October 25, 2008

No Money Down!

The middle column of this graph lifted from Dr. Housing Bubble is the interesting one -- it shows by year what percentage of first-time home buyers in California got a mortgage with no down payment.

In the last three years of the Clinton Administration, it was only about 7%. In 2002, Bush started making speeches denouncing down payments as the primary barrier to minority home ownership. By 2003, 20% were getting their first house with zero money down. By 2006 it was 41%. Think about the quality of debtor who was left to buy his first home in 2006 with no money down after two years in which one-third of all home purchases were no money down. Does the term "scraping the bottom of the barrel" come to mind?

Was it different in the rest of the country? I don't know, but California is more or less what mattered. Remember the old John Prine song about a smack addict, "Daddy Has a Hole in His Arm Where All the Money Goes"? Well, California is the hole where all (or about half) of the defaulted mortgage money went. Similarly, if Bush's plan to add 5.5 million minority homeowners by 2010 was going to happen, it had to happen most of all in California, which has 20 million minority residents.

If Bush was a cynical bastard like Richard Nixon, he could have told his people right after he got re-elected in late 2004 to turn off the money machine. Think of how much less damage there would have been without all the idiotic loans of 2005-2007. But, no, Bush drank the Kool-Aid. No soft bigotry of low expectations for him!

October 24, 2008

Alan Greenspan in 2005

Let's take a fond look back at one of Alan Greenspan's greatest hits:

Remarks by Chairman Alan Greenspan
Consumer Finance
At the Federal Reserve System's Fourth Annual Community Affairs Research Conference, Washington, D.C.
April 8, 2005 [i.e., during the heart of the Housing Bubble]

It is a pleasure to be here today as you conclude your discussions about our dynamic consumer finance market. Our nation's vibrant [chain-yanking ahoy!] financial services industry is remarkable in many respects, with myriad providers offering consumers a broad range of transaction and credit options. The industry is central to the functioning of our robust consumer sector. Therefore, it is essential that policymakers, regulators, bankers, researchers, and consumer groups remain fully engaged in monitoring developments in the consumer finance market and continually seek to better understand the strengths and weaknesses of the financial services industry, including how well it serves lower-income and underserved consumers. ["Underserved" is a euphemism for minority.]

Evolution of the Consumer Finance Market

A brief look back at the evolution of the consumer finance market reveals that the financial services industry has long been competitive, innovative, and resilient. Especially in the past decade, technological advances have resulted in increased efficiency and scale within the financial services industry. Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. ...

... For example, information processing technology has enabled creditors to achieve significant efficiencies in collecting and assimilating the data necessary to evaluate risk and make corresponding decisions about credit pricing.

With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. The widespread adoption of these models has reduced the costs of evaluating the creditworthiness of borrowers, and in competitive markets cost reductions tend to be passed through to borrowers. Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s.

For some consumers, however, this reliance on technology has been disconcerting. Credit-scoring models are complex algorithms designed to predict risk. Consumer advocates have raised concerns about the transparency and completeness of the information fit to the algorithm, as well as the rigidity of the types of data used to render credit decisions. Consumer advocates contend that the lack of flexibility in the models can result in the exclusion of some consumers, such as those with little or no credit history, or misrepresentation of the risk that they pose.

To address these concerns, some firms have worked to customize credit-scoring systems to include new data and to revalue the weight of the variables employed. Also, new organizations have emerged, developing new systems for collecting alternative data, such as rent payments and other recurring payments that will enable creditors to evaluate creditworthiness of consumers who lack experience with credit. [In other words, lower credit standards.]

Improved access to credit for consumers, and especially these more-recent developments, has had significant benefits. Unquestionably, innovation and deregulation have vastly expanded credit availability to virtually all income classes. Access to credit has enabled families to purchase homes, deal with emergencies, and obtain goods and services. Home ownership is at a record high, and the number of home mortgage loans to low- and moderate-income and minority families has risen rapidly over the past five years. Credit cards and installment loans are also available to the vast majority of households.

