October 10, 2008

My Friday night VDARE.com article

I've dug up some crucial numbers on mortgage dollars by race that will answer a lot of the skeptics of my Diversity Recession theory who can't imagine that minorities could borrow enough money to matter.


Anonymous said...

Oh, this ain't gonna make Too Small Cajones ... I mean Too Tall Jones ... happy at all. A "Black/NAM Friday" indeed. Ah well, "the 'truth' will out."

Anonymous said...

Steve, have you been living in a cave this past week?

We don't have a "diversity recession", we have a global economic meltdown. Its comical that you keep banging on this subprime nonsense - in retrospect its just one small symptom of a systemic disease. Did loans to blacks cause the housing bubble in England, Spain, or Ireland? Did they cause the collapse of Iceland's economy?

The fact is, it was all a house of cards, built on paper assets that all turned out to be worthless. Some of these assets were subprime loans. Some were bets (credit default swaps) on subprime loans. Nobody needed any encouragement from the government to create them, and they would have found other stupid places to park other people's money if the housing bubble never happened.

Get real.

Anonymous said...

So you are saying that they finally ended housing discrimination - by not discriminating between people who probably would repay their mortgage and people who probably would not.

Anonymous said...

"The Dangers of buying $900 Billion of securities with 1% down"

From Bloomberg earlier today:

* * *
Egan-Jones Ratings Co. said Morgan Stanley probably needs to raise $60 billion[!] in new equity to reassure customers and investors, up from a $30 billion[!] estimate yesterday[!]. The investment bank has about $900 billion[!] of assets and an equity market value of $8.5 billion[!]. Mark Lake, a Morgan Stanley spokesman, declined to comment.
* * *

Basically Morgan and all the other big I-Banks had leveraged themselves up to 30-to-1 assets/equity. Investing with 3% down gives great returns then the market is moving your way, but not so great when things go the other way...

You could call it the "Stupidity Recession"...except that Hank Paulson walked off with $700M from it, which doesn't seem so stupid from his perspective.

And even though Dick Fuld lost 90% of his net worth when Lehman blew up, he supposedly still has $100M

I'd personally call it the "Las Vegas Recession"...

Luke Lea said...

In the final analysis it is the lenders, not the lendees, who are responsible for approving loans. Some may have been pressured to make more loans to minorities, but none were forced, and most were not even pressured: they did it for the immediate fees, commissions, and executive bonuses.

BTW, instead of arguing the pros and cons of more and better "regulation," why don't we call it "policing?" Enforcing the rules. That is something everybody can understand. Like not speeding or driving while drunk.

Adam Smith once wrote that without government, private property wouldn't last five minutes. Apparently without government enforcement of respnsable lending standards private banking won't last much longer.

Anonymous said...

Yes, there is a global meltdown, but the unexpected losses from subprime crisis did cause it.
It’s really two problems:

1. Interlinked Financial system that makes problems multiply and ripple (this isn’t the first time, but one of the worse)

2. The original problem, in this case unexpected subprime mortgage losses of a 500-1000 billion.

For example Icelandic banks did not invest in American mortgaged backed securities, like British banked did. But they had small equity and lots of loans. When the American problem made American, British and other banks stop lending and asset prices to fall the Icelandic banks had their equity wiped out.

The Icelandic banks would not have failed due to American mortgage crisis if they weren’t overleveraged to start with, which made them too weak to take a heavy hit. But they would not have failed at all without the mortgage crisis.

So it matter why this happened in the US, even internationally. (and if you are American, why the heck wouldn’t you want to know?)

Anonymous said...


Do not forget the Hispanic birth rate increased by about 10% from 1997-2006 (From about 2.6 to 2.92).

Perhaps the Hispanic fertility rate was, in part, inflated by the housing bubble?

Anonymous said...

In the final analysis it is the government that forced lenders to debase their lending standards so that minorities could obtain credit as readily as whites. That's where the rubber meets the road. We are having a financial meltdown because of good old fashioned race hustling that was taken to the next level.

