As I've been pointing out for a long time, much of the "diversity recession" theory does not rest on minorities per se defaulting on home loans, but on contortions to the market rationalized in the name of diversity, such as Bush's attack on down payments (for everybody) in the sacred name of raising minority homeownership by 5.5 million; or by the see no evil-hear no evil-speak no evil politically correct mindset about lending to heavily Hispanic states and black parts of town by fear of discrimination lawsuit discovery of intra-firm emails asking "Aren't we out of our minds to lend $340,000 on a 500 square foot house in Compton? Do you know who lives in Compton?"
Still, ideas have consequences, and these ideas, which both parties supported, no doubt led to higher defaults among minorities.
The federal government has created a vast apparatus of of race reporting on lending to make sure that minorities get their "fair" share of loans, but there doesn't seem to be as equally accessible data on defaults by race. Why not? Well, because the point is to badger lenders into giving more loans to minorities, not to call attention to problems that can cause.
One of my most insightful commenters started out assuming that minorities couldn't have comprised more than a tiny handful of percent of the defaulted dollars. Now, he's up to 10% to 15%, but doesn't think it could possibly be 30%. I'm willing to bet him that when it all gets counted up, it will be closer to 30% than to 15%.
A few methodology issues. The first is that, normally, recessions cause defaults. Eventually, the new recession will cause a lot of defaults, but what we are interested in is not the defaults caused by the recession of, say, 2008-2011, but the defaults that caused that recession. So, therefore, let's look at, say, calendar year 2007.
Second, lenders always have a baseline expectaton of default dollars per year due to random tragedies. What we are interested in is not the total dollar amount of defaults in 2007, but the amount incremental to the expectation. For example, if lenders expected due to random sad events that 1% of prime mortgages would default in 2007 and 3% of subprime mortgages, but the real numbers were 2% of prime and 20% of subprime, then the numbers of interest to us are not 2% of prime, but the unexpected increments: 1% of prime and 17% of subprime. (I just made these numbers up for illustrative purposes.)
Third, there are a variety of technical issues involving when something is foreclosure vs. default vs. severely stressed. And there's the complicating hybrid of short sales.
Fourth, a lot of sales in, say, 2005-2006 were fraudulent using straw buyers, so sorting out blame has its metaphysical aspects.
Fifth, I suspect, on no particular evidence, just a hunch, that more than few of the most enthusiastic speculators in the California housing markets were white immigrants from the Middle East and the ex-Soviet bloc.
My published articles are archived at iSteve.com -- Steve Sailer
Posts
65 comments:
So, what are you basically saying?
Oh, I see. You can't pin all of the blame on minorities, so you have to come up with some quack theory that blames them indirectly.
Nice to see you are appealing to the neo-nazis who frequent your site. I guess you must be getting a lot of donations from the neo-nazi types.
One of my most insightful commenters started out assuming that minorities couldn't have comprised more than a tiny handful of percent of the defaulted dollars. Now, he's up to 10% to 15%
I'm flattered...
But actually, my crude estimates haven't (yet) changed.
I started off by arguing that Latinos+blacks probably only carried about 5-8% of the home mortgage dollars in America.
I admitted that they probably had much higher default rates, but probably less than 3x higher. A 2x default rate would roughly correspond to a 10-15% share of the total dollar-default figure.
Interestingly enough, there's now a bit of tantalizing evidence that illegal immigrants actually have delinquency/foreclosure rates 3x LOWER (!) than the general population:
Illegals pay their home mortgages
I'd hardly regard this one bit of empirical data as definitive, but at least it is hard data, unlike the endless rhetorical fulminations of all the NAMists on this issue.
You state: “Eventually, the new recession will cause a lot of defaults, but what we are interested in is not the defaults caused by the recession…but the defaults that caused that recession.”
Why chose between recession-caused defaults or default-caused recession? Even discounting “normal” (recession neutral) or recession-caused defaults leads to an understatement of the sought after magic “at blame defaults causing the recession” because the net default difference is necessarily defined as defaults causing the recession -the only other category identified. The default pool remaining after discounting recession-neutral or recession-caused defaults likely still includes both of those categories. If the recession itself and the recession-causing (I’d say “contributing”) defaults are the result of the same cause, aren’t there likely to be included among the discounted recession-caused defaults many that should be lumped with recession causing ones -i.e. recession-caused defaults specifically caused by THAT particular recession? We’re trying to identify blame, not blame a particular default type and many from each category share the same blame –artificial manipulation of the credit markets. If Bush sought to add 5.5 million homeowners to a nation that has approx 8 million new and existing home sales annually (even if the 5.5 is spread out over several years), that is a massive and wildly unnatural increase in demand. Please don’t forget the regular and non-minority loan applicant who would have qualified for, say, a $150k mortgage based on income, assets, credit score, proforma debt ratios, etc. When CRA approves that $150k at lower credit worthy levels of each, the original $150-qualified borrow and lenders extrapolate to develop a market for CRA-proportional credit –the non-minority who saved and paid bills for $150k approval fills out the application for new no stated/verified Jumbos. I still don't buy that minority defaults caused the recession. Qualified non-minorites necessarily then qualified for greater debt than THEY could afford -larger values of risky loans by a larger number of (non-minority) borrowers. Equal opportuniy for the un- or under-qualified. Granted, equal opportunity created for a minority-speific purpose. Minorities aren't to blame, their kidglove fondlers like Barney Frank are.