The more credit availability expands, however, the more important financial education becomes. In this increasingly competitive and complex financial services market, it is essential that consumers acquire the knowledge that will enable them to evaluate products and services from competing providers and determine which best meet their long- and short-term needs. Like all learning, financial education is a process that should begin at an early age and continue throughout life. This cumulative process builds the skills necessary for making critical financial decisions that affect one's ability to attain the assets, such as education, property, and savings, that improve economic well-being.

ACORN and the like have gotten big into "credit counseling" for mortgage applicants as an alternative to actually having a track record of meeting your obligations. It provides both mortgages for marginal minority applicants and jobs for unemployed activists as "credit counselors."

A reader in New York who is a public high school English teacher says he was telling one of his students that he was in danger of flunking out of school. The student said he didn't care, he already had a job paying $12 perhour.

"What kind of job pays you $12 an hour?"

"I'm a credit counselor!"


"You know, like somebody wants a mortgage or something, but they be a deadbeat. So, I, like, counsel them about how the bank isn't just giving them the money. They gotta, you know, pay it back. I show them a video about stuff like points, and then they can get their money 'cuz now they've been credit-counseled."

Tom Wolfe explained the inner economic logic of an earlier social work counseling fad in Mau-Mauing the Flak Catchers:

Brothers from down the hall like Dudley got down to the heart of the poverty program very rapidly. It took them no time at all to see that the poverty program's big projects, like manpower training, in which you would get some job counseling and some training so you would be able to apply for a job in the bank or on the assembly line--everybody with a brain in his head knew that this was the usual bureaucratic shuck. Eventually the government's own statistics bore out the truth of this conclusion. The ghetto youth who completed the manpower training didn't get any more jobs or earn any more money than the people who never took any such training at all. Everybody but the most hopeless lames knew that the only job you wanted out of the poverty program was a job in the program itself. Get on the payroll, that was the idea. Never mind getting some job counseling. You be the job counselor.

Of course, things have evolved since the Great Society hey-day of job counseling. I wonder how many ACORN-style "credit counselors" decided they had to get in on this homebuying game and have since defaulted on their own mortgages?

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

Beverly Hills vs. Compton Foreclosures

As I've mentioned before, one of the weird things about the mortgage meltdown compared to other financial bubbles was how concentrated it was among the non-affluent. Usually, bubbles put a lot of money in the hands of well-to-do people who end up blowing it. The collapse of the oil bubble in 1982, for instance, wiped out a lot of J.R. Ewing-types in ostrich-skin cowboy boots who had gotten rich in the 1970s.

But the more you look at finer-grained data, the more you see that this was all about money going to the, roughly, second quartile of society: exactly who had to get the mortgages to raise the homeownership rate from its traditional 64% to 69%, just as the Clinton and Bush Administrations hoped.

Browsing through 27 screens of Los Angeles County foreclosure data by zip code, I could better grasp why money managers in New York and London and Shanghai gave out so many stupid loans for homes in crummy neighborhoods. How can any outsider remember the difference between Huntington Beach and Huntington Park, Lynwood and Lawnwood? Aren't they all in LA? Sunshine! Swimming pools! Movie stars!

But, by accident, one of screens compared three zip codes from two places everybody should have heard of:

_____________________ Median sale price __________ ___ ______Foreclosures____ ___

ZIP CodeCommunity
Sept. 2008 Price (000s)Sept 2008 SalesQ3 2007Q3 2008
Map Beverly Hills, Los Angeles 90210 90210Beverly Hills
Map Beverly Hills, Los Angeles 90211 90211Beverly Hills

Map Beverly Hills, Los Angeles 90212 90212Beverly Hills

Map Compton, Los Angeles 90220 90220Compton
Map Compton, Los Angeles 90221 90221Compton
Map Compton, Los Angeles 90222 90222Compton

So, there were 7 foreclosures in Beverly Hills and 252 in Compton in Q3-2008. Now, those places aren't anymore exactly like you probably think: Compton has been majority Hispanic since the 2000 Census and Beverly Hills is guesstimated to be 30% Iranians.

