The Subprime

Trump’s presidency has sometimes been portrayed as a historical earthquake, radically discontinuous from what came before. Who could have predicted that at a time of rising employment rates, white U.S. Americans would vote in economic resentment of the Democratic Party? How could one foresee a hostile takeover of the Republican Party by business interests that had long been slightly off-stage, the re-centering of racism in US public life in a way it hadn’t been since the Reconstruction (or at least the anti-Civil Rights backlash), and upending democratic traditions in favor of an authoritarian populism that some thought resembled fascism? From one perspective, it was a radical shift. But other historical developments provide plenty of evidence of continuities. Welfare reform and anti-immigrant deportation and detention (in a labor sector dominated by household workers) over the past 30 years suggest something of the centrality of racism in our public policy, even if it happens under the more comforting names of ending “dependency” or crime. The economic misery of the 99% has been evident in periodic uprisings, such as the Occupy movement, but also in quite a sustained way in our struggles over households and reproductive labor.

In How All Politics Became Reproductive Politics, I track the rise of a kind of politics that gave us Trump across the past forty years by looking at households and reproduction. Its broadest argument is simply this: that reproductive labor, its relationship to what we formally consider politics and economics, and how we differently value people’s lives by race are at the heart of most of the things we argue about in the United States — feminism, welfare, immigration, infertility and infant mortality, gay marriage. It’s not the economy versus identity politics, not “real issues” versus the distracting miasma of the culture wars; as Lisa Duggan argues urgently in The Twilight of Equality?, economic realignment took place through the culture wars. The massive neoliberal shift that has taken place beginning in the late 1970s fundamentally realigned the relationships of households, government, and business such that social reproduction and reproductive labor stopped receiving much support from government (including schools, housing, public safety, and the like), and frozen real wages sent every available adult into the labor force, and then to try their luck on debt markets, trying to keep households afloat. This has been the core question at the back of nearly every other public policy issue, including the election of Donald Trump, who campaigned with the old racist promise to white people: your pockets are empty because of people of color (immigrants and Black criminals), put your faith in the white ruling class (we’ll keep your wages low but you’ll get to feel superior to non-white people). Trump offered “globalization” as the name of the problem, a racialized boogey-man of immigrants and free trade agreements, in place of neoliberalism — the political movement among the 1% to shrink government, unions, and wages and redistribute wealth upwards. For decades, the neoliberal movement accomplished its political goals in particular through race-based shaming of irresponsible reproductive behavior — an account of Black “welfare queens,” Latina “breeding machines,” and slutty girls who had a lot of abortions.

Because we are schooled to think of what happens at home as distinct from the economy, it might seem like a reach to think of the nasty things people say about how people of color raise their kids as transformative of the economy or politics. But it is. In the early 2000s, women heads of household across the US became some of the largest consumers of subprime loans. Many of the women who wanted to buy a house were single mothers with children. As journalist Laura Gottesdiener noted, in her book, A Dream Foreclosed, a disproportionate number were also older Black women who owned their homes but were cash-strapped, often the financial rock for multiple generations. In 2006, when the bottom started to fall out of the housing market, these loans could not be refinanced. However, the early wave of foreclosures did not cause much concern because, as scholar David Harvey noted in The Enigma of Capital, “the people affected were low income, mainly African American and immigrant (Hispanics) or women single-headed households.” These were the canaries in the coal mine that might have told policy-makers that unregulated financial markets were destroying people’s lives, and why, when we look back, we find so many unheard voices for mortgage reform among activists who cared about racial or gender justice. But these warnings went unheeded. When, as a result of this sharp rise in foreclosures, the recession began in earnest in 2007 and unregulated financial market losses turned into layoffs and unemployment, still more people were unable to make mortgage payments, and, within months, a death spiral hit the housing market, making it impossible to sell. Single mothers and their children were disproportionately hit by foreclosure. While many were able to double up with relatives or friends, others became homeless.

