Thursday, October 02, 2008
Blame Bill? Blame blacks?
Although I have some issues with what Anglachel has written here (the "racism" canard is inane, and I've no interest in her dispute with the Confluence), I nevertheless encourage you to read her latest.
One of the things that has Anglachel bothered is the current attempt -- by folks on both the right and the left -- to blame the current mortgage mess on Bill Clinton, who salvaged and strengthened the Community Reinvestment Act of 1977. That act eased mortgaged requirements for minorities, who previously had been "redlined" out of home ownership. Thus was born a new mythology, which holds that the CRA caused the subprime mess.
This meme is pure post hoc, ergo propter hoc reasoning. Nevertheless, the "progressive" left likes this "CRA" meme because it gives them an excuse to bash Clinton, who remains their Number 1 enemy. (Remember what happened when I previously defended Clinton's legacy on this point? Democratic Underground forbade anyone from citing my piece because I am -- in prog-vision -- a "conservative.") Meanwhile, the right also likes this meme because they want people to blame the economic meltdown on a "free houses for blacks" giveaway program.
Anglachel:
The enemy of your enemy is not necessarily your friend. Let's face it: This election has given us more strange bedfellows than you'll find in the porn studio hidden in back of the Mos Eisley cantina. I hope I've established, on this blog, my willingness to disagree with (some of) those who share my antipathy for the Glorious Lightbringer.
The CRA did not cause this crisis, as I tried to explain, in my own bumbling way, in a previous post. The CRA has little or nothing to do with most of the bad loans. The sub-primes were only the tip of the iceberg. Real wages have fallen since the Reagan "revolution," and making credit ever easier was the only way to give everyone the illusion of prosperity.
Forgive a touch of self-quotation:
Reviewer John Cassidy provides this illustration:
I remember an uncomfortable conversation I had with one lady who tried to talk me (yeesh...me!) into buying her home in 2003. "You'll make money. The prices will just keep going up and up and up!"
You want to know who caused our current mess? Every single idiot who thought like that.
One of the things that has Anglachel bothered is the current attempt -- by folks on both the right and the left -- to blame the current mortgage mess on Bill Clinton, who salvaged and strengthened the Community Reinvestment Act of 1977. That act eased mortgaged requirements for minorities, who previously had been "redlined" out of home ownership. Thus was born a new mythology, which holds that the CRA caused the subprime mess.
This meme is pure post hoc, ergo propter hoc reasoning. Nevertheless, the "progressive" left likes this "CRA" meme because it gives them an excuse to bash Clinton, who remains their Number 1 enemy. (Remember what happened when I previously defended Clinton's legacy on this point? Democratic Underground forbade anyone from citing my piece because I am -- in prog-vision -- a "conservative.") Meanwhile, the right also likes this meme because they want people to blame the economic meltdown on a "free houses for blacks" giveaway program.
Anglachel:
The argument is little more than this: banks are being forced by Democrats to loan to blacks who are such bad credit risks that they are bringing the entire housing sector down. In California and other Southwest markets, it is the blacks and the “illegals” in tandem doing this. Why are Democrats going along? Because, the Republicans claim, they are captive to black (and other reviled groups’) interests and allow themselves to be used by the Congressional Black Caucus, the NAACP, the ACLU, ACORN, and any other group perceived, rightly or wrongly, to be minority dominated. When the accused organization in (I’m looking at you, ACORN) has a very questionable history, it gets easier to spread guilt by association. This is how Franklin Raines fits in – the (incompetent and undeserving) black CEO who ran Fannie Mae to enrich (undeserving) blacks and other low-life “sub-prime” flimflam artists.
Thus we end up with the leading lights of Left Blogistan solemnly agreeing that the president who fought tooth and nail to secure vital loans to help create long-term wealth in minority communities is nothing but a racist, another faction of the Democrats grabbing everything the Republican ratfuckers are shoving their way to tar the people, policies and plans that the Clintons have promoted and defended against rightwing attacks in some misguided belief that this will hurt Obama with voters instead of reinforce the Obamacan claims that the Clintons are just racists like their Bunker and Bubba supporters, while the Right merrily spreads the lie that Bill and the Democrats created the mortgage meltdown by setting up a scam for the undeserving minorities and poor to steal money and houses through the GSEs and CRA.That last bit may be the longest sentence anyone has composed since the 1780s. But you get the point. Anglachel is scoring the progs for buying into anything that can be spun in an anti-Clinton fashion, yet she is also dissing the PUMAs for thoughtlessly buying into the right's anti-Obama talking points.