So home prices at entry level soar (as they did) which either pushes entry level homeowners up a level (elevating owners of each level in turn) or entry level homeowners remain and borrow (and SPEND!) against equity. Both grow the economy –wouldn’t $10T in annual consumer spending get a boost from $5T in paper real estate gains essentially converted to credit cards? But that growth (not only for continuation but to be preserved at some level) would seem to require continued demand. However, home ownership remained at fairly steady percentages of the population or grew manageably in pre-CRA America in the face a market equilibrium. This isn’t a typical recession. It is a ponzi bubble. And its bursting (causing a “recession”) is sibling to the defaults causing (or rather contributing) to it.
The question isn’t recession-caused or recession-causing defaults. No need to disaggregate. The question is what percentage of the chicken and egg mess is the result of the same thing –overriding all private, centuries’ proven bank management and a race neutral credit market that is the minimal-margin-for-error base of our entire economy to advance social theory and transfer wealth to political constituencies. Note: just observation made by a non-professional, could well be missing important facts or entirely wrong.
"white immigrants from the Middle East and the ex-Soviet bloc."
and Canada because they love to go to Florida....
/not kidding
It's crazy for anyone to assert that NAMs are responsible for only 5-8% of the dollar value of defaults.
Consider:
1) The US is now about 30% black and Hispanic.
2) Default rates are much higher in states with large Hispanic populations. In California, Europeans barely make up 40%. In Arizona, just under 60%.
4) Within those states, the hardest hit areas are in the areas with the largest number of NAMs - LA, not San Francisco; Phoenix, not Scottsdale.
5) New mortgages in the last 5 years were almost certainly given disproportionately to NAMs.
6) While NAMs were buying less expensive homes in the metro areas where they bought, those metro areas were some of the country's most expensive. $300,000 will buy you a very nice home in flyover country. In LA, it'll get you something in Compton - maybe.
7) Under any particular type of loan, NAMs are more likely to default compared to their white & Asian counterparts. And NAMs were taking out the most notorious loans of all.
8) 80+% of white and Asian borrowers have zero incentive to walk away from a house that declines in value - because they have their own money in that house, since they took out fixed rates.
Yet again, we have the points that RKU keeps on missing: the minority connection to the mortgage crisis is multifaceted, with dollar value of defaults being only a small part of it.
What I really want to know: when are we gunna start seeing people go to jail?
Why chose between recession-caused defaults or default-caused recession? Even discounting “normal” (recession neutral) or recession-caused defaults leads to an understatement of the sought after magic “at blame defaults causing the recession” because the net default difference is necessarily defined as defaults causing the recession -the only other category identified.
To paraphrase David Thompson:
"The more sceptical among us might suspect that the unintelligible nature of your 'economic analysis’ is a convenient contrivance, if only because it’s difficult to determine exactly how wrong an unintelligible analysis is.
started off by arguing that Latinos+blacks probably only carried about 5-8% of the home mortgage dollars in America.
TKU, your starting number is 100% useless. Prime rated mortgages are not defaulting in any significant number over normal. Taking a percentage of all mortages is not relvent.Prime rates loans are not part of the discussion when it comes to the mortgage crisis.
Subprime is where almost all the action is, and any discussion must focus on the numbers vis-a-vi subprime. Everything I have seen said minorities have taken out about 50% of the subprime mortgages.
Defaults on alt-a (stated income) loans are starting to become a factor, but even at this late date they only represent fraction relative to subprime, although that is changing.
The only other material factor is commercial loans, but the impact thereof has been on a regional and bank-by-bank baisis, with Wachovia getting his especially hard, for example.
I should also add that heavy leveraging and the CDS instruments (the two are related) have certainly made the consequences of the subprime meltdown much more severe than they would have been otherwise. The blame for this part of the equation is obviously another important point of discussion.
Here is a graph of prime vs subprime defaults through 2007. You can see something like a 10x difference. While not shown, it became worse in 2008.
p v sp
The story is here.
Also, an alt-a related graph can be found here. Again, prime is basically noise.
When the subprime issue surfaced, the overall damage was estimated at 300 Billion dollars, not a small amount but which a 12 Trillion dollar economy like the US can easily absorb. It was the complexity of how this 300 Billion were distributed that caused the uncertainty in the market and finally the run on the banks and panic we are seeing now. I would say then that the subprime default issue was a wellintentioned fiasco, that triggered the krach. I could not even accuse the excessive leverage of the financial system, because in prosperous times that is perfectly rational. Minorities play a very marginal role in the economy, they produce little and consume little. You may not like them, but they didnt do it. Mass panics are never planned and hanging people will be unjust. On the other hand, I would select a few sacrificial victims, organize a public show trial and send them to prison, so the masses will feel the necessary rites have been carried out, the anger of the gods has been calmed and harmony restored. Then the Stock Exchange will rebound mightily.
Does any disinterested reader want to take into account the 5 million mortgages that according to HUD are in the hands of illegal aliens?
http://www.freerepublic.com/focus/f-news/2100080/posts
king obama, the "neo-nazi" epithet has become soooo boring. Please think of something else.
We have all followed Iceland?
----------------------
"
Here are the lethal statistics about Iceland: the value of its economic output, its GDP, is about $20bn; but its big banks have borrowed some $120bn in foreign currencies.
