The Atlantic - Latest Comments in More on the BTN theory

Re: More on the BTN theory

albatross — Wed, 01 Oct 2008 10:03:05 -0000

Opposing immigration is one of Steve Sailer's biggest consistent themes, to the point where I can kind of guess that his take on any social problem will sooner or later link back to the evils of hispanic immigration. ("My back hurts. Here's why this is the fault of the millions of immigrants flooding across the borders....")

He did make the point awhile back that it's important to distinguish between the housing bubble and the financial crisis, and that's worth expanding on. The relatively high mortgage default rate we're having now has to do with the housing bubble, and it's conceivable that CRA could have had something to do with that, though I don't think so. The broader financial crisis has to do with massively screwing up the pricing and estimation of risk, as I understand it. It's amazingly hard to make a case that poor minorities are to blame for bad management of risk in financial institutions that have to be coerced by law to even do business with them.

Re: More on the BTN theory

asdfas — Tue, 30 Sep 2008 21:06:27 -0000

"This is not to say that Hispanics account for most of the defaults in those four states. Plenty of white speculators bought homes figuring they could rent them out to all the Latino laborers who had flocked across the border to build exurban homes. And other whites wanted to move to the exurbs to get their children out of public school systems overwhelmed by the children of illegal immigrants."

In short, even if he isn't right, he's right! Even if white people are defaulting, it's really only because those awful hispanics made them do it! That is one hell of a ballsy argument.

Yeah. To make an argument like this you kind of need to believe that it's some sort of natural law that the consequences of immigration for the country people are coming to will only ever be bad. If it looks like immigration is helping the economy, that just means the bubble hasn't burst yet! Sailer and his friends make a lot of different arguments whose only common thread is the idea that everything is the fault of minorities/immigrants/political correctness. When this leads to the natural accusation of racism the response is "you're not engaging the argument," "how can facts be racist?," "you're just trying to suppress debate," etc. I'm grateful to Brad L and anonymous for taking the time to try to debunk this.

Re: More on the BTN theory

Sharon — Tue, 30 Sep 2008 12:40:08 -0000

Anonymous at 8:38 a.m. wins the thread!

Re: More on the BTN theory

Fat Tony — Tue, 30 Sep 2008 12:13:56 -0000

Thank you to the knowledgeable folks who responded. Seriously, you helped me out a lot.

Re: More on the BTN theory

Jim — Tue, 30 Sep 2008 11:27:55 -0000

Anonymous,

Than oyu for that expnantion. It pulls together what had been (for me at least) only jumbled bits of information inot a sensible picture, and identifies a point of origin for the process. Thank you.

Re: More on the BTN theory

jerri — Tue, 30 Sep 2008 11:08:26 -0000

"President Bush issued America's Homeownership Challenge to the real estate and mortgage finance industries to encourage them to join the effort to close the gap that exists between the homeownership rates of minorities and non-minorities."

bush challenged the wrong people...he should have challenged the builders to build homes that cost less than $200,000 retail. bush put people in houses they could not afford instead of demanding the free market to find a way to build homes the people could afford.

Re: More on the BTN theory

amcon reader — Tue, 30 Sep 2008 10:35:08 -0000

From the American Conservative:

(http://www.amconmag.com/articl...

Usual Suspects

Who’s to blame for the unfolding financial crisis? According to many conservatives, poor black people and, of course, Democrats.

National Review Online indicts President Carter’s Community Reinvestment Act for the meltdown. The CRA emboldened community organizers—like you-know-who—to force banks to make loans to uncreditworthy minorities, you see. Terry Jones of Investor’s Business Daily blames Clinton’s “multicultural housing policy” and his mandates to increase home ownership among blacks and Hispanics.

But as economist Michael Barr points out, about half of subprime loans came from mortgage companies that were unaffected by CRA’s mandates. Perhaps only a quarter of all subprime loans were made by banks governed by “multicultural housing” policies. Nothing excuses politically correct credit, but did community organizers really force lenders to infect all financial markets by repackaging their bad mortgages into securities? Did poor blacks invent credit default swaps?

Of course not. While these so-called conservatives criticize the misguided do-goodism of Democrats past, they ignore the present Republican administration that is pioneering socialism for the rich.