Beverly Hills has a large number of hustlers trying to put one over on the world (compared to, say, sedate San Marino near Pasadena, with just one foreclosure). But, still, a lot more money has been lost, so far, in Compton.

I deleted the column showing price declines since Q3-2007 to squeeze the table in, but just a year ago, Compton homes were average in the mid-300k range. For example, in 2007 a 500 sq. ft. Compton one-bedroom house sold for $340k.

So, the difference in price at the top of the bubble between Beverly Hills and Compton was less than an order of magnitude. In contrast, the difference in average net worth outside of home equity between the two populations must have been two or even three orders of magnitude.

In LA County, though, the real wipeout has come in the farthest exurbs, the high desert Antelope Valley, Lancaster and Palmdale, about 65 miles north of downtown LA by highway.

_____________________ Median sale price _____________ ______Foreclosures____ ___

ZIP CodeCommunitySept. 2008 Price (000s)Change from 2007Sept 2008 SalesQ3 2007Q3 2008

93535 is Lake Los Angeles, west of Palmdale, which ain't got no Lake, ain't got no Los Angeles, and sure as hell ain't got no Lake Los Angeles, to paraphrase Wesley Snipes' wife's opinion of the Vista View Apartments in which she lived in "White Men Can't Jump."

There were 621 foreclosures out of about 14,000 owner-occupied homes in just three months there. Ouch. It's half white, 30% Latino, maybe 15% black. Very working class. Back in 1999, the poverty rate was 18% compared to 14% statewide, so it, at least then, wasn't extremely poor, it was just a lot of working class families trying to get by, trying to keep their kids out of the underclass. (Or get rich quick off flipping homes, if somebody would lend them $300,000 with no money down.)

What was everybody thinking? What possible reason was there for thinking that the American working class was suddenly developing the earning power to pay off these giant mortgages?

This just shows how expensive political correctness is.

October 23, 2008

Colin Powell

My general opinion of Colin Powell is that he is a sensible man. Moreover, I believe that the employment of sensible men in affairs of state should be encouraged.

Powell tried to slow the rush to war in 2002. In the final analysis, he lacked the moral fiber to take the last steps available to him: resign and speak out against the war.

On the other hand, his situation was directly analogous to Secretary of State William Jennings Bryan's in 1915. Fearing that President Wilson was propelling America into the Great War, Bryan resigned.

That's why Bryan's name is treated with such reverence in the media today.

Oh, sorry, wrong universe ... Nobody remembers Bryan's sacrifice of the highest position he ever attained. They just snicker at him for the Monkey Trial. And we ended up in the war anyway...

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

Bill Ayers and his lovely fork-appreciating wife have new book coming out

Mr. and Mrs. Ayers have a new book listed on Amazon.com.
Product Description
White supremacy and its troubling endurance in American life is debated in these personal essays by two veteran political activists. Arguing that white supremacy has been the dominant political system in the United States since its earliest days—and that it is still very much with us—the discussion points to unexamined bigotry in the criminal justice system, election processes, war policy, and education. The book draws upon the authors' own confrontations with authorities during the Vietnam era, reasserts their belief that racism and war are interwoven issues, and offers personal stories about their lives today as parents, teachers, and reformers.

About the Author
William C. Ayers is a distinguished professor of education and a senior university scholar at the University of Illinois–Chicago. He is the author of To Teach: The Journey of a Teacher and Fugitive Days, a memoir about his life with his wife, Bernardine Dohrn. Bernardine Dohrn is the director of the Children and Family Law Justice Center and a clinical associate professor of law at Northwestern University. She is the coauthor of A Century of Juvenile Justice and Justice in the Making. They live in Chicago.