Now that's what I call leverage - and remember that's just the overseas liabilities of its commercial banks.
If this were a business, and if it had no other borrowings (which of course Iceland does have), this would be a debt-to-ebitda ratio of 6.
Or to put it another way, Iceland simply doesn't have the domestic earnings to service this kind of debt.
Which is why if the Icelandic government were to formally underwrite all these liabilities - which it might just have to do, given that other banks and financial institutions no longer want to touch Iceland with the longest barge-pole ever constructed - well its national-debt-to-GDP ratio would be at a level that make the UK in the 1970s look like a model of prudence.
And if Icelandic taxpayers actually had to service all that debt, well there wouldn't be a lot left over for even the basics of life."
----------------------------
I bring up Iceland to repeat my point: This is not the minority recession. The powerful people have been reckless. The caving economy is their fault and mistakes are not related to minorities.
In the last topic, some people responded minorities were the spark so bad lending decisions to them is the genesis of the whole mess. But there's a difference between being the Cause or instead just a preceding event. For minority lending to be the Cause, advocates have to show the bad loans subverted a steady semblance of soundness in the financial order. But we now find irresponsible practices, begun before the crisis, subverted the order, setting it to fall. You can't pin the recession on only one outlet of loose money since other bad turns within the vagary of the market would have sparked expanding problems.
yee,
¿ Have we been following Iceland's financial collapse ? We have. Quoting an expert, "I suspect, on no particular evidence, just a hunch, that more than few of the most enthusiastic speculators in the Iceland housing markets were white immigrants from the Middle East and the ex-Soviet bloc." (open sarcasm )Anybody who says that the Icelanders - pureblooded Viking blue-eyed Nordics - did it to themselves, is a despicable neo-nazzee. (close sarcasm ).
rku points to an article that states this:
"More than 12,000 home loans were issued in recent years through a special program that relies on government-issued taxpayer identification numbers instead of Social Security numbers, according to the association.
The identification numbers, known as ITINs, were designed for foreign-born residents living legally in the U.S. but are widely acknowledged to be used primarily by illegal immigrants."
First, I always assumed that ITINS were for people in the country legally, but who had no need to get a social security number. Say an expat businessman etc. But even so...
We are talking 'more than 12,000' mortgages. We have estimates of 12,000,000 illegals. Let's divide by 6 to get a very conservative figure of 2,000,000 illegal headed households, take a quarter of that to get 'homeowners', that is still 500,000. So using this WAG, but conservative, estimate ITIN mortgages account for 2.4% of mortgages to illegals. And those would be the more responsible ones, the ones that got ITINs in the first place.
More likely, in the majority of cases illegals used there 'American' children's SSNs, or relatives, friends to front them to get mortgages.
Also, notice who the report quotes, the head of the 'national association of hispanic realtors'. There is a disinterested source!
Good explanation of the crisis......
http://ca.youtube.com/watch?v=SwRFoxgEcHc
Judging by where the defaults were concentrated, surely a much higher dollar value will be Hispanic buyers than black buyers. Not too many black sub-prime buyers in California these days.
Consider a hypothetical case in which a fireman lacks the upper body strength to rescue someone trapped in a burning building. The issue is not whether or not the firefighter is a woman, but whether or not physical standards were lowered in order for more women to be firefighters.
Whether or not a defaulter is a member of a minority or not is irrelevant. The issue is the lowering of standards and why it was done.
Is anyone saying that minorities CAUSED the problem? I thought that, on the contrary, Steve is implying that the minority-pimps in government caused the problem.
Steve, you're good. You're really good. White immigrants from the Middle East? One of them is my Turkish wife, who bought and now owns 5 properties in the Inland Empire area.
Fortunately, they're all up-to-date on payments. So far so good. Some of her properties are in poor Hispanic neighborhoods. Recently, while visiting one of the houses to check for repairs, my wife and I had a pistol pointed at us by an enraged Mexican tenant. Things calmed down after the sheriff was called. For future expeditions, I have recently purchased a handgun.
One of my wife's friends, a blonde couple from Syria, owned 30 houses in the Upland-Rancho Cucamonga area at the peak of the housing bubble. In the past year they managed to get rid of about half of them. Today, however, they are in bankruptcy and are returning to Syria.
Incidentally, a lot of their money went to help fund the building of a new mosque in Upland.
Havind spent time with many white immigrants from the Middle East, I have noticed that almost all of them exhbit what I would call a "get rich quick" mentality. They came to the US not to partake in our democracy or culture (such as it is), nor for the wonderful mountains and beaches, but simply to make money and go home.
As some of the commenters here say, minorities might not be the reason for the credit mess that we are in, but they might have been the straw that broke the camel's back.
I bring up Iceland to repeat my point: This is not the minority recession. The powerful people have been reckless. The caving economy is their fault and mistakes are not related to minorities.
Now that's just stupid. The fact that the United States screwed up in one way does not prevent an entirely different (not to mention much, much smaller) nation from screwing up in an entirely different way. Your car's broken because the alternator's out. My car's broken because the transmissions shot. They're both broken; different reasons.
Um, yeah.
Gee, that was fast!
I predicted this would happen the very day the government suggested buying up $700 billion in distressed assets.