Black and Latino pressure groups are responsible for these economic losses and they will be held accountable. This movie does not end happily ever after.

Anonymous said...

Nouriel Roubini would strongly disagree with you, first anonymous, that our housing crisis had nothing to do with the global crisis.

Here is Roubini reviewing his predictions; he had the U.S. housing bust as the starting and most important point for American malaise and predicted a series of events culminating in a near worldwide global recession:

Here is first the February paper in a summary – but literal – version of the original (bold added):

Here are the twelve steps or stages of a scenario of systemic financial meltdown associated with this severe economic recession…

First, this is the worst housing recession in US history and there is no sign it will bottom out any time soon…

Second, losses for the financial system from the subprime disaster are now estimated to be as high as $250 to $300 billion. But the financial losses will not be only in subprime mortgages and the related RMBS and CDOs. They are now spreading to near prime and prime mortgages as the same reckless lending practices in subprime …were occurring across the entire spectrum of mortgages;…Also add to the woes and losses of the financial institutions the meltdown of hundreds of billions of off balance SIVs and conduits;..And because of securitization the securitized toxic waste has been spread from banks to capital markets and their investors in the US and abroad, thus increasing – rather than reducing systemic risk – and making the credit crunch global.

Third, the recession will lead – as it is already doing – to a sharp increase in defaults on other forms of unsecured consumer debt: credit cards, auto loans, student loans…

Fourth, while there is serious uncertainty about the losses that monolines will undertake on their insurance of RMBS, CDO and other toxic ABS products, it is now clear that such losses are much higher than the $10-15 billion rescue package that regulators are trying to patch up. Some monolines are actually borderline insolvent and none of them deserves at this point a AAA rating regardless of how much realistic recapitalization is provided…The downgrade of the monolines will also lead to large losses – and potential runs – on the money market funds that invested in some of these toxic products. The money market funds that are backed by banks or that bought liquidity protection from banks against the risk of a fall in the NAV may avoid a run but such a rescue will exacerbate the capital and liquidity problems of their underwriters…

Fifth, the commercial real estate loan market will soon enter into a meltdown similar to the subprime one…And new origination of commercial real estate mortgages is already semi-frozen today; the commercial real estate mortgage market is already seizing up today.

Sixth, it is possible that some large regional or even national bank that is very exposed to mortgages, residential and commercial, will go bankrupt. Thus some big banks may join the 200 plus subprime lenders that have gone bankrupt. This, like in the case of Northern Rock, will lead to depositors’ panic and concerns about deposit insurance. The Fed will have to reaffirm the implicit doctrine that some banks are too big to be allowed to fail. But these bank bankruptcies will lead to severe fiscal losses of bank bailout and effective nationalization of the affected institutions…

Seventh, the banks losses on their portfolio of leveraged loans are already large and growing. The ability of financial institutions to syndicate and securitize their leveraged loans – a good chunk of which were issued to finance very risky and reckless LBOs – is now at serious risk. And hundreds of billions of dollars of leveraged loans are now stuck on the balance sheet of financial institutions at values well below par (currently about 90 cents on the dollar but soon much lower). Add to this that many reckless LBOs (as senseless LBOs with debt to earnings ratio of seven or eight had become the norm during the go-go days of the credit bubble) have now been postponed, restructured or cancelled. And add to this problem the fact that some actual large LBOs will end up into bankruptcy as some of these corporations taken private are effectively bankrupt in a recession and given the repricing of risk; convenant-lite and PIK toggles may only postpone – not avoid – such bankruptcies and make them uglier when they do eventually occur…

Eighth, once a severe recession is underway a massive wave of corporate defaults will take place. In a typical year US corporate default rates are about 3.8% (average for 1971-2007); in 2006 and 2007 this figure was a puny 0.6%. And in a typical US recession such default rates surge above 10%....Corporate default rates will surge during the 2008 recession and peak well above 10% based on recent studies. And once defaults are higher and credit spreads higher massive losses will occur among the credit default swaps (CDS) that provided protection against corporate defaults. ..If losses are large some of the counterparties who sold protection – possibly large institutions such as monolines, some hedge funds or a large broker dealer – may go bankrupt leading to even greater systemic risk as those who bought protection may face counterparties who cannot pay.