The enemy of your enemy is not necessarily your friend. Let's face it: This election has given us more strange bedfellows than you'll find in the porn studio hidden in back of the Mos Eisley cantina. I hope I've established, on this blog, my willingness to disagree with (some of) those who share my antipathy for the Glorious Lightbringer.
The CRA did not cause this crisis, as I tried to explain, in my own bumbling way, in a previous post. The CRA has little or nothing to do with most of the bad loans. The sub-primes were only the tip of the iceberg. Real wages have fallen since the Reagan "revolution," and making credit ever easier was the only way to give everyone the illusion of prosperity.
Forgive a touch of self-quotation:
I'd add that one hell of a lot of white people got subprime loans during the Insane Years. The CRA did not force Jeb Bush's Florida to hand out mortgage licenses to coke dealers, con artists and other crooks. And the CRA did not force the great financial houses to trade those bad home loans as though they were sure-to-pay-off assets.I encourage you to read this review of George Soros' new book The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means. Soros hopes to combat the Friedmanite belief that the market is a ever-benign organism which behaves according to the postulate of rational expectations. Soros proposes the counter-concept of reflexivity, which bears some similarity to the scientific adage that you cannot observe an experiment without affecting it.
This is from the official CRA guidelines:"CRA activities should be undertaken in a safe and sound manner" (and)"avoid lending activities that may be abusive or otherwise unsuitable" (to) "provide small, unsecured consumer loans in a safe and sound manner (i.e., based on the borrower’s ability to repay) and with reasonable terms" (and) "consistent with safe and sound lending practices."
Reviewer John Cassidy provides this illustration:
Imagine that ABC Corp. makes profits of $W per share, pays dividends of $X a share, and is growing at Y percent per annum. If you assume that this rate of earnings growth will persist indefinitely, it is a matter of high school arithmetic to figure out what ABC Corp.'s stock is worth on a fundamental basis, an amount I will call $Z. In the world of the Chicago economists, well-informed investors bid the price up to $Z and stop there. If prices rise above that level, they step in and sell; if prices fall below $Z, they buy. All is rational: all is efficient.Such mechanisms, I suspect, go a long way toward explaining why our economy has, in recent times, lurched from bubble to bubble. Bubbles are never rational. Back to Cassidy on Soros:
Now imagine that a group of irrationally exuberant investors come to believe that ABC Corp.'s growth rate is about to accelerate to 2Y percent, and, as a result, they bid up its stock up $2Z and keep it there for a while. What happens next? One possibility is that ABC Corp. could issue more of its highly rated shares and use them to purchase a rival, DEF Corp., whose stock price has been lagging—hence presenting a relative bargain. Thanks to the magic of acquisition accounting, the mere act of ABC Corp. buying DEF Corp. would make it appear that its earnings per share were growing rapidly. Voilà, the inflated earnings expectations that drove up ABC Corp.'s stock would have turned out to be justified. Most likely, the stock would rise even further—for a while, anyway.
Turning to the current situation, he says that, in large part, the recent housing bubble in the United States fit the historic pattern, except that in this case reflexivity was centered on the real estate rather than the stock market. As house prices shot up between 2001 and 2005, credit standards deteriorated sharply. Rather than restricting their lending, mortgage financiers deluded themselves into believing that the collateral for the loans they were making would continue to rise in value. The very act of extending more and more credit, on easier and easier terms, kept demand for real estate buoyant, which, in turn, ensured that for several years the lenders' optimistic expectations were validated. It was only when borrowers who had taken out loans they couldn't afford started to default in large numbers that the housing bubble finally burst.And that's it. Don't blame Bill, don't blame CRA, and don't blame black people. Blame the financiers and "experts" who, during the past eight years, operated under the dunderheaded delusion that house prices could go up exponentially while wages went up incrementally.
I remember an uncomfortable conversation I had with one lady who tried to talk me (yeesh...me!) into buying her home in 2003. "You'll make money. The prices will just keep going up and up and up!"
You want to know who caused our current mess? Every single idiot who thought like that.
MY RESPONSE POSTED ON ANGLACHEL's SITE:
Honestly my biggest beef with the whole CRA thing is not that they tried to help minority communities, but they did not bother to regulate what was happening.
You have Raines who was in charge of Mae and doing a terrible job. When they tried to regulate what was going on and hold him accountable, the Congressional Black Caucus stepped in and starting chiming the same BS we've been hearing throughout this election- faux racism. They're only going after Raines because he's a black man and they are only going after this program because the primary beneficiaries are blacks. It's all there in that video on youtube.
So what happens? The Congress loses their nerves because they don't want to be tagged racists and the Mae goes unchecked not only buying up bad debt to "help those people" but engaging in bone headed accounting practices- like cutting back on buying insurances. The dream is over and bubble bursts.