Those who tried to tell this story were systematically shut down. In 2008, when the New York Times ran a piece showing how bankers had disproportionately targeted Black women, single mothers for the most part, for predatory subprime mortgages regardless of the creditworthiness, the op ed page hit back the next week, (mis)read these facts in terms of the moral failings of borrowers. It ran a letter from a Baltimore mortgage lender arguing, “a big part is missing from the media coverage, and it’s exactly the reason people took out subprime loans — they had bad credit and posed a big risk to the lenders.” Not mortgage brokers underwriting discriminatory loans, or seeking out borrowers they thought unlikely to repay as a way to make a buck, but irresponsible mothers were at fault. As early as 2007, Glenn Beck was on Fox News blaming “illegal immigrant” home buyers, and commentators across conservative media were complaining that the Clinton administration had made loans to Blacks and Hispanics, whom they blamed as the morally inferior and financially illiterate cause of the subprime crisis.

The Moynihan report narrative that had animated the welfare reform smears of the 1990s — that the moral failings of Black single mothers were the cause of all the poverty in the Black community, and much of what ailed the nation — was more than a way to blame the vulnerable rather than the lenders for the recession. It was, substantially, the cause of the recession. For decades, lenders were trolling for “high risk” borrowers, not content to wait until borrowers shopped for a loan. As one lender admitted, his preferred borrower was an elderly, widowed woman of color living on a fixed income who owned her home and could be persuaded to borrow against it. If she lost her home and could not pay rising interest rates, well, the broker had long since received his fee and the lender who originated the loan had already sold the high-interest loan at a profit. For example, consider the case of Flora, whom Elizabeth Warren interviewed for A Fighting Chance:

She explained that she and her husband had retired and moved to a small town in the South a few decades earlier to be near family. They bought a modest house. Flora’s husband had passed on, and she was on her own now. Flora explained that she’d gotten a call a few years ago from ‘a nice man from the bank.’ She said he’d told her that because interest rates were low, he could give her a mortgage with a lower payment. She’d asked him what would happen the payment if interest rates went back up. According to Flora, he’d assured her that ‘the banks know about these things in advance’ and that he would ‘call her and put her back in her old mortgage.’ She had taken the deal, and before long, her payments had shot up. She paused, then said quietly, ‘He never called.’ The new monthly payment swallowed nearly every penny of her Social Security check. She had tried delaying her payments, borrowing on credit cards, going to a payday lender, but it had all come crashing down. Next week she would have to leave her home. “I’ll be living in my car,” she said, “at least for a while.”

In a practice activists called “reverse redlining,” mortgage lenders sought out Black, Latina/o, and female-headed households for mortgages, urging them to considering buying homes, and “charging them through the roof,” as one activist told the Wall Street Journal in 2009. Subprime industry executives, politicians, and federal regulators fought to keep this high-profit industry expanding, continually easing lending standards. Banking deregulation in the 1980s and 90s incentivized lenders to make loans that were unlikely to be paid back. The lower the borrowers’ credit score, the higher the interest rate could go. Securitization meant that mortgage loans and credit card debt could be bundled together and sold, so that no particular bank was responsible if any individual loan was not repaid. Other deregulation measures allowed an ever-expanding array of entities to make loans, so mortgage brokers made increasing profits off of origination fees associated with loans, and these too were higher for subprime than conventional loans. As Gottesdiener puts it, “who was allowed to buy what type of mortgage was so stark that the word ‘subprime’ (the industry’s term for predatory loans) became ‘a demographic category as much as a financial definition.’” The expectation that these households were morally suspect and unlikely to pay their debts is precisely what made lenders seek them out for mortgages. In the 1990s, fully one-third of borrowers eligible for conventional loans were steered into subprime loans, because they were much more profitable for brokers and lenders, but much more expensive, usually, for borrowers to repay. A win-win for the financial services industry, especially when it became clear that government would bail out financial institutions like AIG that had purchased the bundled high-risk loans. All the risk devolved onto borrowers, and predatory lenders never paid a price.