The impeccably leftist New Yorker sees links between US subprime mortgages and the Icelandic crisis:
http://www.newyorker.com/talk/financial/2008/04/21/080421ta_talk_surowiecki
Professor Lee Ohanian in - where else? - the Wall Street Journal:
"What should be done? We should encourage the immigration of prime-age individuals. Beginning in 2007, net immigration fell to half of its level over the previous five years. Increasing immigration would increase the demand for housing and raise home prices. And note that the benefit would be immediate. Home prices -- and the value of subprime obligations -- would rise in anticipation of a higher population base. The U.S. particularly needs highly skilled workers. These workers not only would purchase homes, but would generate higher living standards for all Americans."
While Prof. Ohanian is terribly wrong on that point, his article gets it at least half right:
"[T]here is a real danger that even a moderate recession, along with the current perception of an economic crisis, would lead to calls from various quarters for bad economic policies -- policies that tend to either pander to special-interest groups, benefiting relatively few at the expense of many."
Indeed. In fact, I'd say it already has.
yee,
ALL the trouble here in Germany stems from German banks being naughty and either directly dipping into the US sub-prime pool or buying derivatives. Apart from that there is nothing out of the ordinary which could have triggered panic. Deutsch Bank has always being playing games on the markets but the Bundesbank used to force them to keep enough cash under the till to cover those games. The reason this situation has come about in Germany is because of the fucking EU and the Euro, and I deliberately use that word in this sense. Under the Bundesbank regime any bank playing these games would have had Herr Adenauer's wrath down their necks. It’s unfortunate our liberals are trying out exactly the same nonsense which is making the US squeak.
http://www.appeal-democrat.com/articles/crisis_69544___article.html/
Here is a not very objective source, who says hispanics only received 6.2% of the subprime loans. I wonder whether that figure is real.
Minorities play a very marginal role in the economy, they produce little and consume little.
Unless you give them the tools with which to consume a great deal - like unsecured, no down payment home loans that help lead to a housing price bubble.
Unless you use them to overbuild hundreds of billions of dollars worth of homes that no buyer can afford.
Mark Steyn believes in AFF, too.
Saturday Night Live's sketch definitively addressed this issue, from the top down. Diabolical internationalists pressured politicians to manipulate the game rules. Thousands of financiers got rich repackaging the toxic debt and off-loading it on banks. Greedy yuppies with hot wives got caught up in a ponzi scheme of flipping and renting. Meanwhile, millions of poor credit risks (of all races) were necessary pawns manipulated by the yuppies who rented their investments out to them and the financiers who facilitated mortages to them.
As I believe Steve is suggesting, minorities were not the cause of this "froth", but were the "cause celebre" of the lobbyists for the financiers who manipulated the game rules. If anybody is suggesting that this mess is the "fault" of minorities, and I doubt anybody is actually doing that, they are wrong.
One thing to consider is that because of the way mortgage-backed securities were bundled and sliced, the growth of bad debt may have reached a critical tipping point. Once a certain amount of bad mortgages are in the system, the problem of asymmetrical information becomes acute and the market may suddenly become illiquid. If this is the case, a relatively small increase in bad mortgages could cause a big problem; but whether you wanted to blame the rules that encouraged the mortgages or the lack of transparency resulting from the complexity of the financial instruments would be a matter of perspective.
I have a side question:
Why does the government refinance the banks? If the idea is to save the real economy, why not lend the money directly to industry, government departments, universities and the public? Why bother go through the banks which have shown how useless they are? And on top they take exorbitant cuts. The government surely has the infrastructure. It only needs to give it to the Receiver of Revenue. They have offices all over the place and can lend directly to the public and industry. I really don't understand the purpose of the banks anymore.
http://www.compliancetech.com/Demographic_Impact_of_the_Subprime_Mortgage_Meltdown.pdf
Here is the report that Thomas Elias was referring to, but I think he misquoted the numbers. Hispanics got 20.76% of the subprime loans in 2006, and blacks got 19.18%. However, about 58% of subprime loans went to nonhispanic whites, and 66.92% of all subprime loans went to upper and middle income borrowers. It sounds like the biggest part of the problem is people refinancing for speculation.
A good time to go on a trip to Iceland!
Cheap holiday and you will be helping them out.
Fifth, I suspect, on no particular evidence, just a hunch, that more than few of the most enthusiastic speculators in the California housing markets were white immigrants from the Middle East and the ex-Soviet bloc.
Lots of Chinese and Koreans were in on that action, too.
Steve,
While we're figuring out how the young geniuses of Compton can pay off their six-figure mortgages, we can also set our powerful brains to work on how these same folks might generate enough tax revenue to keep the credit line going on 51 billion simoleons of debt.
Y'all better invent fusion power quick, Steve-o.
--Senor Doug
I agree with most of your post here, but not with the "fear of discrimination lawsuit part."
If this were a real issue, then it would have affected all banks. Instead, many banks like Chase and B of A are doing just fine and have little in the way of subprime losses, while the likes of WaMu and Countrywide had tons.
The point is that banks _could_ have avoided extending lots of bad loans, and many in fact did.
This was a matter of _choice_ for all the failed banks. Fear of discrimination lawsuits sounds to me like a bad excuse for unwise lending decisions.
"white immigrants from the Middle East and the ex-Soviet bloc"
You'll find them behind far more than their fair share of any type of fraud and scam in California.
Besides financial and real estate fraud, fake health products and MLM are also big.
