6 ms·

Mortgage Crisis Caused By Anti-Racist Activism

21 points by xlnt 19y ago

sohail 19y ago
Awesome.
rms 19y ago
I swear that I remember a quote from Greenspan saying that low interest rates would cause a housing bubble but I can't find it anymore. Anyone have any idea what I am thinking of?
- pius 19y ago
  I don't know if this what you're looking for, as Greenspan was not prognosticating, but speaking in hindsight. "Greenspan said in an interview with Austrian magazine Format that low interest rates in the past 15 years were to blame for the house price bubble, but that central banks were powerless when they tried to bring it under control." http://www.reuters.com/article/ousiv/idUSL2146624120070921 http://www.reuters.com/article/ousiv/idUSL2146624120070921
Kaizyn 19y ago
Most of these 'junk loans' that were made to borrowers with bad credit were resold on the stock market to third parties. The fact that lenders 1) didn't have to suffer the consequences of making bad loans and 2) financially profited from making those bad loans suggests that they had an interest in seeing relaxed underwriting standards. For this reason, I can't help but think that the author is pointedly ignoring the main contributing factor to the mortgage disaster.
- xlnt 19y ago
  It's easier to sell loans that are likely to get paid back, isn't it? And at a higher price.
  - jauco 19y ago
    depends on what you mean by sell. But the way I understand it, it's way easier to sell loans without caring if they get paid back. Because then your essentially expanding your market to include 'people who won't pay back'. Bigger market means more sells. Normally you would exclude those people because you eventually want your money back with interest, but the sellers in this particular story didn't care about that. (It wasn't their money)
  - xirium 19y ago
    It doesn't matter if the morgages are repaid and it may even be beneficial to bankers if there is a small level of defaulting. Unlike junk bonds, resold mortgages have an underlaying value in property. Unfortunately, beyond a small level of defaulting, a glut of unsold property decreases property prices, decreases the value of already resold mortgages and make property more affordable to nieve investors.
mynameishere 19y ago
That's just one factor among many, but symptomatic of our underlying belief that money should go to where it is "deserved" rather than where it is effective....
bilbo0s 19y ago
I have officially heard it all now. I knew that a lot of the 'handlers' of corporate bigwigs would have them out angling for a defense at the trials that are looking increasingly likely, but this one just reeks of desperation. The current mortgage crisis was fueled by a myriad of reasons, but believe me, the idea that billionaires were sitting around thinking about ways to get money into the hands of poor black guys was hardly one of them. I can see now that one of their strategies will be to play the race card. Their aim will be to ensure the jury thinks about something other than the mountain of documents, emails, and other internal and external communications and directives. All of which will point to the inescapable conclusion that their cases are really about garden variety fiduciary negligence on an unprecedented scale. The race card is how many of the wealthy, from OJ to the CEO of HealthSouth manage to escape justice. It behooves us all to hold our wallet and our will a little closer when the wealthy start to talk about racism, or the dangers thereof. Middle America you are being conned. Just today the CEO of Bear Stearns unloaded what used to be over a USD1 billion stake in Bear for USD60 million, under the terms of the original deal with the government that his stake was only to be USD15 million. Poor him you say? He lost so much money you say? Consider the fact that Bear's stock price is being propped up by a USD30 billion guarantee from the US. Then ask yourself where the money for that guarantee comes from. Even better research it. Did you know several such guarantees are being made? Consider some news that the government would have us believe is completely unrelated. It just got a whole lot harder for poor and middle class college students to get student loans, because the government has found it necessary to materially decrease the levels of subsidy it provides to student loans. Now a cynic would say that the CEO of Bear just raided the US college fund for USD60 million. An optimist would say the government is simply making financially prudent cut backs in its spending. The truth is somewhere in the middle, but I think we'd all agree that these types of financial machinations are sub optimal. Giving anti-capitalist guarantees of security is how we got here in the first place. WOW . . . I'm ranting . . . I gotta stop working so late. At least I caught myself. The short version is this article insults my intelligence, and assumes that I am uninformed. All of which would trouble me a good deal less if the aim of this article was something other than keeping a scumbag out of Club-Fed.
- yummyfajitas 19y ago