As scholars Paula Chakravartty and Denise Ferreira da Silva note, what followed was a wave of condemnation against the “subprime,” a category of people “construed as intellectually (illiterate) and morally (greedy), unfit if measured against any existing descriptors of the modern economic subject.” Nevertheless, the Black, Latin@, and female subjects of discriminatory treatment in credit markets were taken to be at fault for not paying unpayable loans — after seeking out borrowers based on the bet that these loans couldn’t be paid, which drove up the interest rate and origination fees, they could turn around and blame the borrowers for not paying them.

To add insult to injury, it wasn’t just those who were behind on their mortgage who were foreclosed on. “Foreclosure mill” law firms earned massive fees by targeting people who should not have been foreclosed on at all, backdating, falsifying, and “robo-signing” the documents that were supposed to demonstrate what the “subprime” was supposed to have predicted all along: that women and people of color in particular would not pay their bills. Arguably, though, it showed the opposite: like the sharecroppers and agricultural workers paid in scrip at the company store and denied access to the ledgers that supposedly showed them in arrears two or three generations ago, societies structured in dominance by geography, race, and gender produced debt-bondage, poverty, and homelessness among working folk and single mothers and their kids through fraud and theft.

The belief that distressed mortgage borrowers were morally suspect also governed the response to calls for the federal government to intervene in the mortgage meltdown. Although many advocates for relief to distressed homeowners made compelling arguments about why it was in the best interest of the nation’s economy as a whole to help them keep their houses, the hoped-for mortgage bailout never really appeared. Despite the promises, 5 million families lost their homes from 2007 to 2015, resulting in a 30% to 40% reduction of the wealth of the middle-class — concentrated among Black, Latinx, and female-headed households. First TARP — the troubled asset relief program offered up in 2008 under the Bush administration — then HAMP — Home Affordable Modification Program the Obama administration — failed, by design, to keep people in their homes. Prosecutor Neil Barofsky, the Special Inspector General for TARP, was so disgusted by that program and how it was used to reward what he called “Wall Street crooks” that he titled a book about it Bailout: How Washington Abandoned Main Street While Rescuing Wall Street. These programs gave billions to banks, regardless of whether they engaged in wrongdoing, but refused to offer more than a pittance to homeowners.

The key debate was about whether these programs should offer principle reduction to homeowners — whether, because they bought their homes in a market with inflated prices superheated by predatory mortgage transactions that benefited the banks, the government mortgage authorities could reduce their loans to reflect the sober, morning-after reality of what people’s homes were actually worth in the Great Recession. For the most part, Republicans were explicitly against this proposal, while the Obama administration hid its opposition behind happy-sounding promises of programs to reduce principle that in practice, critics argued, was just another giveaway to the banks. Both, revealingly, couched their reservations in moral terms. Timothy Geithner, Obama’s Treasury Secretary, explained that principle reduction would create incentives for borrowers who were not in trouble to stop paying their mortgages in order to get the principle reduced, which he dubbed “moral hazard.”

CNBC’s Rick Santelli, reporting from the Chicago commodity pits, apparently didn’t get the word that the Democrats were never going to actually refinance people’s principle, and made the conservative case against refinancing mortgages when Obama’s bailout was announced in 2009, in what was later billed as the rant that launched the Tea Party: “Government is promoting bad behavior. . . . Do we really want to subsidize the losers’ mortgages? This is America! How many of you people want to pay for your neighbor’s mortgage? President Obama, are you listening? How about we all stop paying our mortgages! It’s a moral hazard.” While the right cheered, Charles Demos at the progressive blog My Direct Democracy called out Santelli as a racist:

After watching the [Santelli clip], I first had to check my calendar. Somehow I felt I traveled back in time to the early 1970s to witness first hand Richard Nixon’s “northern strategy,” his pursuit of white ethnic voters who were so deeply disaffected over Great Society programs ranging from desegregation (remember the Boston busing madness?) to affirmative action among others that they would desert the Democratic Party becoming “Nixon’s silent majority” and “Reagan Democrats.”

At the same time that Fox News and even the mainstream press was blaming “illegal immigrants” and (subprime) loans to Black, Hispanic, and female borrowers of whatever race, the Tea Party was born out of the demand that all these unworthy families be put out in the street. It was a stark preview of the Trump electoral strategy.