Bush proposed an “ownership society,” saying that Americans would prosper when they were given more economic freedom and accountability. Now the same administration insists that prosperity depends on bailouts, that accountability means disaster. Instead of Americans owning their own homes as free individuals, the Bush administration has made all of us collective owners of the worthless banks and lenders that ruined the real estate market. Never have so many owed so much to so few.

Re: More on the BTN theory

anonymous — Tue, 30 Sep 2008 08:38:08 -0000

Fat Tony: DO THE MATH.

The total amount in bad mortgages is roughly $250 billion. If it all evaporated by the time the House reconvenes on Thursday (which it can't), that's not enough to bring down the US economy, much less freeze credit worldwide.

The reason this is a crisis is the several TRILLION in derivatives, credit default swaps and the like, for which the original mortgage loans were simply an excuse.

There is actually a fancy word for what is happening in this scam, "reification". It means to treat an abstraction as if it is an object, like 'taking your courage in both hands.'

Ya see -- the reason the $250 billion in bad mortgage loans cannot completely evaporate is because there is an asset at the bottom of it: the house. If you sell a house that you bought for $300k for a $200k loss, there is still a $100k asset -- that might be sold for $400k some day.

But the trillions created out of that $250 billion in mortgage loans, which are just part of the $62 trillion or so in various derivatives and debt default swaps worldwide, have ONLY their market value. If you can't sell 'em, they are literally worthless.

Whenever anybody tries to tell you the problem are folks who bought houses they couldn't afford, tell them to do the math: trillions are bigger than billions.

When the guy across the street bought his house for $300k, the mortgage was immediately bundled with a few thousand other mortgages into various investment tricks: mortgage backed securities (a bet that no more than 2% of these thousands of mortgages would default), and, to pick one other, credit default swaps, which a bet by the buyer that more than 2% would fail, and by the seller, less: a kind of insurance.

But in this kind of abstract finance, remember: the guy who buys the 'insurance' doesn't own the asset. Yet through the market, those guys control what the claim has to pay: these guys make LOTS of money when the default rate goes higher than the 2% rate at which the swap was valued, the same way an arsonist can make money on fire insurance.

And it's legal -- thanks to Phil Gramm and the Commodity Futures Modernization Act of 2000, in which without a vote or even a debate, he inserted provisions that enabled Enron's criminal manipulation of energy futures AND barred all regulation and oversight for derivatives. Those markets are the trillions threatening worldwide recession, not few hundred billion in bad US home mortgages. So this was NOT caused by the Community Reinvestment Act of 1977, however "aggressively" it was pushed by Clinton, and it wasn't Fannie or Freddie, either. The global trade in abstract financial instruments like derivatives and credit default swaps wasn't created by Fannie Mae or Freddie Mac -- they were late to the party, and they went down precisely because they DIDN'T bring their own keg.

So what's wrong with Sailer's 'argument' (besides his obvious racism) is simply bone-deep ignorance: he can't do the math.

This isn't about a few hundred billion in bad mortgage debt. It's about many trillions in speculative financial instruments, which are worthless because no one will buy them.

Re: More on the BTN theory

Brad L — Tue, 30 Sep 2008 05:23:31 -0000

@Fat Tony (note: the one I tried to post was lightly edited in the comment window. Apologies if there are little rough spots in this previous version)

The problem with debunking Sailer is that it is a full-time job. His articles, like the one you link to, are windy missives that spend a great deal of time arguing over motives, and often do little in supporting the hypothesis they represent.

Further, he links to what little hard "evidence" far more than he actually explains or describes them - a lazy and rather frustrating shorthand that is designed to make him look as though he's done exhaustive research. But when you start looking through his evidence, it's usually both thin and highly interpretive.

This article is a great candidate for this. If what he is proposing here is that minority lending is causing a recession, he's done a poor job of explaining why. First, he goes on and on about how Bush and the ownership society caused this whole thing by wanting to increase minority ownership. The fact that they did want to increase minority ownership is the one convincing thing he writes about - to the extent that you think it is a bad goal, you think Bush is a bad actor. But here's the thing... for all the time that he spends on this, he spends extremely little time demonstrating that a) minority loans are going bad at an exeggerated rate and b) this was caused primarily by banks trying to shoehorn in first-time (marginal) homebuyers.

