Although the chart no longer is found on the Smithsonian website, the mentality that created it lives on in the policies of the Biden administration. To show its commitment to equity—equal outcomes—the Federal Housing Finance Agency (FHFA) implemented a new policy on May 1, 2023, that punishes homebuyers with high credit scores who can put down at least 15–20 percent on a mortgage by making them pay higher interest rates and extra fees. Declares a Wall Street Journal editorial:
Good credit score = bad social score
https://mises.org/wire/bidens-new-intersectionality-where-equity-policies-meet-bad-economics
William L. Anderson
In the summer of 2020, the Smithsonian Institution created a chart meant to condemn what it calls “whiteness,” and it listed a number of characteristics it claimed were essential to “white culture.” Among the so-called characteristics it described in pejorative terms was delaying gratification, or saving for the future, what Austrian economists would call low time preference.
The chart, which was withdrawn after widespread protest, sought to identify the characteristics needed to build not only an economy but civilization itself with a racist culture. Thus, the kind of lifestyle and values that might culminate in someone having high credit scores and saving up for a significant down payment for a house were something not to be emulated or praised, but rather to be called out and declared shameful.
Although the chart no longer is found on the Smithsonian website, the mentality that created it lives on in the policies of the Biden administration. To show its commitment to equity—equal outcomes—the Federal Housing Finance Agency (FHFA) implemented a new policy on May 1, 2023, that punishes homebuyers with high credit scores who can put down at least 15–20 percent on a mortgage by making them pay higher interest rates and extra fees. Declares a Wall Street Journal editorial:
According to calculations by Evercore ISI, buyers with strong credit scores between 720 and 739 who make 15%–20% down payments will see their rates increase by 0.750%. Borrowers who put down 20%–25% will see rates increase by 0.500%.
The winners are borrowers with weak credit scores—that is, riskier borrowers. Under current FHFA policy, a borrower with a weak credit score below 620, who is borrowing more than 95% of the value of their home, pays 3.750%. Under Ms. Thompson’s new plan, those borrowers will see their fees decrease by 1.750%.
Not surprisingly, commentators like James Bovard have rightly attacked this policy as one that imposes perverse incentives, turning the rewards for creditworthiness upside down. Bovard writes:
Starting May 1, The Post exposed last week, a Biden administration decree will require adjusting mortgage calculations to penalize homebuyers with a FICO credit score of 680 and above—almost two-thirds of the population.
This levy will be used to reduce costs for people with low credit scores—i.e., risky borrowers more likely to default on mortgages.
However, this is not merely another version of the Law of Unintended Consequences, in which well-meaning government officials implement a policy without looking at the so-called bigger picture. The consequences here are intended. The Biden administration officials know full well the implications of this new policy and is sending the message that the notion of creditworthiness itself is implicitly racist.
As Newsweek points out, the racial gaps in home ownership and credit scores are significant:
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