October 18, 2008

The ever-expanding Steveosphere

The New York Times runs an article that provides a human interest illustration for my June "Diversity Recession" thesis:

The Reckoning
Building Flawed American Dreams
By DAVID STREITFELD and GRETCHEN MORGENSON

SAN ANTONIO — A grandson of Mexican immigrants and a former mayor of this town, Henry G. Cisneros has spent years trying to make the dream of homeownership come true for low-income families.

As the Clinton administration’s top housing official in the mid-1990s, Mr. Cisneros loosened mortgage restrictions so first-time buyers could qualify for loans they could never get before.

Then, capitalizing on a housing expansion he helped unleash, he joined the boards of a major builder, KB Home, and the largest mortgage lender in the nation, Countrywide Financial — two companies that rode the housing boom, drawing criticism along the way for abusive business practices.

And Mr. Cisneros became a developer himself. The Lago Vista development here in his hometown once stood as a testament to his life’s work.

Joining with KB, he built 428 homes for low-income buyers in what was a neglected, industrial neighborhood. He often made the trip from downtown to ask residents if they were happy.

“People bought here because of Cisneros,” says Celia Morales, a Lago Vista resident. “There was a feeling of, ‘He’s got our back.’ ”

But Mr. Cisneros rarely comes around anymore. Lago Vista, like many communities born in the housing boom, is now under stress. Scores of homes have been foreclosed, including one in five over the last six years on the community’s longest street, Sunbend Falls, according to property records.

While Mr. Cisneros says he remains proud of his work, he has misgivings over what his passion has wrought. He insists that the worst problems developed only after “bad actors” hijacked his good intentions but acknowledges that “people came to homeownership who should not have been homeowners.”

They were lured by “unscrupulous participants — bankers, brokers, secondary market people,” he says. “The country is paying for that, and families are hurt because we as a society did not draw a line.”

The causes of the housing implosion are many: lax regulation, financial innovation gone awry, excessive debt, raw greed. The players are also varied: bankers, borrowers, developers, politicians and bureaucrats.

Mr. Cisneros, 61, had a foot in a number of those worlds. Despite his qualms, he encouraged the unprepared to buy homes — part of a broad national trend with dire economic consequences.

He reflects often on his role in the debacle, he says, which has changed homeownership from something that secured a place in the middle class to something that is ejecting people from it. “I’ve been waiting for someone to put all the blame at my doorstep,” he says lightly, but with a bit of worry, too.

The Paydays During the Boom

After a sex scandal destroyed his promising political career and he left Washington, he eventually reinvented himself as a well-regarded advocate and builder of urban, working-class homes. He has financed the construction of more than 7,000 houses.

For the three years he was a director at KB Home, Mr. Cisneros received at least $70,000 in pay and more than $100,000 worth of stock. He also received $1.14 million in directors’ fees and stock grants during the six years he was a director at Countrywide. He made more than $5 million from Countrywide stock options, money he says he plowed into his company.

He says his development work provides an annual income of “several hundred thousand” dollars. All told, his paydays are modest relative to the windfalls some executives netted in the boom. Indeed, Mr. Cisneros says his mistake was not the greed that afflicted many of his counterparts in banking and housing; it was unwavering belief.

It was, he argues, impossible to know in the beginning that the federal push to increase homeownership would end so badly. Once the housing boom got going, he suggests, laws and regulations barely had a chance.

“You think you have a finely tuned instrument that you can use to say: ‘Stop! We’re at 69 percent homeownership. We should not go further. There are people who should remain renters,’ ” he says. “But you really are just given a sledgehammer and an ax. They are blunt tools.” [More]

My published articles are archived at iSteve.com -- Steve Sailer

24 comments:

eh said...

It was, he argues, impossible to know in the beginning that the federal push to increase homeownership would end so badly.

Maybe so. But back then someone should have thought a bit more about existing mortgage underwriting standards -- why they had evolved the way they did, what value they had, whether they were worth preserving, and whether the risk of abandoning them was too great.

Perhaps it's not the best analogy, but this whole debacle, which has been labeled the 'diversity recession', makes me think about how this same unthinking push for 'diversity' is destroying the historic demographic makeup of the country as a whole. And how will that end?