  The article doesn't claim that billionaires were "sitting around thinking about ways to get money into the hands of poor black guys was hardly one of them." It claims that changes to the law, promoted by ACORN, made it legal to write bad loans. A quick look at Wikipedia suggests that this might be the case: >The [1995] revisions [to the Community Reinvestment Act] allowed the securitization of CRA loans containing subprime mortgages. The first public securitization of CRA loans started in 1997 http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Changes_of_1995 http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Chan... NY Post or not, it appears correct. I also recommend reading this article (for a different reason): http://www.paulgraham.com/disagree.html http://www.paulgraham.com/disagree.html
davidw 19y ago
!NH
far33d 19y ago
i won't be using the NYPost for economic analysis, thank you very much.
- pg 19y ago
  I'm not saying this article is right, but can you point to something specific it says that you feel is incorrect?
  - far33d 19y ago
    Ouch. I guess this was one of those "intellectual" DH0's. I will put together a real response.
  - far33d 19y ago
    This article uses a classic diversion tactic - focus on a singular issue, which may have contributed, and attribute all of a complex issue to the single issue that fits the agenda. No mention of how lending agencies, given incentives to close as many mortgages as possible, had no incentive to make sure those lenders could actually pay. The article gives no mention to how the Fed's lax monetary policy dropped interest rates and created a frenzy in housing that blocked a lot of people out unless they used non-traditional instruments. The author doesn't say that the "anti-racist" policies are one factor (which may be true) but that these policies are the direct cause. As someone who purchased a home two years ago, I became personally aware of how low short-term interest rates combined with a housing frenzy that drove prices up over 20% a year can easily push a lot of people to get low-interest ARM mortgages instead of more stable 30yr mortgages. I just think this article takes on a straw man because it suits an anti affirmative action agenda.
    - xlnt 19y ago
      So, which sentences in the article contain mistakes, specifically?
- dissenter 19y ago
  OK, fair point, the NYPost is not the gold standard in economic analysis. On the other hand 1. The author, Stan Liebowitz, is "the Ashbel Smith professor of Economics in the Business School at the University of Texas at Dallas"---not exactly unqualified to speak on the subject. 2. The New York Post may run a lot of salacious pieces, but how often does the NYPost run an overtly discriminatory and salacious piece? Remember, this is the paper your New York workers read on the train on the way to work. That's about as mixed a bag as you can get. The New York Post, like every other New York paper, does its damnedest to appeal to the widest possible spectrum. The Post is a liberal paper. You can call it conservative, but only when you're comparing it to the NY Times. This makes the article interesting, and it should at least give you pause. It's easy to take a snotty attitude against reading something like the Post, but the article, which admittedly isn't that great, raises an interesting point. In America we purposefully overlook a lot of things in the name of equality. In underwriting you don't want overlook anything. The financial analysts who failed to analyze this situation are responsible for the crisis. So are the former home owners who defaulted on their loans. And the people who issued them those loans. But when good analysis is restricted by federal law, and bad analysis is incentivized, how much blame can you place on analysts before next placing it on legislation? Regardless of how much blame you assign to the legislation, you must now multiply that manyfold. This is a little thing that has made a big difference. The point is that we have to ask ourselves what level of abstraction we are willing to force onto the notion of a person. Are we willing to turn so much of a blind eye that it throws us into economic recession? This recession is likely to be mild, but deep recessions are a time of great uncertainty. You don't have to read very far back in history to learn that people tend to stop overlooking things when their pocketbooks are empty. Equality, in other words, is a luxury item, and like many of the things we enjoy in America, it's contingent on our economy not exploding.
tbourdon 19y ago
Where does education and personal responsibility come into play? Just because one qualifies for a loan doesn't mean one should enter into a loan, no matter what the means of qualification. It doesn't really matter if one qualifies by some government mandate or by the lender's willingness to accept more risk, responsibility still lies with the borrower to honestly analyze whether or not they will be able to make good. In my mind, the real failure lies with our nation's inability to educate it's citizens on how to manage their own finances effectively.
deleted 19y ago
[deleted]
jfoutz 19y ago
It was those damned shiftless minorities, not our commision only salespeople. A salesperson would NEVER lie to close a sale. Thanks Sarah Silverman, for making racist humor ok for rich white people.
wumi 19y ago
and the reason for changing the title was ...?