Perhaps the cruelest cut, though, was Obama’s HAMP, born of a 2012 election-year promise to refinance mortgages for distressed borrowers to let them and their children stay in their homes. In fact, as Treasury Secretary Geithner admitted in a meeting that included two of his main critics, Elizabeth Warren (who anchored the progressive wing of the Democratic party under Obama) and Neil Barofsky, HAMP was designed to ease foreclosure for the benefit of the banks — to slow rather than stop foreclosures in order to protect the banks from more foreclosures than they could handle at any one time. As Barofsky wrote,

For a good chunk of our allotted meeting time, Elizabeth Warren grilled Geithner about HAMP.  In defense of the program, Geithner finally blurted out, ‘We estimate that they can handle ten million foreclosures, over time,’ referring to the banks. ‘This program will help foam the runway for them.’ A light bulb went on for me.  Elizabeth had been challenging Geithner on how the program was going to help homeowners, and he had responded by citing how it would help the banks. Geithner apparently looked at HAMP as an aid to the banks, keeping the full flush of foreclosures from hitting the financial system all at the same time.

Fewer than 1 million loans were modified, and many argued that these were low-hanging fruit — loans banks would’ve agreed to refinance anyway.

In Bailout, Barofsky documented criminal fraud by mortgage servicers in the HAMP program, as well as two strategies that were perfectly legal, but that can be only be called scams. “One particularly pernicious type of abuse,” he wrote, “was that servicers would direct borrowers who were current on their mortgages to start skipping payments, telling them that they would allow them to qualify for a HAMP modification.  The servicers thereby racked up more late fees, and meanwhile many of the borrowers might have been entitled to participate in HAMP even if they had never missed a payment. Those led to some of the most heartbreaking cases. Homeowners who might have been able to ride out the crisis instead ended up in long trial modifications, after which the servicers would deny them a permanent modification and then send them an enormous ‘deficiency’ bill.”

The second rampant but legal scam was to create a two-track system within the banks, where one side would be negotiating a “trial” mortgage adjustment with the homeowner and the other would be proceeding with a foreclosure. They won both ways: during the “trial” modification period, loan servicers would wrack up big fees (because as long as the modification was not final, borrowers were technically “late” — by design — on portions of their mortgage), pocket the partial payments, then deny the modification because of “incomplete” paperwork (homeowners in HAMP modification proceeding reported that banks “lost” their paperwork over and over again — one survey found that they had to submit it an average of six times), and then foreclose on the home anyway, and resell it. As Barofsky wrote, “HAMP was not separate from the bank bailouts; it was an essential part of them. From that perspective, it didn’t matter if the modifications failed after a year or so of trial payments or if struggling borrowers placed into doomed trial modifications end up far worse off.” This explained a particularly cruel feature of these modifications: even if you actually got one, in five years the interest rate ballooned, which meant that a borrower would see her payment go up by as much as 23%. The same adjustable rate features that were criticized as part of subprime mortgages were built into HAMP.

How All Politics Became Reproductive Politics argues that this story about “losers mortgages” and the “subprime as a demographic category” that made the banks and financial services industry rich before and after the foreclosure crisis was the rule, not the exception. The massive changes in the economy since the late 1970s — stagnant real wages, shrinking government support for everything from schools to roads to welfare, “personal responsibility” and “moral hazard” as the reason for vast public policy changes — was driven in significant part through a demonization of the reproductive labor of women, particularly women of color, and all people who do care work. Just as Reagan himself campaigned for election by telling a story about “welfare queens” driving Cadillacs and getting rich off the government dole, Conservatives in the US used an account of irresponsible Black and Latina women and their children to beat back that activism. And this — not some shocking, shattering political change — in how Mr. Trump went to Washington, by engaging in the normal business of the Republican, and often the Democratic, Party, alongside Wall Street and a broad faction of the business community.


Laura Briggs is Chair and Professor of Women, Gender, Sexuality Studies at the University of Massachusetts, and the author of several books; her newest How All Politics Became Reproductive Politics: From Welfare Reform to Foreclosure to Trump is available today from University of California Press. You can download the chapter that this essay is excerpted from here.