If you clear away all the brush, here is his evidence that minority borrowing defaults more than other borrowing:

1. He contends that banks were "handing out more mortgages to likely deadbeats." The link he provides is about immigration and welfare. The word "mortgage" does not appear on it once.

2. A couple of articles written in 2004 that say that lending to immigrants by Fannie and Freddie will be problematic (but which, of course, offers no contemporary view into whether this has turned out to be the case, and which is just another recitation of why the goal is a bad one in his eyes).

3. About 2/3 down the page, he actually starts to address the primary question, with this:

"But now minority homeownership rates appear to be falling as foreclosures hit Hispanics and blacks harder than whites and Asians."

What's interesting here, but what Sailer neglects to mention, is that the couple profiled in the article were not undone by their original loan (as one might expect from his hypothesis), but after they refinanced and moved from fixed-rate to an interest only ARM! The original loan, as far as he, I, or anyone can tell from this article, was not actually a problem. At that time, rates were low, and refinancing made sense -- the article suggests the couple got bullied, or more charitably persuaded, away from their original goal into something that offered a dazzlingly low monthly payment (as interest-only ARM loans did).

The article does note that minorities went for these loans more often, and offers two views: one, that race bias played a part apart from income in the direction that these folks were steered; and two, that it didn't - risk and risk alone drove those loans. The article does not offer a conclusion, but I have little doubt Sailer has made up his mind on the issue.

So, this is a very, very poor demonstration of his point. Even if the couple "got greedy," the problem doesn't seem to be that they weren't initially qualified.

4. His next bit of support is this link, which shows foreclosure rates by state. To his credit, Sailer admits that this provides absolutely no info about minority rates of default. The article also provides no insight into whether these loans were the original loans or not. So, as evidence, it is incredibly weak. But that doesn't stop him from doing a lot of Wild Assed Guessing (or, if you like, inferring) about who might be defaulting. And never, ever, does he probe deeper into whether the loans in default are first loans for first-time homebuyers, which is absolutely key to his hypothesis.

5. Then this:

"But the circumstantial evidence that blacks and Hispanics account for a disproportionate share is agreed upon by all who have looked into the question closely."

The link, here, is a Google search on "foreclosures + minorities." This time, he didn't even bother to serve up a lame almost-related article. He wants you to search "minorities" and be happy with whatever screeds you might find. Meanwhile, the question is far from settled in the way that he suggests. Ta-Nehisi has already linked to the Gordon piece, but see also this article, and this report, which directly addresses the question of defaults that takes into account loan origination.

6. Next, he provides this amazing hedge:

"This is not to say that Hispanics account for most of the defaults in those four states. Plenty of white speculators bought homes figuring they could rent them out to all the Latino laborers who had flocked across the border to build exurban homes. And other whites wanted to move to the exurbs to get their children out of public school systems overwhelmed by the children of illegal immigrants."

In short, even if he isn't right, he's right! Even if white people are defaulting, it's really only because those awful hispanics made them do it! That is one hell of a ballsy argument.

This, plus one (firewalled) profile piece of a woman who bought in for cheap and lost her house, is the whole of his evidence that lending to minorities for the purpose of first-home buying is the cause of our troubles. This is far, far less than convincing.

After this, and some handwaving about how many minorities there are, and what home prices have done, he gets to more Sailer-esque garbage about why people are doing what they are doing:

"Why did the Wall Street financial engineers concoct a mountain of leverage on the back of the pebble of probability that these California mortgages would be paid off?

One reason is obvious: political correctness, enforced by anti-discrimination lawsuits."

The other, more obvious reason than fear of political correctness, is that the people that sold the loans had an incentive to make them (commission) but no incentive to value risk properly, as the mortgages were simply passed down a line to someone else in a distant corner that might be left holding the bag if they loan went belly up (and, unfortunately, leveraged to boot). But hey, why blame that when we can blame political correctness?

Next time you read Sailer, take him with a beach's worth of salt.

Re: More on the BTN theory

Brad L — Tue, 30 Sep 2008 05:20:25 -0000

@ Fat Tony

I just posted a rather long stab at countering Steve's post. I think I referenced to many of his links, because the article has been held for moderation. I'm re-posting it, sans links, so that you can at least see the direction of it. Perhaps our host will be so kinda as to replace the next comment with the original at some point.