21 points by xlnt 19y ago

Awesome.

rms 19y ago

I swear that I remember a quote from Greenspan saying that low interest rates would cause a housing bubble but I can't find it anymore. Anyone have any idea what I am thinking of?

pius 19y ago
I don't know if this what you're looking for, as Greenspan was not prognosticating, but speaking in hindsight. "Greenspan said in an interview with Austrian magazine Format that low interest rates in the past 15 years were to blame for the house price bubble, but that central banks were powerless when they tried to bring it under control." http://www.reuters.com/article/ousiv/idUSL2146624120070921 http://www.reuters.com/article/ousiv/idUSL2146624120070921

Kaizyn 19y ago

Most of these 'junk loans' that were made to borrowers with bad credit were resold on the stock market to third parties. The fact that lenders 1) didn't have to suffer the consequences of making bad loans and 2) financially profited from making those bad loans suggests that they had an interest in seeing relaxed underwriting standards. For this reason, I can't help but think that the author is pointedly ignoring the main contributing factor to the mortgage disaster.

xlnt 19y ago
It's easier to sell loans that are likely to get paid back, isn't it? And at a higher price.
- jauco 19y ago
  depends on what you mean by sell. But the way I understand it, it's way easier to sell loans without caring if they get paid back. Because then your essentially expanding your market to include 'people who won't pay back'. Bigger market means more sells. Normally you would exclude those people because you eventually want your money back with interest, but the sellers in this particular story didn't care about that. (It wasn't their money)
- xirium 19y ago
  It doesn't matter if the morgages are repaid and it may even be beneficial to bankers if there is a small level of defaulting. Unlike junk bonds, resold mortgages have an underlaying value in property. Unfortunately, beyond a small level of defaulting, a glut of unsold property decreases property prices, decreases the value of already resold mortgages and make property more affordable to nieve investors.

mynameishere 19y ago

That's just one factor among many, but symptomatic of our underlying belief that money should go to where it is "deserved" rather than where it is effective....

bilbo0s 19y ago

I have officially heard it all now. I knew that a lot of the 'handlers' of corporate bigwigs would have them out angling for a defense at the trials that are looking increasingly likely, but this one just reeks of desperation. The current mortgage crisis was fueled by a myriad of reasons, but believe me, the idea that billionaires were sitting around thinking about ways to get money into the hands of poor black guys was hardly one of them. I can see now that one of their strategies will be to play the race card. Their aim will be to ensure the jury thinks about something other than the mountain of documents, emails, and other internal and external communications and directives. All of which will point to the inescapable conclusion that their cases are really about garden variety fiduciary negligence on an unprecedented scale. The race card is how many of the wealthy, from OJ to the CEO of HealthSouth manage to escape justice. It behooves us all to hold our wallet and our will a little closer when the wealthy start to talk about racism, or the dangers thereof. Middle America you are being conned. Just today the CEO of Bear Stearns unloaded what used to be over a USD1 billion stake in Bear for USD60 million, under the terms of the original deal with the government that his stake was only to be USD15 million. Poor him you say? He lost so much money you say? Consider the fact that Bear's stock price is being propped up by a USD30 billion guarantee from the US. Then ask yourself where the money for that guarantee comes from. Even better research it. Did you know several such guarantees are being made? Consider some news that the government would have us believe is completely unrelated. It just got a whole lot harder for poor and middle class college students to get student loans, because the government has found it necessary to materially decrease the levels of subsidy it provides to student loans. Now a cynic would say that the CEO of Bear just raided the US college fund for USD60 million. An optimist would say the government is simply making financially prudent cut backs in its spending. The truth is somewhere in the middle, but I think we'd all agree that these types of financial machinations are sub optimal. Giving anti-capitalist guarantees of security is how we got here in the first place. WOW . . . I'm ranting . . . I gotta stop working so late. At least I caught myself. The short version is this article insults my intelligence, and assumes that I am uninformed. All of which would trouble me a good deal less if the aim of this article was something other than keeping a scumbag out of Club-Fed.