I recognize that this is only part of the problem, but it's a HUGE part of the problem. You have poor people (more whites than blacks), speculators, middle class people who eyes were bigger than their stomach and the mentality that there is nowhere to go but up and the fall would be light (Raines himself said that these were not risky investments because they were physical properties). And now this whole thing is affecting every person who did the right thing (white, black, Hispanic, citizen or not). And those people are pissed. So when they hear stories about how the democrats are beholden to such special interests- they get the blame.
Housing prices fall and many people find themselves unable to pay their mortgages. Democrats (names escape me) kept pushing to expand the buying power of these two entitles thereby blowing the bubble up further. So maybe they thought they were helping home owners, but in the end they wound up hurting them. All they had to do to help cushion the blow (don’t know if it could have been avoided) was punish the people in charge of Mae and Mac and stop the dangerous lending/selling practices.
As you understand this is a very complex issue and I understand your point about manipulation of events to play on peoples’ fears. But at the end of the day this did not have to happen and that is what people will take away. The underlying crux of this racial argument (at least which is apparent to me) is the inability to punish high profile black leaders who do the WRONG THING!!! So I can’t blame the Republicans and whatever inherent racism you seem to think exists in that party. If you look at the video questioning Raines, all of white America prejudices are confirmed. You have a man who should be fired, but is being defended by mostly Black and Democratic members of Congress and the crux of their argument is that doing the right thing (regulating Mae) is discriminatory.
If the default argument of black America is “Racism” the community will never progress. In my opinion we will be kept in a constant state of victimization and dependency upon the “benevolent” Democrats to always come to our rescue. I don’t doubt politicians from both sides are interested in helping the Community, but many of them are a poison. And unfortunately from what I see, many of them lie on the Democratic side. They come to the community to pander for votes, give people just enough to keep them quite (and dependent) and then let things run wild and screw us over. How many African American people have lost their homes because the stupidity of Congress? And now they come to us saying “We will help you.” Please. Face it they come to us with candy, but the candy is laced with opium.
Honestly my biggest beef with the whole CRA thing is not that they tried to help minority communities, but they did not bother to regulate what was happening.
You have Raines who was in charge of Mae and doing a terrible job. When they tried to regulate what was going on and hold him accountable, the Congressional Black Caucus stepped in and starting chiming the same BS we've been hearing throughout this election- faux racism. They're only going after Raines because he's a black man and they are only going after this program because the primary beneficiaries are blacks. It's all there in that video on youtube.
So what happens? The Congress loses their nerves because they don't want to be tagged racists and the Mae goes unchecked not only buying up bad debt to "help those people" but engaging in bone headed accounting practices- like cutting back on buying insurances. The dream is over and bubble bursts.
I recognize that this is only part of the problem, but it's a HUGE part of the problem. You have poor people (more whites than blacks), speculators, middle class people who eyes were bigger than their stomach and the mentality that there is nowhere to go but up and the fall would be light (Raines himself said that these were not risky investments because they were physical properties). And now this whole thing is affecting every person who did the right thing (white, black, Hispanic, citizen or not). And those people are pissed. So when they hear stories about how the democrats are beholden to such special interests- they get the blame.
Housing prices fall and many people find themselves unable to pay their mortgages. Democrats (names escape me) kept pushing to expand the buying power of these two entitles thereby blowing the bubble up further. So maybe they thought they were helping home owners, but in the end they wound up hurting them. All they had to do to help cushion the blow (don’t know if it could have been avoided) was punish the people in charge of Mae and Mac and stop the dangerous lending/selling practices.
As you understand this is a very complex issue and I understand your point about manipulation of events to play on peoples’ fears. But at the end of the day this did not have to happen and that is what people will take away. The underlying crux of this racial argument (at least which is apparent to me) is the inability to punish high profile black leaders who do the WRONG THING!!! So I can’t blame the Republicans and whatever inherent racism you seem to think exists in that party. If you look at the video questioning Raines, all of white America prejudices are confirmed. You have a man who should be fired, but is being defended by mostly Black and Democratic members of Congress and the crux of their argument is that doing the right thing (regulating Mae) is discriminatory.
If the default argument of black America is “Racism” the community will never progress. In my opinion we will be kept in a constant state of victimization and dependency upon the “benevolent” Democrats to always come to our rescue. I don’t doubt politicians from both sides are interested in helping the Community, but many of them are a poison. And unfortunately from what I see, many of them lie on the Democratic side. They come to the community to pander for votes, give people just enough to keep them quite (and dependent) and then let things run wild and screw us over. How many African American people have lost their homes because the stupidity of Congress? And now they come to us saying “We will help you.” Please. Face it they come to us with candy, but the candy is laced with opium.