Found at Rasmusen's Weblobg:
http://rasmusen.org/t/2008/10/mortgage-backed-securities.html
"Via Marginal Revolution, I found Gary Gorton's The Panic of 2007, a long paper on the institutional details of the financial crisis. It gives particular examples of subprime mortgage bonds, tells how subprime mortgages work in detail, talks about the collateralized debt obligations that buy the bonds and issue their own securities, and so forth. It also talks about why there is a liquidity crisis. Prof. Gorton assigns blame entirely to subprime mortgages, because they are especially sensitive to housing prices (as opposed to interest rates). I only read a little of the article, and it makes difficult reading. The main impression I get is that these mortgage-backed assets are far more complicated than I had thought, and it is no wonder that they are hard to value. I'm also amazed anyone would buy them, for that very reason. It seems that they must just have trusted the rating agencies, which should not have assigned ratings to such complicated securities."
That paper: http://www.kc.frb.org/publicat/sympos/2008/Gorton.08.04.08.pdf
From page 3: "Subprime mortgages are a financial innovation to allow poorer (and disproportionately minority) people and riskier borrowers access to mortgage finance in order to own homes."
-Frank
I am Lugash.
Interesting comment about the ptentially incriminating emails. I think we're seeing late stage political correctness. All of the mid to senior level managers now in place know it's suicide to mention these things. They've known this since day one of their careers. It's like the weather to them, except they can't can't even talk about it.
I am Lugash.
daveg posted some good graphs describing on defaults by mortgage type. Here's another, from the 9/20/08 WSJ article Loan Delinquencies Rear Their Ugly Head Again.
The performance of sub-prime loans is awful and looks worse over time (2005 -> 2008), and in comparison to prime loans (end of August '08, >9% already defaulted versus ~1%).
The rightmost graph shows that 30-day delinquencies of subprimes originated in 2006, 2007, and 2008 were already over 25%, and still climbing.
Today, however, they are in bankruptcy and are returning to Syria.
What should anger all of us about these folks is this: they're free to engage in such risky ventures; we're not.
If they destroy their credit rating, they can always go back home. For us, this is home.
If they do something marginally or even outright criminal, they can go home, and in most minor criminal cases the government won't bother trying to extradite them. We don't get that option.
Let me just point out that when you have a really big disaster, there are usually multiple causes. San Francisco in 1906 was a combination of earthquake and subsequent fire, Galveston in 1900 wind and waves.
Here we have a common theme, overleveraging, carried out both at the bottom and top of the upside down financial pyramid. To the extent that the whole system topples down into a depression, then the key will be overleveraging at the Wall Street level. If we get by with a just a recession caused by the evaporation of $5 trillion in paper wealth in housing prices, then the main cause will at the Main Street level.
Steve would have a great point if real estate bubbles didn't happen in other developed countries in the world. According to wiki - Spain saw Real Estate prices rise 247% from 1997 to 2005. Here's an interesting spreadsheet also showing the same thing happening in the UK.
But I don't disagree with your point that minorites are defaulting disproportionately (then again, Brimelow claimed that blacks and whites had the same default rates as late as the early-1990s, how disproportionate remains to be seen). And exactly what %age of the total dollar figures in foreclosures they represent also is in question. Half-a-million Californians held real estate licenses in 2006, lots of speculating going on and not just by evil "slumlords" renting to minorities. It only takes a few Casey Serins to outdo an entire neighborhoods of insolvent minoities
All Nazis, including neo-Nazis, are socialists. This cannot but be true, since socialism is part of both the name and the programs of every Nazi movement. By calling someone a Nazi, you're saying they're someone who is likely to:
(a) ban IQ tests,
(b) cooperate with Stalinists in tearing down conservative Slavic countries,
(c) quote Marx, favorably,
(d) welcome ex-Communists into their political party with open arms,
(e) steal votes from left-liberal parties during economic downturns (while making remarkably little headway against conservative / Catholic parties, and most of all
(f) try to use government policies to improve the nature of the public.
Six different ways in which Nazis are the diametric opposite of conservatives. While the real Obama is completely ignorant of who started the fighting between Georgia and Russia, king obama is completely ignorant of the history and ideology of his favorite historical whipping boys. (Come on, admit it ... you think/thought the Nazis were in favor of IQ tests, didn't you?)
I bring up Iceland to repeat my point: This is not the minority recession. The powerful people have been reckless. The caving economy is their fault and mistakes are not related to minorities.
This is the same sort of specious logic the usual suspects have been crapping all over these threads, ad infinitum (literally - it just doesn't seem to have an end), and seemingly whenever these people have no argument (my favorite - Jews are responsible for none of the leftism in America, because Europe is leftist and has few Jews; WTF? A third-grader can do better than this).
That said, a con artist and his game are two different things. Con artist = you decide (I say there's plenty of blame to go around). His game = clearly, it was "all these poor NAMs, and you don't want to help them? What are you, a racist?"
Pretending to be so obtuse you can't understand this is pathetic, but not effective.
"Now that's just stupid. The fact that the United States screwed up in one way does not prevent an entirely different (not to mention much, much smaller) nation from screwing up in an entirely different way."
At the exact same time; riiiiigggghhhtt!
I think a better analogy is if someone were to leave his lights on for 26 straight days while on vacation then come home to a dead battery, and upon the car not starting, rebuild the engine.
Another analogy:
You're standing in the smoldering ruins of San Francisco in 1906, and you say, "Gee, earthquakes are a problem around here."
