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\\jciprod01\productn\N\NYS\66-4\tit664.txt unknown Seq: 1 14-APR-11 11:27 NEW YORK UNIVERSITY ANNUAL SURVEY OF AMERICAN LAW VOLUME 66 ISSUE 4 NEW YORK UNIVERSITY SCHOOL OF LAW ARTHUR T. VANDERBILT HALL Washington Square New York City \\jciprod01\productn\N\NYS\66-4\ms664.txt unknown Seq: 2 14-APR-11 11:27 New York University Annual Survey of American Law is in its seventieth year of publication. L.C. Cat. Card No.: 46-30523 ISSN 0066-4413 All Rights Reserved New York University Annual Survey of American Law is published quarterly at 110 West 3rd Street, New York, New York 10012. Subscription price: $30.00 per year (plus $4.00 for foreign mailing). Single issues are available at $16.00 per issue (plus $1.00 for foreign mailing). For regular subscriptions or single issues, contact the Annual Survey editorial office. Back issues may be ordered directly from William S. Hein & Co., Inc., by mail (1285 Main St., Buffalo, NY 14209-1987), phone (800- 828-7571), fax (716-883-8100), or email ([email protected]). Back issues are also available in PDF format through HeinOnline (http://heinonline.org). All articles copyright 2011 by the New York University Annual Survey of American Law, except when otherwise expressly indicated. For permission to reprint an article or any portion thereof, please address your written request to the New York University Annual Survey of American Law. Copyright: Except as otherwise provided, the author of each article in this issue has granted permission for copies of that article to be made for classroom use, provided that: (1) copies are distributed to students at or below cost; (2) the author and journal are identified on each copy; and (3) proper notice of copyright is affixed to each copy. Manuscripts: The Annual Survey invites the submission of unsolicited manuscripts. Text and citations should conform to the 19th edition of A Uniform System of Citation. Please enclose an envelope with return postage if you would like your manuscript returned after consideration. Editorial Office: 110 West 3rd Street, New York, N.Y. 10012 (212) 998-6540 (212) 995-4032 Fax http: //www.law.nyu.edu/pubs/annualsurvey \\jciprod01\productn\N\NYS\66-4\logo664.txt unknown Seq: 4 14-APR-11 11:27 iv \\jciprod01\productn\N\NYS\66-4\boe664.txt unknown Seq: 5 14-APR-11 11:27 NEW YORK UNIVERSITY ANNUAL SURVEY OF AMERICAN LAW 2010-2011 BOARD OF EDITORS Editor-in-Chief DARRYL G. STEIN Managing Editors CLAIRE DECAMPO JARED ROSCOE Development Editors Executive Article Editors Senior Articles Editor ELISA KAO BRANDON ADONI STEPHEN S. MAR MATTHEW M. KARLAN MATTHEW D. GIBBS COLIN GILLESPIE NICOLLE NONKEN Note Editors DANIEL L. PASSESER Symposium Editor LINA BENSMAN JOSH SIMPSON ALEXANDRA MITTER JAIME A. MADELL ROBERT TAYLOR LERON THUMIM Article Editors JONAH C. ABRAMOWITZ HAYES HOLDERNESS JR.GIULIA STELLA PREVITI THOMAS ADAMS ANDREW S. JACOBS RYAN G. REIFFERT ALLA BERENSHTEYN ISABELLE KINSOLVING FARRAR SARAH M. SCHOENBACH ALEXANDER S. BIRKHOLD JOSH LEVY ANDREW R. SPERL MATT BROWN ED LINTZ JAMES M. THOMPSON KATHERINE COMEAU ANDY LUTES NEIL J. TOOMEY EVA GARDNER PAUL MILETIC JASON VINOKUR QAIS GHAFARY ALEXANDER F. MINDLIN TIMES WANG JESSICA GREENBAUM MICHAEL MIX LENNOX WHITE JASON B. GUMER MICHAEL NADLER MADELYN K. WHITE PHILIP N. PILMAR Staff Editors COREY BERMAN INAYAT ALI HEMANI VICTORIA PORTNOY DANIEL BREMMER IAN HERBERT