CALIFORNIA - Per capita income in state is expected to sink over 20 years - Growth in poorly educated population is blamed in study

CALIFORNIA - Prisons' budget to trump colleges' - No other big state spends as much to incarcerate compared with higher education funding

People, especially politicians, ought to think more about whether America as a majority white nation has value, whether it is worth preserving. Before it's too late. If it isn't already. Especially now that the US is, apparently, about to elect a non-white President, seemingly giving even more legitimacy to what is going to be -- if nothing is done -- the demographic destruction of the historic American nation.

THE CHRONICLE RECOMMENDS: Barack Obama for president - Why Obama is the choice - The Illinois senator has shown beyond a doubt that he is the one to lead the nation in troubled times.

Note the absurd hyperbole, driven by mindless political correctness, for someone who never served in the House -- in fact he was defeated in his attempt -- and has not even completed a single term in the Senate.

Michael said...

The ever-expanding Steveosphere

Wow, way to toot your own horn. Remember white pride goeth before, Mr. Sailer.

tommy shanks said...

>>While Mr. Cisneros says he remains proud of his work, he has misgivings over what his passion has wrought.

Liberals are forever forgiving each other of the damage they do by calling it "passion." "My intentions were good and I was passionate, so don't blame me."

It's when the Cisneroses of this world exercise their "passions" through the government that they inflict misery on the rest of us. If he had been forced to carry out his crusade for homeownership in the private sector, the potential for destruction would have been limited.

Anonymous said...

Interestingly, the previous day the Times ran an op-ed by Michael S. Barr and Gene Sperling which argues that efforts to raise the level of minority home ownership had nothing to do with the current crisis:

Poor Homeowners, Good Loans

I wouldn't mind seeing some critical analysis here of the two articles and how they relate to each other.

Roger Chaillet said...

Too bad Steve didn't point out the fact that Henry's claim to fame was being mayor of the Mexican majority border town of San Antonio.

Big Government, in the form of 4 military bases (used to be 5) is the only thing propping up San Antonio. Affirmative action is what gave San Antonio a Hispanic middle class.

That and tens of thousands of military retirees.

Henry and his tribe knew only Big Government the whole of their lives.

The south and west sides of San Antonio are almost all Hispanic.

And poor and impossibly violent.

Captain Jack Aubrey said...

But back then someone should have thought a bit more about existing mortgage underwriting standards -- why they had evolved the way they did, what value they had...

I'd think that would be Mortgage Lending 101: Week One: Day One: Question One: "Yo Teach, why the hell do people have to put 20% down on a house?"

"So they don't walk away when the home's value declines."

“But you really are just given a sledgehammer and an ax. They are blunt tools.

Ah, at 61, finally a Republican in the making. Government is a blunt tool. Government does not do brain surgey.

mother hubbard said...

"They were lured by “unscrupulous participants — bankers, brokers, secondary market people,” he says. “The country is paying for that, and families are hurt because we as a society did not draw a line.”"

This thinking seems to be universal among the liberals who helped open the pandora's box of giving loans to the unqualified in order to increase minority homeownership. Notice how the liberal can never be at fault for the results of crazy schemes intended to produce desired outcomes.

On Amazon.com, I've been searching through the scanned indexes of books that discuss the housing bubble for clues to the author's approach. A few of the books actually reference CRA. And some of them that don't include the CRA offer proposals for mortgage restrictions very similar to those that existed until the 90's. So I'm left with the decision to buy a book written by a bravely honest soul or one from someone who is probably more discreet and sardonic. Maybe I'll splurge and buy one of each just to compare.

Anonymous said...

So, really, what was happening is that the political classes were exploiting the masses in order to make a killing.

Remember that the next time they make lots of noise about CEOs ripping people off etc. They are simply trying to divert attention from their dirty snouts.

Anonymous said...

People, especially politicians, ought to think more about whether America as a majority white nation has value, whether it is worth preserving. Before it's too late. If it isn't already. Especially now that the US is, apparently, about to elect a non-white President, seemingly giving even more legitimacy to what is going to be -- if nothing is done -- the demographic destruction of the historic American nation.