And you are angrily answered, "Why are you talking about the earthquake? It was the fire! Lots of places have fires. Look at Chicago in 1871. We need a better fire department, we need fire retardant building codes, we need those new horseless fire trucks."
And you say, "I'm all for what you said. But, hey, let's not forget the earthquake that started the fire. We have to do things like make water mains more earthquake safe, and build big, robust water tanks in each neighborhood in case the next earthquake knocks out the water mains. Adn we need to put in new building codes to keep buildings from being destroyed even if there isn't a post-quake fire."
But, they just answer, "No, no, it was the fire! Why are you talking about the earthquake?"
Steve, you can play chicken and egg games endlessly. If you want someone to blame for overdevelopment/easy money - blame Greenspan for keeping interest rates so low.
Personally, I think the current crisis was caused by the oil price crunch (also related to the weak dollar caused by low interest rates and of course, the Iraq war). High gas prices caused a consumer freakout and made those exurbs where a good chunk of foreclosures are happening much less attractive.
If you're going to take the post-San Francisco Earthquake reassessment approach, it's worth thinking a few steps ahead. In the wake of the Enron/Worldcom fiascoes, Congress passed Sarbanes-Oxley, which included the mark-to-market accounting requirement. Mark-to-market is a pro-cyclical policy -- it makes the books look better than they are in upturns and worse than they are in downturns. We need more counter-cyclical policies, across the board.
One example might be in the use of leverage. Currently, commercial banks are required to be no more leveraged than 12-to-1. It might make sense to tighten this to, say, 10-to-1 when GDP exceeds, say, a 3.5% annual rate, and then loosen it back to 12-to-1 when GDP falls back below, say, 1.5%. You could put similar leverage requirements on investment banks, if any independent ones are still left.
Another idea might be to phase out the tax deduction for paying interest on debt, and eliminate double taxation of dividends. That will remove the incentive for companies to lever up to buy back their own stock, and encourage them to pay out more of their profits to shareholders in dividends.
Dave
From KFYI
http://kfyi.com/pages/local_news.html?feed=118695&article=4364653
HUD: Five Million Fraudulent Mortgages Held by Illegals
One illegal alien was arrested this year in Tucson after allegedly using a stolen social security number to buy two homes and rack up over $780,000 in bad debt.
Some five million fraudulent home mortgages are in the hands of illegal aliens, according to the U.S. Department of Housing and Urban Development.
It's not known how many of those have contributed to the subprime housing mortgage meltdown, but it has affected every state, including Arizona.
The problem began years ago when banks were forced to give mortgages without confirming social security numbers or borrower identification. As a result, illegal immigrants were able to obtain home mortgages which they could not afford.
One illegal alien was arrested this year in Tucson after allegedly using a stolen social security number to buy two homes and rack up over $780,000 in bad debt.
Steve, you can play chicken and egg games endlessly. If you want someone to blame for overdevelopment/easy money - blame Greenspan for keeping interest rates so low.
It isn't a "chicken or egg" game to point out that, blame aside, this poison pill was coated in chocolatey NAM-charity goodness.
That's the biggest reason why everyone swallowed it, and no one's allowed to look too hard at why it's making us sick.
HUD: Five Million Fraudulent Mortgages Held by Illegals
Wouldn't give illegal immigrants the highest rate of home ownership of any demographic group in America? I guess that all those illegal day-laborers hanging around Home Depot were actually real estate moguls in their spare time!
Since none of the NAMists seem to have come up with any hard data, here's a simple suggestion:
(1) Make a list of the 100 highest delinquency/foreclosure zip-codes in America.
(2) Make lists of the 100 most heavily black, most heavily Latino, and most heavily NAM=black+Latino zip-codes in America.
(3) Compare these lists, and see if there's any sort of pattern or not.
A slightly more thorough and quantitative version would be to do cross-correlations across all zip codes, and see what you get.
Please bear in mind that this would be a necessary but not sufficient condition for the "NAM" hypothesis, since it wouldn't tell you anything about the *size* of the defaulted mortgages, e.g. urban Detroit probably has a high rate of default but a very low dollar value.
I think all this data is completely public, so the NAMists should stop wasting their time with long-winded comment threads, and just put together some quantitative evidence.
Steve would have a great point if real estate bubbles didn't happen in other developed countries in the world. According to wiki - Spain saw Real Estate prices rise 247% from 1997 to 2005. Here's an interesting spreadsheet also showing the same thing happening in the UK.
So, you're comparing the bubble in the US to that in Spain and saying 'therefore it can't be due to immigrants.'
Nice.
From Wikipedia on Spain:
Spain, has recently experienced large-scale immigration for the first time in modern history. According to the Spanish government there were 5,220,000 foreign residents in Spain in January 2008. Of these more than 700,000 were Romanian, and well over half a million were Moroccan while the number of Ecuadorians was around half a million as well. Colombian population amounted to around 300,000...Chinese are estimated to number over 110,000. Immigrants from several sub-Saharan African countries have also settled in Spain as contract workers, although they represent only 4.08% of all the foreign residents in the country. During the early 2000s, the mean year-on-year demographic growth set a new record with its 2003 peak variation of 2.1%, doubling the previous record reached back in the 1960s when a mean year on year growth of 1% was experienced. This trend is far from being reversed at the present moment and, in 2005 alone, the immigrant population of Spain increased by 700,000 people...