Product Details

  • Paperback: 192 pages
  • Publisher: Third World Press (June 1, 2009)

Where's Rev. Wright's book?

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

Biden's loin-girding: I told you so

Way back in August, I described Joe Biden as "kind of a bozo." But then the whole world decided that they either hated or loved Sarah Palin, and everybody decided that therefore, through some sort of reverse osmosis process, Biden must be a Steady Hand on the Tiller etc etc.

Nah, he's a garrulous old hack, which isn't the worst thing in the world, but it's the wrong thing in a Vice President. The VP is supposed to be the next best thing to the President, which means people (especially foreigners, who don't know any better) listen to him, which means he isn't supposed to talk too much. He's supposed to just stand there looking sad while they lower the dictator of Bebukustan into the ground. Al Gore was good at that.

Biden's not. Every so often, he just can't control himself, and then you get incidents like "I think I have a much higher I.Q. than you do.''

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

October 22, 2008

Best. Election. Ever. Colin Powell sings, dances in celebration of Nigerian email fraud

Via Craptocracy, we learn that three days before endorsing Barack Obama, Colin Powell warmed up by, well ....

From the Guardian:

Colin Powell celebrated his 71st birthday this year but he's clearly not too old to pull some cheeky Afro-hip-hop moves. His take on Olu Maintain's song Yahooze at the Africa Rising event at the Royal Albert Hall worked a lot better than his former boss George Bush's embarrassing inaugural shape-throwing alongside Ricky Martin. Although he kept his jacket buttoned, almost everyone deemed his dancing spot-on.

But it doesn't look as if the former US secretary of state paid too much attention to the lyrics, or he might have discovered that the Nigerian hit is a celebration of that country's most infamous export, advance-fee email fraud (sometimes called 419 fraud, after the relevant section of the Nigerian penal code). The perpetrators are known as "Yahoo boys" after their email service-provider of choice.

He told the crowd:

"I stand before you tonight as an African-American," The Times quoted Powell as telling the audience. "Many people say to me, 'You became secretary of state of the USA., is it really necessary to say you are an African-American, or that you are black?' And I say, 'Yes,' so that we can remind our children. It took a lot of people struggling to bring me to this point in history. I didn't just drop out of the sky. People came from my continent in chains. There's no reason a new Africa can't be created right here and now."

Of course, it's purely racist for anybody to suggest that race had any influence on Powell's endorsement of Obama, even when Powell admits it was a factor.

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

October 21, 2008

Cousin marriage in Iraq

As I wrote in my early 2003 American Conservative article on why Iraqi social structures were likely to undermine America's goal of nation-building in Iraq, "Cousin Marriage Conundrum" (which Steven Pinker selected for his anthology The Best American Science and Nature Writing, 2004 anthology), about half of the married couples of Iraq are first or second cousins.

Reading Daniel Yergin's history of the oil industry, The Prize, I discovered a great example of the logic behind this.

Imagine you are the dictator of an oil-rich country. Who is the most likely person to overthrow you?

Your Minister of Defense, right?

So, you could appoint your own first cousin as Minister. He'd be more loyal to you than some stranger would.

Yet, Shakespeare's history plays about struggles for the English crown have been characterized as the War of the Cousins.

Or, you could appoint your own son-in-law. He'd be more loyal than some stranger would.

Yet, King James II of England was overthrown in 1688 by his son-in-law William of Orange.

But, if you were Saddam Hussein, you could appoint your own first cousin who is also your brother-in-law!