Right - because John McCain was working overtime to secure that future for us!

Anonymous said...

when people start using your ideas, they no longer emanate from the steveosphere, but are simply obvious to everyone. It's like the expiration of patent protection.

Anonymous said...

I prefer an affirmative isteve, which reminds us of its impact and forsightfulness. "The ever expanding stevosphere" probably could be rapped over a beat, too.

josh said...

Doing well by doing "Good." Cisneros got famous years ago by getting caught in some weird sex scandal,when he was at HUD. He seemed to take the same stance as he is doing now,the self pitying whining baby,who is only trying to help!! The growing presence of Mexican officials and policy makers--not just the affirmative action plug-ins like Cisneros---means our political system will get even more corrupt,more inefficient,more stupid and more wasteful than it is now! You might dream that the Diversity Recesion will "reform" the diversicrats and theyll learn their lesson and shape up and do right. Not bloody likely!!! I wonder what role Bill Ayers will play in the Obamo administration??

David Davenport said...

People, especially politicians, ought to think more about whether America as a majority white nation has value ...

But politicians of color, including President Nobama, don't want America to be majority white.

It is as stark as that.

Anonymous said...

Dream of a world where Steve is considered mainstream and Bill Ayers
is marginal, fringy.

Anonymous said...

Colin Powell, Just another affirmative action flack.

Anonymous said...

"But you really are just given a sledgehammer and an ax. They are blunt tools."

Is this quote evidence that Senor Cisneros' iq is a tad low?

Axes are pretty sharp, there, Senor.

Should someone someday bury one in his skull, he'd discover that for himself. Geez, if a guy's gonna give a speech excusing himself for causing the ruination of a first world country, he ought at least check it for logic.

Captain Jack Aubrey said...

Dream of a world where Steve is considered mainstream and Bill Ayers is marginal, fringy.

You obviously haven't read Obama's agenda. Dreaming will soon be illegal.

Anonymous said...

"Notice how the liberal can never be at fault for the results of crazy schemes intended to produce desired outcomes."

I think this tends to be true of almost all people, but liberals tend to find themselves in this situation more as do the youth. It's for ego protection that we try to diffuse blaming ourselves while delicately acknowledging our failures. It reminds me of a saying, "I've always heard of the 'wrong crowd' but I've yet to meet a member of it".

BTW, yeah, that article was right out of the steveosphere.

Mr. Anon said...

"josh said...

Cisneros got famous years ago by getting caught in some weird sex scandal,when he was at HUD."

To be fair, it wasn't a weird sex scandal, but rather a fairly run-of-the-mill kind - putting his mistress on the payroll, I think.

For a weird sex scandal, you'd have to go back to Barney Frank's rent boy running a call-boy service out of Frank's residence. Of course, in Kennedy-land that didn't hurt him one bit, and Frank is now more powerful than ever.

Bill said...

What's with all the danged anonymice lately?

Anyhow, I think the steveosphere will expand and be consolidated into a potent bloc... IF, and only if, Steve can find the time to articulate a manifesto better than citizenism. Sorry, Steve, but that one was just too simplistic for a guy of your maturity and mental clarity.

Steve Sailer said...

Bill,

In the manifesto-writing racket, "simplistic" is a compliment.

Ronduck said...

Scores of homes have been foreclosed, including one in five over the last six years on the community’s longest street, Sunbend Falls, according to property records.

Cisneros builds a development for Mexican immigrants who want to achieve a middle class lifestyle and he gives the main street an English name. I find this funny because most of the developments in my area have names in Spanish, and Spanish street names too. It seems that many Mexicans have a clearer idea of what constitutes the heart of America than many guerros do. I just wish they would vote that way.

Michael said...

The south and west sides of San Antonio are almost all Hispanic.

And poor and impossibly violent.


Eek, the 2000 census has San Antonio some two thirds hispanic. When did this happen? I thought I knew my demographics and that San Antonio was a white Texas holdout. Lol, did I get that wrong.

Anonymous said...

Steve,

Have you seen this article? It looks to be related to your affordable family formation idea, though I think they just noticed the association in polling data and reported it.