Allegedly, the growing immigrant population is the main reason for the slight increase in Spain's fertility rate. From 2002 through 2008 the Spanish population grew an 8%, from which 6% were foreign.
Spain and Britain have both experienced massive immigration - among the highest rates in Europe, in fact - and at the same time as their real estate bubbles. But the two can't be at all related, can they?
At the exact same time; riiiiigggghhhtt!
At the exact same time as a general economic slowdown, caused in large part by the slowing economy of the US. As the saying goes, "When the US sneezes, the world catches a cold."
"Come on, admit it ... you think/thought the Nazis were in favor of IQ tests, didn't you?"
I'm sure Nazis regarded IQ tests as a Jewish conspiracy. That tended to be the Nazi answer to most things.
Britain has certainly been swamped with immigrants since 1997 and especially since 2002. However the worst housing bubbles have tended to be not in London, which attracts the majority of new immigrants, but in places like Manchester and Leeds.
RKU sez
I started off by arguing that Latinos+blacks probably only carried about 5-8% of the home mortgage dollars in America.
I admitted that they probably had much higher default rates, but probably less than 3x higher. A 2x default rate would roughly correspond to a 10-15% share of the total dollar-default figure.
Doesnt really matter what the default perentage is until someone comes up with credible empirical evidence on the total dollar pot on the loans given out. For example, even a seemingly huge 70% default rate on 10% of the total cash is far less significant than defaults on the remaining 90% of the cash. That 10% is still a minor part of the action overall action.
Interestingly enough, there's now a bit of tantalizing evidence that illegal immigrants actually have delinquency/foreclosure rates 3x LOWER (!) than the general population:
There are a number of factors that explain this pattern but an interesting link nevertheless.
http://www.latimes.com/news/local/immigration/la-me-immighome6-2008oct06,0,1279877.story?page=2
Maybe a way to make a small glass of lemonade out of this pile of lemons would be to offer statehood to Iceland, along with an assumption of their debt. The Icelanders would get bailed out, we'd keep a strategic outpost in our orbit and get a few hundred thousand higher-IQ citizens, and access to their energy resources.
On the other hand, the Senators and Congressman from Iceland would probably vote for all of those left wing, pro-diversity policies that most iSteve readers hate.
- Fred
Capt Jack sez:
It's crazy for anyone to assert that NAMs are responsible for only 5-8% of the dollar value of defaults.Consider:
1) The US is now about 30% black and Hispanic.
2) Default rates are much higher in states with large Hispanic populations. In California, Europeans barely make up 40%. In Arizona, just under 60%.
4) Within those states, the hardest hit areas are in the areas with the largest number of NAMs - LA, not San Francisco; Phoenix, not Scottsdale.
Your example is meaningless, your logic flawed, and your facts wrong. For one thing, white people are around 60% of the California and Arizona populations, as any 30 second Google search will attest. See also http://www.census.gov/population/www/socdemo/hispanic/hispanic.html
If you are gonna throw out these dubious arguments at least get your facts straight.
You also illogically glide from saying that the US is 30% NAM, to talking about states with high Hispanic populations. OK, but so what? If you want to prove that NAMs are responsible for more than 5-8% you need to come up with some mortgage figures, including total amounts borrowed. But all you keep recycling from post to post is the same bogus assertions, without credible proof. As for default rates, we all know minorities default at higher rates, but that fact is meaningless without reference to the total amount of cash borrowed.
New mortgages in the last 5 years were almost certainly given disproportionately to NAMs.
Oh really? Where is your proof of this "disproportionate" thing?
While NAMs were buying less expensive homes in the metro areas where they bought, those metro areas were some of the country's most expensive. $300,000 will buy you a very nice home in flyover country. In LA, it'll get you something in Compton - maybe.
OK, but so what? How does this prove your point of minorities getting a "disproportionate" share of new mortgages? Exactly what is "disproportionate"? Keep in mind also that while said minorotees were buying up less desirable properties in California, white people were buying up much more valuable and or desirable properties, so your example of differing housing values is meaningless as a support to your argument. Furthermore you are once undermining your own claims. If said minorities were buying up cheaper housing, then it stands to reason that they are not borrowing as large amounts as white people would borrow. Indeed, poor people as a whole generally do not take out as many loans as middle income people. Disproportionately, banks for them are primarily a savings mechanism. See: "Behavioral Economics and Marketing in Aid of Decision Making among the Poor." Marianne Bertrand, Sendhil Mullainathan and Eldar Shafir; Journal of Public Policy & Marketing, 2006, 25(1), pp. 8-23.
ANd while the lower interest rates and loosened credit caused ALL TYPES of Americans to take out more mortgages, it is by thus no means clear that minorities borrowed a "disproportionate" share of the total pot loaned out.
7) Under any particular type of loan, NAMs are more likely to default compared to their white & Asian counterparts. And NAMs were taking out the most notorious loans of all.
lol.. Again, default rates mean little without reference to the total amount of dollars borrowed. And your claim is undermined by Sailer's own data showing that the most "notorious" ARM type loans only make up 6-12% of the total loans outstanding. If therefore the evil minorities took out most of such loans as you insist, that is still a relatively minor percentage of the total pot. You keep contradicting your own arguments.
8) 80+% of white and Asian borrowers have zero incentive to walk away from a house that declines in value - because they have their own money in that house, since they took out fixed rates.