Yergin writes;

The new Iraqi regime -- particularly the party, military, and security services -- was dominated by Tikritis, many of them related in some way to Hussein. So obvious was their grip that in the mid-1970s the government banned the use of names that indicated clan, tribe, or locality of origin. At the top sat members of Hussein's Talfah family and two other immediately related families, the only people he could trust -- to the degree that he could trust anybody. He has already married his cousin, the daughter of his uncle Kahyr Allah Talfa. Now Adnan Khayr Ala Talfah -- son of his uncle, brother of his wife, his own cousin -- was Minister of Defense (a post he held until his death in a helicopter crash in 1989). Hussein Kamil Al-Majid, who happened to be both Hussein's cousin and son-in-law, became chief weapons buyer, and responsible for the development of nuclear and chemical weapons and missiles. And the influence of [uncle and father-in-law] Khayr Allah Talfah continued to be felt. In 1981, the government printing house distributed a pamphlet by Talfah. Its title gave some idea of the thrust of his political thought: Three Whom God Should Not Have Invented: Persians, Jews, and Flies.

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


I haven't looked at the Wikipedia article about me in a long time, but my wife was complaining about it not being as high quality as it could be.

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

October 20, 2008

"Rachel Getting Married"

From my review in The American Conservative of the Jonathan Demme movie:

The movie's better half stars a charismatic Anne Hathaway ... as Kym, an attentionaholic part-time model turned full-time drug addict who is furloughed from a posh rehab clinic for her sister's wedding. Exactly as her levelheaded sister Rachel dreads, Kym's self-destructive antics enthrall the multicultural throngs crowding the grounds of their father's Connecticut estate to prepare for Rachel's big day on which the Reform rabbi is to marry her to a tall, gentlemanly black man from Hawaii.

The highlight of the ceremony is the groom singing his bride a Neil Young ballad. White liberals critics have gone nuts over "Rachel" because the interracial marriage reminds them of a certain black Hawaiian's promise that promoting "mutual understanding" is "in my DNA." I fear, though, that even electing Obama President won't get many black guys to understand the appeal of whiny Canadian folk rockers from the Sixties.

First-time screenwriter Jenny Lumet named the groom "Sidney." She is presumably referencing both Sidney Poitier in Stanley Kramer's 1967 interracial marriage movie "Guess Who's Coming to Dinner," and her father, Sidney Lumet, director of 1957's "Twelve Angry Men," one of Kramer's successors as a liberal warhorse. ...

Still, a more entertaining screenplay could be written about the star's off-screen misadventures. Hathaway was in the news in June when the FBI hauled away her suave Italian boyfriend, Raffaello Follieri. Outfitted with clerical cassocks and a claim to be the Vatican's chief financial officer, Follieri had wormed his way into a $100 million deal with Bill Clinton and Ron Burkle to sell off Roman Catholic churches in America to pay for sex scandal settlements. On a rented yacht in Montenegro, the bipartisan cute couple also hosted the 70th birthday party of John McCain.

An equally entertaining movie could be made about the real-life Lumet sisters (who are granddaughters of famed jazz vocalist and beauty Lena Horne). When their dad received his Lifetime Achievement Oscar in 2005, screenwriter Jenny, the sensibly dressed old-fashioned leftist, had the global television spotlight stolen from her by the startling new cleavage of her sister Amy, a would-be model and 1992 National Review contributor ("Baby Cons of America, unite: You have nothing to lose but your parents' guilt.")

Now, Jenny / Rachel has taken sibling rivalry to a new level.

Here's some more material I uncovered. Amy Lumet, who was married to writer P.J. O'Rourke back around then, began her 1992 National Review essay:

A VERY polite gentle man in New York asked me this fall if I was planning to vote for Bill Clinton. Talk about insulting! I pointed to my John McCain hat--"I'm a Republican," I said. The gentleman told me that, in his experience, cute young things tended to be liberal. We need to prove him wrong in a major way.

According to Washington Post gossip columnist Lloyd Grove, Amy worked for McCain in the Senate, but I don't have any corroboration of that, although the opening line of her NR essay suggest that. Wikipedia says O'Rourke and Amy Lumet were married 1990-1993. Was Lumet working for McCain during this period?