Ninth, the “shadow banking system” (as defined by the PIMCO folks) or more precisely the “shadow financial system” (as it is composed by non-bank financial institutions) will soon get into serious trouble. This shadow financial system is composed of financial institutions that – like banks – borrow short and in liquid forms and lend or invest long in more illiquid assets. This system includes: SIVs, conduits, money market funds, monolines, investment banks, hedge funds and other non-bank financial institutions. All these institutions are subject to market risk, credit risk (given their risky investments) and especially liquidity/rollover risk as their short term liquid liabilities can be rolled off easily while their assets are more long term and illiquid. Unlike banks these non-bank financial institutions don’t have direct or indirect access to the central bank’s lender of last resort support as they are not depository institutions. Thus, in the case of financial distress and/or illiquidity they may go bankrupt because of both insolvency and/or lack of liquidity and inability to roll over or refinance their short term liabilities. Deepening problems in the economy and in the financial markets and poor risk managements will lead some of these institutions to go belly up: a few large hedge funds, a few money market funds, the entire SIV system and, possibly, one or two large and systemically important broker dealers. Dealing with the distress of this shadow financial system will be very problematic as this system – stressed by credit and liquidity problems - cannot be directly rescued by the central banks in the way that banks can.

Tenth, stock markets in the US and abroad will start pricing a severe US recession – rather than a mild recession – and a sharp global economic slowdown. The fall in stock markets… will resume as investors will soon realize that the economic downturn is more severe, that the monolines will not be rescued, that financial losses will mount, and that earnings will sharply drop in a recession not just among financial firms but also non financial ones. A few long equity hedge funds will go belly up in 2008 after the massive losses of many hedge funds in August, November and, again, January 2008. Large margin calls will be triggered for long equity investors and another round of massive equity shorting will take place. Long covering and margin calls will lead to a cascading fall in equity markets in the US and a transmission to global equity markets. US and global equity markets will enter into a persistent bear market as in a typical US recession the S&P500 falls by about 28%.

Eleventh, the worsening credit crunch that is affecting most credit markets and credit derivative markets will lead to a dry-up of liquidity in a variety of financial markets, including otherwise very liquid derivatives markets. Another round of credit crunch in interbank markets will ensue triggered by counterparty risk, lack of trust, liquidity premia and credit risk. A variety of interbank rates – TED spreads, BOR-OIS spreads, BOT – Tbill spreads, interbank-policy rate spreads, swap spreads, VIX and other gauges of investors’ risk aversion – will massively widen again. Even the easing of the liquidity crunch after massive central banks’ actions in December and January will reverse as credit concerns keep interbank spread wide in spite of further injections of liquidity by central banks.

Twelfth, a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices will ensue leading to a cascading and mounting cycle of losses and further credit contraction. In illiquid market actual market prices are now even lower than the lower fundamental value that they now have given the credit problems in the economy. Market prices include a large illiquidity discount on top of the discount due to the credit and fundamental problems of the underlying assets that are backing the distressed financial assets. Capital losses will lead to margin calls and further reduction of risk taking by a variety of financial institutions that are now forced to mark to market their positions. Such a forced fire sale of assets in illiquid markets will lead to further losses that will further contract credit and trigger further margin calls and disintermediation of credit. The triggering event for the next round of this cascade is the downgrade of the monolines and the ensuing sharp drop in equity markets; both will trigger margin calls and further credit disintermediation.