Huh? Whites and Asians will not walk away from a house declining in value? Say what? Sigh.. Captain, you are again undermining your own arguments. In an earlier post, you claimed that white people were "fleeing" when Mexicans and blacks moved in to go to higher property value areas. But now here you are contradicting yourself and saying that white people have "zero incentive" to move even when housing values decline. Focus Captain.. focus... and try to be consistent shall we? How can they be "fleeing" but not moving at the same time?
As for "zero incentives" because of "fixed rates, I suppose you are trying to say that because they have a fixed mortgage they will not move cuz of those low payments. The picture you draw is of static white people, marking time as they watch the suburban grass grow (even as they miraculously "flee" from Jose next door). The only thing wrong with this picture is that it is divorced from reality. There is such a thing as RISING PROPERTY VALUES, which enable someone with even a good mortgage rate to sell out, pocket the cash and get another property, then sell that, pocket the profits and continue the cycle. This is what millions of white people did using a variety of financing methods.
But using your own example, even if housing prices are declining in an area, there is also such a thing as MOVING TO SOMEPLACE ELSE WITH LOWER PRICES. Remember that? That is why retirees can sell their homes in NY or NJ or Boston for a good piece of change, then move south to those areas where housing prices are much lower. All these are sound reasons to move, even when you have a fixed rate mortgage, AND even if there are no Mexicans moving in next door to "flee" from .. lol...
Yet again, we have the points that RKU keeps on missing: the minority connection to the mortgage crisis is multifaceted, with dollar value of defaults being only a small part of it.
The minority connection to the mortgage crisis is multi-faceted, but your claims as to addressing those facets clearly lack logic, common sense and factual accuracy.
Does any disinterested reader want to take into account the 5 million mortgages that according to HUD are in the hands of illegal aliens?
http://www.freerepublic.com/focus/f-news/2100080/posts
The only problem with this claim is that it appears bogus.
It appears mostly on blogs or discussion forums, and points to a weblink that doesnt even exist.
http://kfyi.com/pages/local_news.htm...rticle=4364653
Few posting this dubious "fact" whether on the freerepublic or elsewhere have produced any offical HUD report backing up the claim. If you could do any better by all means, give us a credible source from HUD.
J sez:
Minorities play a very marginal role in the economy, they produce little and consume little. You may not like them, but they didnt do it.
I agree they "didn't do it", as the illogical claims posited by some on this blog would have it. They conveniently forget things like low interest rates which is another factor that encouraged people to take out loans, without the need for any "minority calculus" entering into it at all.
Some here would dispute your "marginal" theory, arguing that the vast influx of Mexicans is consuming "disproportionate" shares of the loans, and consuming "disproportionate" shares of housing causing good white people to flee. They are also producing TOO MUCH labor for construction causing "overbuilding" in the housing market, thus leading to the current crisis, itis further contended by the "minorities are to blame" school.
Too Tall says:
"Your example is meaningless, your logic flawed, and your facts wrong. For one thing, white people are around 60% of the California and Arizona populations, as any 30 second Google search will attest."
The gentleman doth protest too much.
The Census Bureau says that as of 2005:
"Forty-three percent of the people in California were White non-Hispanic."
The mistake Too Tall makes is that his 60% figure includes people who call themselves Hispanic _and_ white.
http://factfinder.census.gov/servlet/NPTable?_bm=y&-geo_id=04000US06&-qr_name=ACS_2005_EST_G00_NP01&-ds_name=&-redoLog=false
I would add that some modest but not insignificant fraction of that 43% consists of first-generation immigrants from the ex-Soviet Union and/or Middle East. (Serial speculator Casey Serin being a classic example.)
The only thing I've found from HUD on the matter of aliens, mortgages, and defaults is:
http://preview.tinyurl.com/4pttpl
That's a preview tinyURL. It does say fraud happens with illegal alien mortgage holders, but doesn't estimate how much.
"too tall jones said...
Few posting this dubious "fact" whether on the freerepublic or elsewhere have produced any offical HUD report backing up the claim. If you could do any better by all means, give us a credible source from HUD."
According to KFYI, HUD doesn't want to discuss the matter. I guess it's not important enough for us to know.
http://kfyi.com/pages/
money-matters.html?feed
=268721&article=4381201
From KFYI website:
"HUD Declines To Discuss Illegal Mortgages
Thursday, October 9, 2008
The Department of Housing and Urban Development won't discuss whether 5 million illegal immigrants held mortgages.
Earlier this week, we posted a story that said figures from the Department of Housing and Urban Development showed that home mortgages were held by 5 million illegal immigrants and that this may have contributed, in part, to the housing crisis that has led to the recent failure in the financial markets.
Our source for that story, a retired agent from Immigration and Customs Enforcement, stands by those numbers.
A person from Housing and Urban Development contacted KFYI to tell us the number was inaccurate, that there were only 2.3 million mortgages held by immigrants, so there was no way that 5 million illegals could have mortgages.
When asked what HUD says the correct number is, the person (who identified himself only as 'Brian' and who refused to give his last name), either would not or could not say how many illegal immigrants hold mortgages. He also said there was "no way" HUD would grant an interview on the subject."
If you are gonna throw out these dubious arguments at least get your facts straight.
OK, how about this for California. Scroll down to get the figure of 43.1% for "White persons not Hispanic, percent, 2006."
Post a Comment