And here is a picture of the two sisters (with Mrs. Ozzy Osbourne in the middle)

Above is a popular picture of the two sisters sitting side-by-side at the Academy Awards while their Dad, Sidney Lumet, received his lifetime achievement award. Well, actually, the most commonly available screen capture on the Internet is a picture of just one and a half sisters, because Jenny, the screenwriter of "Rachel Getting Married," normally gets cropped in half because the kind of guys who post screen captures on the Internet only have eyes for her sister Amy.

By the way, P.J. O’Rourke, Amy's ex-husband, wrote this Spring in the Weekly Standard about a visit he recently paid to an aircraft carrier:
I was there to get a journalistic hook--a tailhook, as it were--for a preconceived idea. I wanted to say something about Senator John McCain.... Some say John McCain's character was formed in a North Vietnamese prison. I say those people should take a gander at what John chose to do--voluntarily. Being a carrier pilot requires aptitude, intelligence, skill, knowledge, discernment, and courage of a kind rarely found anywhere but in a poem of Homer's or a half gallon of Dewar's. ...

I can speak to John's honor, duty, valor, patriotism, etc., but I'm not sure how well his self-discipline would have fared if he'd been on an aircraft carrier with more than 500 beautiful women sailors the way I was. At least John likes women, which is more than we can say about Hillary's attitude toward, for instance, the women in Bill's life, who at this point may constitute nearly the majority of the "women's vote."

I wish P.J. all the luck in the world in his battle with cancer.

In other, but still somehow related news, Oprah Winfrey is planning to make a biopic about the Lumet sisters' still living grandma, Lena Horne. Alicia "AK-47" Keys is slated to star..

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

My new picture

We text pundits tend to be the opposite of Dorian Gray. As we decay dismayingly in the flesh, the headshots over our columns remain as youthful as the day they were shot (typically about a decade ago).

Anyway, I finally got my hair cut and ten hours of sleep, so, I figured that this was as good as it's going to get, and I got my picture taken over the weekend. I suppose I should have somebody Photoshop it a little, but, all in all, it came out okay.

In contrast, here's the smaller, less-high def 2000 headshot of me at 41 that I had used for years. I'm not really the redhead I looked in that shot -- we were just using old-fashioned print film in a room lit by incandescent lightbulbs (I didn't want any flashbulbs to show off my wrinkles), which gave a pleasantly warm but unrealistic glow to the color tone.

Especially after seeing Charlie Kaufman's upcoming movie "Synecdoche, New York," his first since "Eternal Sunshine," in which Philip Seymour Hoffman is beset by ten or twelve diseases while aging 40 years, I'd say, overall, I've got nothing to complain about. It's been a healthy, happy decade for me, much of which I owe to you, my readers, editors, and patrons.

ght photos by Steve Sailer 2008 and 2000

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

October 19, 2008

How much of the Housing Bubble took place in Spanish?

The NYT article on Clinton Housing and Urban Development secretary Henry Cisneros's role in debauching mortgage credit standards in the name of helping lower income people get their hands on the American Dream raises a question that I've wondering about for awhile. I suspect that when the dust settles and we finally realize what an outsized role Hispanics had in mortgage defaults that set off the global credit crisis, we'll begin to realize that one reason the insanity of the Bubble years stayed somewhat under the national radar was that some of the very worst aspects of it were being conducted in Spanish. For example, Spanish language radio stations are hurting financially right now because they had been getting so much advertising from mortgage brokers and real estate agents. (When you read about some poor illegal immigrant maid taking out a $400,000 loan that she didn't understand from a predatory lender, read carefully and you'll note that the "predatory lender" who talked her into was almost always a Spanish-speaker himself.)

And there were a lot of English-speaking working-class Hispanics who got in on the bubble, too, but they are almost equally invisible to the NY-DC axis of power and influence in this country.

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