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April 21, 2021

The Stymied Biden Racial Equity Agenda

Also, more worries on residential real estate than commercial

 

Protests outside the state Capitol in Columbus, Ohio, after the killing
of a Black woman by police on Tuesday. (Jay LaPrete/AP Photo)

The Chief

**** During the transition period, Joe Biden consistently described
four overlapping crises in America. Two of them, the COVID crisis and
the concurrent economic crisis, have taken up a lot of the focus since
inauguration, with the American Rescue Plan and the successful vaccine
rollout. The economy is poised for takeoff and we're going to hit 200
million shots under Biden this week. We are going to run out

of willing vaccination subjects soon, and I'm mildly concerned about
vaccine hesitancy. But contracting COVID is 84 percent effective

in preventing the virus, a better efficacy rate than the Johnson &
Johnson vaccine, and that puts us much further along toward herd
immunity than we realize.

If we were only looking at the first 100 days through the lens of those
two crises, we'd give Biden pretty high marks. He identified two
others, however: the climate crisis and the racial equity crisis.
We're going to handle climate tomorrow, on the kickoff of the Earth
Day summit. But how is Biden dealing with race?

The Biden team will tell you that racial equity is built into everything
they do. But yesterday was a high-profile test, as the Derek Chauvin
verdict

came in. Biden spent the first part of the day telling reporters that he
was "praying the verdict is the right verdict
," and that
the evidence was "overwhelming in my view." The jury was already
deliberating at this point, but in general presidents should not opine
on unresolved criminal cases. It was a rare moment for a fairly
disciplined White House, although I wouldn't guarantee that it was
unscripted.

**Read all of our First 100 reports here**

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**** After the verdict, Biden made televised remarks
.
It started as you'd expect, identifying the systemic racism that the
murder of George Floyd highlighted, and calling the accountability for
Chauvin a "step forward." Then he talked about how to prevent the
situation of Black and brown families fearing their life in routine
interactions with police. "And this takes acknowledging and
confronting, head on, systemic racism and the racial disparities that
exist in policing and in our criminal justice system more broadly."

So what were the commitments Biden made? Well, he used the speech to
argue for the confirmation of Vanita Gupta and Kristen Clarke, who would
take the number 3 position and the head of the civil rights division at
the Justice Department, respectively. Gupta's likely to need Kamala
Harris's vote to break a 50-50 tie in the Senate for confirmation, and
Clarke might as well. Republicans have tried to characterize both of
them

as radicals.

Next, Biden called for passage of the George Floyd Justice in Policing
Act, which passed the House last year but has never had a chance in the
Senate. Vice President Harris, who co-authored the bill when she was in
the Senate, also stressed this

in her remarks. But unless the filibuster goes away, that's not
becoming law, and even then, it's a coin flip.

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And this isn't even a transformative bill: it allows for more state
and federal oversight of police departments, restricts but does not end
qualified immunity, mandates body and dashboard cameras, prohibits
chokeholds and no-knock warrants, and attempts to end racial profiling
and restrict use of deadly force. But Derek Chauvin was wearing a body
camera, and New York State had banned chokeholds two decades before Eric
Garner was murdered. "If these things worked, they would have worked
already," our Alex Sammon wrote last year
.
The fact that a young Black girl was killed in Columbus, Ohio while the
verdict was being read

speaks to this.

I would like to see an end to the transfer of military equipment

to police departments, which is in the bill, but Biden has the ability
to end that himself

by banning the transfers under the 1033 program. Though an executive
order to that effect-which President Obama enacted in 2015-was
expected

in the first week of Biden's presidency, he didn't follow through.
In the first quarter of 2021, the military sent $34 million

in equipment to local police, arming them to the teeth and continuing to
allow them to present the impression of a foreign occupier.

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This is the larger point. What Biden says he wants to do legislatively
probably can't happen, and what he can do on his own hasn't
happened. He will be able to get his personnel in place (just barely),
and they can be more aggressive on civil rights. They can open
investigations into police departments, as Attorney General Merrick
Garland just announced in Minneapolis
,
and use consent decrees to force changes. But the police departments who
saved the 1033 program clearly have the president's ear. And years of
technocratic nudges during the Obama administration didn't really
change the trajectory of policing.

So what are we left with? "Changing hearts and minds," as Biden put
it. During the summer of protest it did feel like Americans of all races
were reckoning with the issue that has hung over America for centuries.
But polarization has returned (look at Gupta and Clarke and the
Republican reaction), and unity rhetoric is unlikely to reverse that. It
took over 200 years to get to where we are on racial inequity, and
waiting around for generations with better perspectives might take the
same length of time.

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Getting Real About Real Estate

An interesting piece from my former employer The Intercept yesterday
posited a new financial crisis

in the making, with inflated valuations on commercial mortgage-backed
securities (CMBS), mostly for Dollar General stores. I... don't know
what to make of it. CMBS values probably are over-inflated, but these
loans are endlessly rolled over until they're not.

If we're going to see a commercial real estate crisis, it'll be
because a bunch of buildings don't have tenants anymore and can't
make their loan payments. That won't be true of Dollar General, but it
could be true of a lot of office buildings and the retail buildings that
support office parks and downtown business districts. Maybe that's why
Jamie Dimon is so flustered

about the "damage" of working from home: he doesn't want a bunch
of CRE loans defaulting. But with architecture design services growing
,
CRE could see a rebound by next year.

Meanwhile, I'm more concerned about old-fashioned residential real
estate, as low inventory sends prices to the moon. I hadn't been made
aware of the "Mortgage Application Fraud Risk Index" until the other
day, when I learned it increased by 12 percent

last quarter. That's still low, but with prices historically high
,
getting people into houses might involve some fudging of the numbers.
Ultimately there isn't the kind of rampant speculation that we saw
during the housing bubble. But there are some ripe conditions for
untoward activities. Hopefully having a Consumer Financial Protection
Bureau in place before the fact will be helpful.

What Day of Biden's Presidency Is It?

Day 92.

We Can't Do This Without You

Today I Learned

* I was on with Texas Standard talking about the Save Our Stages
implementation. Listen here
.
(Texas Standard)

* Not sure what immigration through reconciliation would look like, but
apparently that got floated

in a White House meeting yesterday. (Politico)

* Seasonal worker visas go up

while the refugee cap remains locked. Hmm... (Wall Street Journal)

* And here's the inside story
on
why that refugee cap hasn't budged yet.  Short version: it was
Biden's call. (New York Times)

* Good discussion drawing lessons from the first 100 days
.
(Five Thirty Eight)

* Senate Democrats want student loans that went delinquent automatically
rehabilitated
.
(Senate letter)

* Amazon becoming a sticking point

in global minimum tax negotiations. (Bloomberg)

* The Republican counter-offer on infrastructure will come in at
$600-$800 billion

and include mostly surface transportation and broadband. (Politico)

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