February 12, 2009

Daniel Seligman's prescient 1989 column on mortgage discrimination

Daniel Seligman, who died last week at age 84, was my role model as a quantitative journalist. From the 1970s into the 1990s, he wrote a blog-like column of multiple short items in Fortune, distinguished by his quantitative bent. Like me and unlike most journalists, he loved to count things. (By the way, it's probably not a coincidence thatmy favorite Sesame Street character is The Count.)

Here's a particularly relevant selection from Seligman's Keeping up columns:

December 4, 1989

Based on a reference to him in the Almanac of American Politics, we had always assumed that U.S. Senator Alan Dixon was relatively harmless. ("Among the least known of all Senators" was how the Almanac referred to the Illinois Democrat.) Based on his conduct in the current hearings on mortgage discrimination, we must rate him at least average as a menace.

[By the way, Dixon's successors in that Senate seat have been Carol Mosley Brown, Peter Fitzgerald, Barack Obama, and Roland Burris.]

The hearings, chaired by Dixon in his role as head of the Senate banking subcommittee on consumer affairs, have been something of a scream. The purpose of the hearings has been quite straightforward: to enable club members to garner headlines by posturing as antidiscrimination stalwarts and yelling at the various federal agencies that monitor all those laws banning bias in mortgage lending. So the agencies -- the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., and the Office of Thrift Supervision -- were roundly reproved for not detecting the avalanche of mortgage-based bias postulated to be discernible by anybody walking around the block.

Is mortgage bias really a problem? A curious feature of the federal regulatory scene is that long after Congress passed the Equal Credit Opportunity Act and the Community Reinvestment Act (which bars redlining of urban minority population centers), the federal government seems not to generate many complaints of such bias. The regulators' reports indicate that they receive few complaints. And while the U.S. Justice Department has launched hundreds of housing-related antidiscrimination suits during the past 20 years, only a small fraction of them have involved lending practices.

Dixon and the other solons nevertheless took it for granted that bankers have to be prodded on minority mortgage lending. Joining the long line of politicians who claim to know better than businessmen what's good for business, Dixon returned repeatedly to the thought that such prodding always results in higher profits. "It's good business," he burbled at the end of one session. "Everybody makes money."

It is true that federal data show black loan applicants being rejected roughly twice as often as white applicants. But this does not mean blacks are subject to a tougher standard. The higher rate of black rejections might mean that weak black applicants are responding to bank "outreach" programs (as the Office of Thrift Supervision noted). It might mean that black applicants' buildings are on average less attractive as security -- a thought no witness was foolish enough to mention aloud.

A Fed governor did bravely mention a fact of possible relevance: that market forces work against discrimination. John LaWare argued that bankers are in business to make loans and that "the institutional commitment to doing business where it makes economic sense will win out over prejudice." Dixon did not pick up on this thought, plainly not what he came to hear.

But he did get his picture in the Washington Post. Fame beckons.

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


Anonymous said...

Sorry to be off-topic, but this is too funny to pass up.

"THURSDAY, Feb. 12 (HealthDay News) -- New research suggests the income and education levels of parents are connected to a baby's skills with gesturing, which in turn can indicate whether a child will develop strong language abilities."

Hmmm, what else is linked to larger vocabularies and higher income and education?

"Spencer Kelly, a gesture researcher and an associate professor of psychology at Colgate University in New York, said children from more privileged households might live in homes with more objects, such as toys and furniture. As a result, they may "provide more opportunities for parent and child to use gestures when talking about things.""

More objects in the home! Of course! Why didn't I think of that?

"The next step, she said, is to see if helping kids gesture more will help them develop better vocabulary"

I predict great success.


Anonymous said...

A brilliant Seligman article.

Anonymous, LOL. Wonder how "repressed" European children - told to control themselves and that pointing is disrespectful - ever learned to speak the complex language of English so effectively.

The "new research" seems like more Freudianistic BS: acting out and dropping standards of behavior - aka "Liberation" - is The Answer! So maybe all kids should be dropping gang signs to hip-hop, and wiggling their asses all over the classroom? Theodore Dalrymple, call your office. (See KMac on Freud and his legacy.)

Anonymous said...

Off topic: NH Republican Gregg has withdrawn from Commerce Sec nomination tonight. Chalk up another failure to political correctness. I believe Gregg wanted to be in Obama's cabinet out of a moronic sense of racial 'reconciliation'.

Whatever. For the good of the country Obama's people need to do a much better job vetting nominees. I did not vote Obama but I want him to get it the hell together--for the good of the country. Stop the hijinks. Stop the circus. Appointing people from the other party is dicey and this one blew up in his face for whatever reason.

People need to remember that the USA has rivals and enemies all over the world and they are sizing up the Obama administration daily. Russia and China are no doubt sensing major weakness. Thank God both of their economies are going into the crapper or we would be totally screwed.

This global situation is very much like the early 1930's where various weak leaders around the world made huge mistakes and then were replaced by pathological strongmen.

Anonymous said...

As one analyst pointed out, there is a really easy way to measure lending discrimination. If a group is being discriminated against, it will have a lower default rate.

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