesses, including Inner City, whose financial plight has been specifically identified in meetings with top administration officials.

Inner City Broadcasting, which owns 17 commercial stations nationwide and was co-founded in 1971 by Mr. Sutton, faces a possible financial collapse because of pressure by Goldman Sachs and GE Capital to repay nearly $230 million in debt, Pierre Sutton, his son, said in an interview Wednesday.

Inner City has been battered by declines in advertising, as have many stations around the country, which have experienced drops of 10 percent or more in the last year because of the recession and the move of advertisers to the Internet.

While others are suffering, too, Black Caucus members and lobbyists for Inner City in a series of meetings have pressed the administration for special help for black-owned broadcasters like Inner City, participants in the meetings said.

Caucus members made their case about minority-owned businesses directly to the Treasury secretary, Timothy F. Geithner, and the White House chief of staff, Rahm Emanuel, last month.

In pushing its cause, Inner City hired a prominent Washington lobbying firm, the Podesta Group, which assigned to the case a former senior aide to Senator Charles E. Schumer, Democrat of New York, and a former executive director of the caucus.

Mr. Sutton, even today at age 89, remains a prominent African- American power broker in New York City. The father and son have been major campaign contributors to one of the leaders of the caucus, Representative Charles B. Rangel of New York, who is also a protégé of the senior Mr. Sutton.

Members of the caucus asked the administration to squeeze lenders like GE Capital and Goldman Sachs to renegotiate their loans with Inner City and other black-owned radio stations, arguing that these financial institutions themselves had already received federal assistance. Some caucus members even pushed to include black-owned radio stations in the bailout.

“There is a lot of concern about Inner City Broadcasting,” said Barney Frank, Democrat of Massachusetts, the chairman of the House Financial Services Committee, who set up one recent meeting with Mr. Geithner and Mr. Emanuel at the request of the Black Caucus.

Mr. Frank said the radio stations were only one issue raised by the caucus, and that others included financial difficulties faced by black-owned auto dealers, newspapers, banks and government contractors. 

A lot of people are hurting in the current recession.  It’s time the federal government treated everyone equally and dismantled the racial spoils system which has grown up in recent years.