Preview

The Stymied Biden Racial Equity Agenda

Also, more worries on residential real estate than commercial

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.

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.

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.

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.

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.

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)