MARTIN RAPHAN ZACHARY BRIERS ANDERSON HESTON SPENCER RICKS ALICE BYOWITZ JESSICA HEYMAN KATHARINE RODGERS EDWARD DECKER TIMOTHY-TAYLOR HURLEY ARMINE SANAMYAN JAMES EBBERSON MICHAEL KAHN MATHEW SCHUTZER BURTON EGGERTSEN FELICITY KOHN MAXINE SHARAVSKY GRETA FAILS JENNA BASS LEVY ELINA SHEYKH-ZADE AARON FINCH TREVOR MAUCK JAKE TRACER MATTHEW GABBARD MELISSA C. MCGRANE SEAN TYRER STEPHANIE GAMIZ CHRISTOPHER MATTHEW SANDERS WITKOW MATTHEW GIBBONS MCNERNEY BENJAMIN J. WOLFERT ELIJAH GJELTEMA ROSEMARY MORGAN DONNA XU GEORGE HANG EVAN PARZYCH JAMES YU JEREMY W. HAYS CASEY PEARLMAN DIWEI ZHANG LAUREN E. PEDLEY Faculty Advisor HARRY FIRST \\jciprod01\productn\N\NYS\66-4\boe664.txt unknown Seq: 6 14-APR-11 11:27 vi \\jciprod01\productn\N\NYS\66-4\toc664.txt unknown Seq: 7 14-APR-11 11:27 SUMMARY OF CONTENTS ARTICLES THE COST OF INEQUALITY: SOCIAL DISTANCE, PREDATORY CONDUCT, AND THE FINANCIAL CRISIS Raymond H. Brescia 641 DEMOCRACY AT THE CORNER OF FIRST AND FOURTEENTH: JUDICIAL CAMPAIGN SPENDING AND EQUALITY James Sample 727 NOTES PRICE INCLUDES TAX: PROTECTING CONSUMERS FROM TAX- EXCLUSIVE PRICING Hayes Holderness 783 REVISING JUDICIAL APPLICATION OF THE SINGLE SUBJECT RULE TO INITIATIVE PETITIONS Florin V. Ivan 825 THE POSTER’S PLIGHT: BRINGING THE PUBLIC DISCLOSURE TORT ONLINE Jaime A. Madell 895 NEW YORK CITY’S LANDMARKS LAW AND THE RESCISSION PROCESS Joachim Beno Steinberg 951 \\jciprod01\productn\N\NYS\66-4\toc664.txt unknown Seq: 8 14-APR-11 11:27 viii \\jciprod01\productn\N\NYS\66-4\NYS401.txt unknown Seq: 1 22-APR-11 12:07 THE COST OF INEQUALITY: SOCIAL DISTANCE, PREDATORY CONDUCT, AND THE FINANCIAL CRISIS RAYMOND H. BRESCIA* TABLE OF CONTENTS I. An Overview of the Mortgage Crisis ................. 647 R A. How Did We Get Here? ......................... 647 R B. The Present Foreclosure Crisis ................... 650 R II. Inequality and Financial Crises ...................... 655 R A. On Game Theory, Trust and Social Distance..... 655 R B. Income Inequality, Social Distance and the Foreclosure Crisis................................ 669 R C. Racial Distance and the Foreclosure Crisis ....... 684 R III. An Alternative Explanation and a Response.......... 693 R A. The CRA: Not Guilty ............................ 694 R B. The Role of Government Sponsored Entities .... 699 R IV. Moving Forward: Social Distance and Financial Reform .............................................. 701 R A. Social Distance, Dodd-Frank and a New Regulatory Framework ........................... 703 R 1. The Bureau of Consumer Financial Protection ................................... 705 R 2. Strengthened Fair Lending Enforcement .... 709 R 3. Reforming Mortgage Laws ................... 710 R * Assistant Professor of Law, Albany Law School; J.D., Yale Law School (1992); B.A., Fordham University (1989); formerly the Associate Director of the Urban Justice Center in New York City, a Skadden Fellow at The Legal Aid Society of New York, law clerk to the Honorable Constance Baker Motley, and staff attorney at New Haven Legal Assistance Association. I am grateful to the participants in the Albany Law School Scholarship Workshop Series for their helpful comments as I was conceptualizing this piece, especially Timothy D. Lytton and Kirsten Keefe, and those attendees at the mid-year meeting of the Association for American Law Schools in June 2010, where I presented an earlier draft of this piece, who offered helpful comments and critiques, especially Vicki L. Been, Emma Coleman Jordan, and Florence Wagman Roisman. I would also like to thank Thomas Sander of the Saguaro Seminar for comments on an earlier draft. For their invaluable contributions to this project, I would like to thank my research assistants, Natalie Bernardi, Meghan McDonough, and Andrew Martingale; and my indefatigable legal assistant, Fredd Brewer. 