These people have no shame. Truly, I am disgusted. Many, many commentators have been warning of this likely course of events. Bill Clinton had practically nothing to do with this. Why not blame Alan Greenspan? Or Citibank? Or Angelo Mozillo? Or every Congressional representative who ever took money from Fannie and Freddie?
Show me one moron suggesting this and I promise you I will punch the idiot in the face for their combination of stupidity and racism. And I love the patriotism of those who take a national crisis caused by over consumption and speculative excess, and use it to justify their petty views. Way to go morons. Hope you enjoy the 2nd depression.
The data is available to prove categorically that this story is rubbish. But its not worth it. There are more convincing stories about Roswell.
I have a friend called Josh Rosner. He has written extensively (and passionately) on this potential disaster for many years prior to recent events. Look up his work if you want details. Funny he never mentioned this. Must have slipped his mind.
Harry
Show me one moron suggesting this and I promise you I will punch the idiot in the face for their combination of stupidity and racism. And I love the patriotism of those who take a national crisis caused by over consumption and speculative excess, and use it to justify their petty views. Way to go morons. Hope you enjoy the 2nd depression.
The data is available to prove categorically that this story is rubbish. But its not worth it. There are more convincing stories about Roswell.
I have a friend called Josh Rosner. He has written extensively (and passionately) on this potential disaster for many years prior to recent events. Look up his work if you want details. Funny he never mentioned this. Must have slipped his mind.
Harry
DG, Raines became a scoundrel, pure and simple. And yeah, I think a form of reverse racism made everyone afraid to talk about what was really happening at Fannie Mae.
But the problem was a lot bigger. The crisis became major because average shmoes (of all hues) got greedy and thought they could become instant millionaires by flipping houses.
But the problem was a lot bigger. The crisis became major because average shmoes (of all hues) got greedy and thought they could become instant millionaires by flipping houses.
It's absolutely dumbfounding. All Republicans have done for the last 20 years is screw things up and blame the Democrats. All but the ditziest wingers have seen the pattern, yet here they go, trying it again.
As for progressives, they bash their fellow Democrats because they don't have the guts to confront real Republicans. I learned this at Democratic Underground, where never a kind word is heard about Democrats.
As for progressives, they bash their fellow Democrats because they don't have the guts to confront real Republicans. I learned this at Democratic Underground, where never a kind word is heard about Democrats.
I know exactly damn-all about finance. However, the most interesting exposition of the mortgage meltdown subject was This American Life's The Giant Pool of Money, which broke it down simply as follows:
Industrialization of China and India adds to the pool of money chasing investments;
American real estate seen as an excellent investment;
More money chasing mortgage-backed securities;
More pressure to make mortgage loans in order to create more mortgage backed securities to meet investor demand;
Leading to an insane loosening of standards.
Nowhere was the CRA mentioned.
Industrialization of China and India adds to the pool of money chasing investments;
American real estate seen as an excellent investment;
More money chasing mortgage-backed securities;
More pressure to make mortgage loans in order to create more mortgage backed securities to meet investor demand;
Leading to an insane loosening of standards.
Nowhere was the CRA mentioned.
Frankie Raines, the $15mn man! I used to love watching him on TV. So smooth, so well briefed, that man could have made a fortune selling snake-oil.
One should never pin anything on one guy, but yes, prima facie he looks like he has a good shot at going down for 10-15 years. But Frankie (Raines) cant explain (Freddie) Mac (sorry for the pun).
And why be surprised that he is calling in the favours now. He signed a lot of cheques back in the day. Congressional Reps have been known to buy any old snake oil. Why wouldn't Frankie look to keep his ass out of jail by claiming racism? Dick Grasso got to keep his loot.
Do you think Frankie might play John the Baptist to Obama's Jesus?
Harry
One should never pin anything on one guy, but yes, prima facie he looks like he has a good shot at going down for 10-15 years. But Frankie (Raines) cant explain (Freddie) Mac (sorry for the pun).
And why be surprised that he is calling in the favours now. He signed a lot of cheques back in the day. Congressional Reps have been known to buy any old snake oil. Why wouldn't Frankie look to keep his ass out of jail by claiming racism? Dick Grasso got to keep his loot.
Do you think Frankie might play John the Baptist to Obama's Jesus?
Harry
"more strange bedfellows than you'll find in the porn studio hidden in back of the Mos Eisley cantina."
That is your best line this year, Joseph.
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That is your best line this year, Joseph.