yummyfajitas 19y ago
The article doesn't claim that billionaires were "sitting around thinking about ways to get money into the hands of poor black guys was hardly one of them." It claims that changes to the law, promoted by ACORN, made it legal to write bad loans. A quick look at Wikipedia suggests that this might be the case: >The [1995] revisions [to the Community Reinvestment Act] allowed the securitization of CRA loans containing subprime mortgages. The first public securitization of CRA loans started in 1997 http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Changes_of_1995 http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Chan... NY Post or not, it appears correct. I also recommend reading this article (for a different reason): http://www.paulgraham.com/disagree.html http://www.paulgraham.com/disagree.html

davidw 19y ago

!NH

far33d 19y ago

i won't be using the NYPost for economic analysis, thank you very much.

pg 19y ago
I'm not saying this article is right, but can you point to something specific it says that you feel is incorrect?
- far33d 19y ago
  Ouch. I guess this was one of those "intellectual" DH0's. I will put together a real response.
- far33d 19y ago
  This article uses a classic diversion tactic - focus on a singular issue, which may have contributed, and attribute all of a complex issue to the single issue that fits the agenda. No mention of how lending agencies, given incentives to close as many mortgages as possible, had no incentive to make sure those lenders could actually pay. The article gives no mention to how the Fed's lax monetary policy dropped interest rates and created a frenzy in housing that blocked a lot of people out unless they used non-traditional instruments. The author doesn't say that the "anti-racist" policies are one factor (which may be true) but that these policies are the direct cause. As someone who purchased a home two years ago, I became personally aware of how low short-term interest rates combined with a housing frenzy that drove prices up over 20% a year can easily push a lot of people to get low-interest ARM mortgages instead of more stable 30yr mortgages. I just think this article takes on a straw man because it suits an anti affirmative action agenda.
  - xlnt 19y ago
    So, which sentences in the article contain mistakes, specifically?
dissenter 19y ago
OK, fair point, the NYPost is not the gold standard in economic analysis. On the other hand 1. The author, Stan Liebowitz, is "the Ashbel Smith professor of Economics in the Business School at the University of Texas at Dallas"---not exactly unqualified to speak on the subject. 2. The New York Post may run a lot of salacious pieces, but how often does the NYPost run an overtly discriminatory and salacious piece? Remember, this is the paper your New York workers read on the train on the way to work. That's about as mixed a bag as you can get. The New York Post, like every other New York paper, does its damnedest to appeal to the widest possible spectrum. The Post is a liberal paper. You can call it conservative, but only when you're comparing it to the NY Times. This makes the article interesting, and it should at least give you pause. It's easy to take a snotty attitude against reading something like the Post, but the article, which admittedly isn't that great, raises an interesting point. In America we purposefully overlook a lot of things in the name of equality. In underwriting you don't want overlook anything. The financial analysts who failed to analyze this situation are responsible for the crisis. So are the former home owners who defaulted on their loans. And the people who issued them those loans. But when good analysis is restricted by federal law, and bad analysis is incentivized, how much blame can you place on analysts before next placing it on legislation? Regardless of how much blame you assign to the legislation, you must now multiply that manyfold. This is a little thing that has made a big difference. The point is that we have to ask ourselves what level of abstraction we are willing to force onto the notion of a person. Are we willing to turn so much of a blind eye that it throws us into economic recession? This recession is likely to be mild, but deep recessions are a time of great uncertainty. You don't have to read very far back in history to learn that people tend to stop overlooking things when their pocketbooks are empty. Equality, in other words, is a luxury item, and like many of the things we enjoy in America, it's contingent on our economy not exploding.

tbourdon 19y ago

Where does education and personal responsibility come into play? Just because one qualifies for a loan doesn't mean one should enter into a loan, no matter what the means of qualification. It doesn't really matter if one qualifies by some government mandate or by the lender's willingness to accept more risk, responsibility still lies with the borrower to honestly analyze whether or not they will be able to make good. In my mind, the real failure lies with our nation's inability to educate it's citizens on how to manage their own finances effectively.

deleted 19y ago

[deleted]

jfoutz 19y ago

It was those damned shiftless minorities, not our commision only salespeople. A salesperson would NEVER lie to close a sale. Thanks Sarah Silverman, for making racist humor ok for rich white people.

wumi 19y ago

and the reason for changing the title was ...?