641 \\jciprod01\productn\N\NYS\66-4\NYS401.txt unknown Seq: 2 22-APR-11 12:07 642 NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 66:641 4. Weakening Federal Preemption of State Consumer Protection Laws .................. 713 R B. The Community Reinvestment Modernization Act.............................................. 716 R C. Social Capital, Social Distance, Regulatory Reform and Financial Crises ............................. 718 R V. Conclusion .......................................... 720 R “An imbalance between rich and poor is the oldest and most fatal ailments of all republics.” —Plutarch1 “The injunction of Jesus to love others as ourselves is a recogni- tion of self-interest . We have to tolerate the inequality as a way to achieving greater prosperity and opportunity for all.” —Lord Brian Griffiths, Vice Chairman, Goldman Sachs International2 The present financial crisis—what is now commonly referred to as “the Great Recession”3—presents, for many, the opportunity to promote a particular economic and socio-political world view about the causes of the crisis. For those on the left, the crisis was the product of a deregulatory philosophy with its roots in Reaganomics, which gained a reckless head of steam during the presidency of George W. Bush.4 On the right, many blame government policies as well, but not those that promoted de-regulation. Rather, it was lib- eral Democrats, like Presidents Carter and Clinton and Representa- tive Barney Frank, who purportedly pushed the banking industry to lend to people of low-income who had no business being homeown- ers.5 In some ways, the financial crisis is like a Rorschach test: what 1. BRUCE JUDSON, IT COULD HAPPEN HERE: AMERICA ON THE BRINK 76 (2009) (no citation in original). 2. Simon Clark & Caroline Binham, Profit ‘Is Not Satanic,’ Barclays CEO Varley Says (Correct), BLOOMBERG NEWS (Nov. 3, 2009), http://www.bloomberg.com/ apps/news?pid=newsarchive&sid=aGR1F_bjSIZw. 3. See Barry Eichengreen & Kevin H. O’Rourke, A Tale of Two Depressions, AD- VISOR PERSPECTIVES (Apr. 21, 2009), http://www.advisorperspectives.com/news letters09/pdfs/A_Tale_of_Two_Depressions.pdf; see also Paul Krugman, The Great Recession Versus the Great Depression, N.Y. TIMES, Mar. 20, 2009, http://krugman. blogs.nytimes.com/2009/03/20/the-great-recession-versus-the-great-depression/. 4. For the ways that deregulation laid the groundwork for the financial crisis, see SIMON JOHNSON & JAMES KWAK, 13 BANKERS: THE WALL STREET TAKEOVER AND THE NEXT FINANCIAL MELTDOWN 67–72 (2010). 5. For an argument that the government programs were responsible for fuel- ing the financial crisis, see Howard Husock, Op-Ed., Housing Goals We Can’t Afford, N.Y. TIMES, Dec. 11, 2008, at A49; see also Whose [sic] Responsible for Economic Mess?, \\jciprod01\productn\N\NYS\66-4\NYS401.txt unknown Seq: 3 22-APR-11 12:07 2011] SOCIAL DISTANCE AND THE FINANCIAL CRISIS 643 one sees in an ink blot may reveal more about him or her than it does about the picture.