Based on estimates by Goldman Sachs $200 billion of losses in the financial system lead to a contraction of credit of $2 trillion given that institutions hold about $10 of assets per dollar of capital. The recapitalization of banks sovereign wealth funds – about $80 billion so far – will be unable to stop this credit disintermediation – (the move from off balance sheet to on balance sheet and moves of assets and liabilities from the shadow banking system to the formal banking system) and the ensuing contraction in credit as the mounting losses will dominate by a large margin any bank recapitalization from SWFs. A contagious and cascading spiral of credit disintermediation, credit contraction, sharp fall in asset prices and sharp widening in credit spreads will then be transmitted to most parts of the financial system. This massive credit crunch will make the economic contraction more severe and lead to further financial losses. Total losses in the financial system will add up to more than $1 trillion and the economic recession will become deeper, more protracted and severe.

A near global economic recession will ensue as the financial and credit losses and the credit crunch spread around the world. Panic, fire sales, cascading fall in asset prices will exacerbate the financial and real economic distress as a number of large and systemically important financial institutions go bankrupt. A 1987 style stock market crash could occur leading to further panic and severe financial and economic distress. Monetary and fiscal easing will not be able to prevent a systemic financial meltdown as credit and insolvency problems trump illiquidity problems. The lack of trust in counterparties – driven by the opacity and lack of transparency in financial markets, and uncertainty about the size of the losses and who is holding the toxic waste securities – will add to the impotence of monetary policy and lead to massive hoarding of liquidity that will exacerbates the liquidity and credit crunch.

In this meltdown scenario US and global financial markets will experience their most severe crisis in the last quarter of a century.


Anonymous said...

Did loans to blacks cause the housing bubble in England, Spain, or Ireland? Did they cause the collapse of Iceland's economy?

Last first: Icelandic banks had huge amounts of deposits in them. They've been targetting non-Iceland depositors - especially Brits - for years. The assets of Kaupthing Bank alone amount to 623% of Iceland's GDP. We're talking about the equivalent of a US bank holding something north of $80 trillion in assets, which simply does not happen here.

I touched on the data regarding mass immigration in the UK and Spain here (near the bottom). That mass immigration would cause a bigger bubble in the UK and Spain than here only makes sense, as the two countries are much more densely populated and have recently had much higher immigration rates than the US.

In the final analysis it is the lenders, not the lendees, who are responsible for approving loans.

Why were they approving the loans? Because they weren't bearing most of the risk. They were just dumping it on others, especially the 2 GSEs.

Anonymous said...

When this is all over and the story is being written, VDare should publish a "Greatest Hits of the Diversity Recession" as a fundraiser. It would make a great Halloween present an even number of years from now.

I have a hunch the WaMu commercials/press release will find a prominent place in what should be a very thick book/DVD combo.

Anonymous said...

I can personally vouch for what Testing RKU's Truth said...

My immediate family - 3 households - whiteflighted it out of London in 2004-6. And took on mortgages they really couldn't afford. Their nice safe neighbourhoods had turned into third world crapholes. For instance, a 10 year old afghan refugee wandering the street with a knife at 11pm. Nappy's tossed into the front garden.

Anonymous said...

Anonymous: We don't have a "diversity recession", we have a global economic meltdown. Its comical that you keep banging on this subprime nonsense - in retrospect its just one small symptom of a systemic disease.

While it's true that the subprime mess is but a leading indicator, the foundational question remains: What is the systemic disease?

IQ and the Wealth of Nations

List of countries and territories by fertility rate

And the answer is that the civilized world is experiencing the greatest collapse in its population since 450AD.

By and large, high IQ people went completely nihilistic about 40 years ago, and stopped making babies, and now, to mix metaphors, the chickens are coming home to roost.

Anonymous said...

Put simply, it is the profit-focussed self-interest of banks which makes them work. Not everyone in society needs to think like a banker - that's why they're a profession - but if nobody thinks like a banker, no one gets any credit. Look at monetary policy in Medieval Europe - and the paltry economic growth rates there.

