19 November 2011

Localism, finance and federalist legalism + pointless video post – ‘River of Rapture’ by Death Angel

In the past couple of days, I have attended a heavy metal concert featuring thrashers Testament, Anthrax and Death Angel, as well as a brown-bag talk from Pitt economics PhD student Xu Yilan and her paper on the effect of financial deregulation on home foreclosures. Her paper was very well-conceived, painstakingly rigorous in methodology and quite interesting both in terms of its own argument and in terms of the history it uses to tell its story.

In November 2006, the Ohio Supreme Court overturned a city ordinance issued by Cleveland, heavily regulating loans originating at interest rates higher than 4.5% above the T-bill base rate in order to discourage usurious mortgage lending practices, on the basis that they were more restrictive than state laws governing mortgage lending, and thus violated the ‘home rule’ provision of the Ohio State Constitution. Maryland’s Supreme Court slapped down a similar county-level ordinance at about the same time. As a result, according to the study by Ms Xu, subprime lending practices took off (subprime loans increasing by 30%, and total loans by subprime lenders by 40%) even though overall credit was unaffected. In addition, there was a nearly 50% increase in loan foreclosures! This study suggests, quite tellingly, that:

  1. local regulations do impact the housing market, often to a higher degree than higher-level regulations,

  2. heavy regulation does not necessarily have a deleterious impact on the total amount of credit in the market, and

  3. lenders will take what slack they are given – that is to say, if subprime and usurious lending practices are deregulated, you will find more of them in the market as a result.

It also demonstrates a rather uncomfortable tendency in American political discourse to limit our discourse on federalism to merely the relationship between states and the federal government, getting bogged down in arguments about ‘states’ rights’. I must confess that, despite my distributist and pro-subsidiarity inclinations, I am heavily sceptical to the point of dismissive of the common run of ‘states’ rights’ arguments in American political discourse given the way that they have been aligned with some incredibly ugly race politics in the American South, predating the Civil War. That is an important argument, but separate from the one I want to make here, however – and it is the case that the amount of legal leeway given to states has, granted, resulted in some remarkable institutional experimentation. It is certainly not an empty reputation of the federalist system that it allows for a significant degree of regional autonomy and difference, to the point where states may be justly thought of as ‘crucibles of democracy’.

At the same time, though, states have proven that they can be every bit as tyrannical as the federal government in terms of enforced conformity, if not more so. Jim Crow is only the most egregious historical example. Cleveland created its own laws and apparently had some success in enforcing them; as a result of state-mandated deregulation, however, predatory lending practices boomed again within the city itself. It strikes me as a structural weakness of our political system that local politics are bound up entirely in their relationships with the relevant state authorities, whilst the ‘federalist’ arguments are relegated to the national stage and concern only ‘states’ rights’ rather than the rights of cities, towns, counties and communities. Additionally, the corporate news media, also hoping to create news with the broadest possible audience in mind, focusses disproportionately on this higher level. Small wonder the American public care so much more about presidential and congressional politics than what goes on in their own backyards!

Thus, it strikes me that in such cases as Ohio and Maryland, ‘states’ rights’ as commonly advocated by libertarians and palaeoconservatives with national political aspirations, are in fact the bane of truly distributist and localist concerns. This is just my interpretation of the paper, however. I highly recommend reading Ms Xu’s work on its own merits – as presented, it was a very interesting economics paper in its own right.

The night before, however, I attended an epic concert on the North Shore by Testament, Anthrax and Death Angel. My gentle readers may be familiar with my Testament fandom (and Anthrax aren’t bad at all either!), but their fellow Bay Area thrashers Death Angel are also worth an honourable mention and pointless video post here. As a live act, the Filipinos pull some massive weight, and in terms of their energy and presence were able to stand toe-to-toe with the renowned brethren for whom they opened. Their new album Relentless Retribution not only has some of the most awe-inspiringly ferocious album art I’ve seen on a thrash album in a long time, but also has some awe-inspiringly ferocious music as well, such as ‘River of Rapture’ here:

My favourite song on the album is still probably the opening track, ‘Relentless Revolution’, though: classic thrash metal at its peak, spirited, aggressive and incendiary (this one they did play at the concert!). I certainly appreciated hearing Death Angel for the first time – amazing stuff.

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