Why can't anyone properly think like a banker any more? Because hyperegalitarianism - a superset of political correctness - has been taught to them since kindergarten. Several generations have believed that it is "negative" and "hurtful" to admit the sad truth about anyone.

There is no single law or executive order responsible for the Diversity Recession. It was caused by an extremely diffuse blindness that the financial elites adopted quite voluntarily when they chose to stop being "right-wingers" in the 1990s (most other elites chose to stop being rightist between 1930 and 1970). The roots, of course, lie with Rousseau.

Affirmative action isn't really required by law very much ... in the places where it is prohibited by law it generally continues unabated. My guess is that most loan officers, underwriters, etc., are (or were, until recently) affected by the same forces. Think how GOOD they must have felt, in 2003 or 2006 or whenever, when they gave a loan to someone who couldn't pay the interest - so trusting, so optimistic, so blank-slater, so ... not racist.

Why not? With government bailouts linking the fates of all banks together, pretty much, an individual bank would have no real incentive to minimize defaults. On the other hand, given the ominous hissing of the Stasi about "redlining" in the 1990s, a bank would have a very real incentive not to be seen as ... racist.

Anonymous said...

Testing RKU's Truth: I touched on the data regarding mass immigration in the UK and Spain here (near the bottom). That mass immigration would cause a bigger bubble in the UK and Spain than here only makes sense, as the two countries are much more densely populated and have recently had much higher immigration rates than the US.

As we speak, classical Spain [Roman Papist, Iberian, Castilian] is effectively extinct:

A Portrait of Europe's Aging Population

...However, the decrease in numbers has been greatest in Spain, where the young population has diminished by 44% in the 1990 to 2005 period...

Once nihilism took hold in Spain, the Muslims quickly reconquered it without even having to fire a shot.

Anonymous said...

By and large, high IQ people went completely nihilistic about 40 years ago, and stopped making babies, and now, to mix metaphors, the chickens are coming home to roost.

Why? Television. TV raised material and personal expectations to levels few people could reasonably hope to achieve. It wastes people's time. It destroys real culture and real human interaction. And it doesn't matter if you shut it off because almost no one else does.

There's one aspect of diversity I don't mind so much: more minorities on TV shows. In fact, one day I hope to see only minorities on TV shows. That way whites will shut the damn thing off.

Anonymous said...

Me: Once nihilism took hold in Spain, the Muslims quickly reconquered it without even having to fire a shot.

Ooops - I forgot about 3-11, so maybe I should have said, "firing no more than a few shots".

Anonymous said...

By and large, high IQ people went completely nihilistic about 40 years ago, and stopped making babies... -- Lucius Vorenus

Not nihilist, but secularist. Though in breeding terms it amounts to the same thing.

Religion is the only successful method to get women-- especially white women-- to breed.

A race that accepts Darwin is, ironically, by Darwin a race unfit.

Anonymous said...

RC - "secularism" and "darwinism" are just different names for nihilism.

Death is their purpose, and embracing them [or it - the underlying nihilism] can end only in Death.

Truth said...

"By and large, high IQ people went completely nihilistic about 40 years ago, and stopped making babies... -- Lucius Vorenus"

How many kids do you have again? Oh wait, you're not high IQ; never mind.

Anonymous said...

maybeitsbecause, when are you Britons going to get down to business and start outlying knives? I can't believe those things are still allowed over there.

And heavy things! Why do you still allow those? Once knives and heavy things are banned, the streets of London will be safe to walk again.

Oh, and by the way, all the Normans and Anglo-Saxons will have to clear out. Of Britain. They weren't there first after all; the Native Britons are all Celtic. (Knife-wielding illegal immigrants can stay though, since jerks like the BNP think they should leave.)

And one more thing - my cousin's husband's friend, who is almost literate, said a Conservative once said rivers would foam with blood. (Not a damn thing about the River Tiber!) This is why Labour should govern forever and London remade to resemble Karachi. It's that bloody river.