Re: More on the BTN theory

Asher — Tue, 30 Sep 2008 02:28:39 -0000

"teh blacks"

Is that a Byron Crawfordesque teh, or a typo?

Re: More on the BTN theory

Glaivester — Tue, 30 Sep 2008 01:58:06 -0000

Shorter MoeLarryandJesus:

Steve Sailer is a blasphemer who espouses theories that go against my holy book!

Re: More on the BTN theory

MoeLarryAndJesus — Tue, 30 Sep 2008 00:42:28 -0000

Fat Tony writes: "I understand you have to consider the source and vdare is pretty much a joke, generally speaking, but I have trouble finding fault wiith much in this piece."

That's because you have no experience in or knowledge about the mortgage industry.

Rove was trying to take credit for SHIT THAT WAS ALREADY HAPPENING. The notion that the Bushpigs went out of their way to do something good for minorities in America is comical. But of course they were always available to take credit.

The endgame is that there's zero evidence that loans to minorities were disproportionately responsible for this crisis. Repiglicans are hosting a lynching here.

Re: More on the BTN theory

Fat Tony — Tue, 30 Sep 2008 00:05:31 -0000

http://www.vdare.com/sailer/080928_rove.htm

This is the article people are talking about, btw. I'd honestly be intrigued to see someone, either TNC or one of the lefties here take a stab at countering a lot of what's said in it.

I understand you have to consider the source and vdare is pretty much a joke, generally speaking, but I have trouble finding fault wiith much in this piece.

Re: More on the BTN theory

MoeLarryAndJesus — Mon, 29 Sep 2008 23:42:12 -0000

Glaivester writes: "I agree with JonF that Steve Sailer ought to be mentioned here as a notable exception, although I would not use pejorative language to describe him."

Of course not. As your website makes clear, you're one of his consecrated altar boys.

I would not use non-pejorative language to describe Sailer. He's the polite face of white supremacy in this country, and anyone who takes his pseudo-science seriously is a pathetic racist of one sort or another.

Re: More on the BTN theory

dannity — Mon, 29 Sep 2008 22:34:00 -0000

Ta-Nehisi, for God's sake, DO NOT START READING SAILER! Unless you want to end up like poor Fred over here.

Re: More on the BTN theory

Fred — Mon, 29 Sep 2008 22:13:23 -0000

T-NC,

This is another reason why you should read Sailer. He has been explicitly hammering Bush on this, repeatedly. I linked to his relevant columns in one of your previous threads.

Re: More on the BTN theory

Glaivester — Mon, 29 Sep 2008 21:37:02 -0000

Fascinating how none of these denunciations of lending to teh blacks have included a denunciation of George Bush's "Ownership Society."

That's a result of Bush Butt-Kissing Syndrome.

But I agree with JonF that Steve Sailer ought to be mentioned here as a notable exception, although I would not use pejorative language to describe him.

Re: More on the BTN theory

JimS — Mon, 29 Sep 2008 20:47:24 -0000

"they are busy begging the government for more money, which the hard right has now denied them."

I would simply like to point that with a Democratic majority in both houses and no veto threat the right cannot deny anything right now. With a third of republicans voting for the bailout, close to hundred democrats (I haven't looked up the numbers) had to have voted with the house republicans. Whether the bailout is worthwhile or not there's no way you can fault the "hard right" for the failure of the bill to pass.

Re: More on the BTN theory

JonF — Mon, 29 Sep 2008 20:41:34 -0000

Re: Fascinating how none of these denunciations of lending to teh blacks have included a denunciation of George Bush's "Ownership Society."

Not quite true. Some of the more rabid (and racist) rightwingers have happily tossed the Bush administration on the bonfire too. Steve Sailer did so quite explicitly in comentary over on TheAmericanScene.com and someone else blamed Karl Rove and his plan to convert Hispanics en masse into a GOP-voting group.

Re: More on the BTN theory

frankie d — Mon, 29 Sep 2008 20:14:39 -0000

i haven't had anything to say about this amazing republican tactic because it is so incredible.

i see them on tv trying to make the argument and i am just dumbfounded.

republicans always wonder why they can never attract black voters.

all they have to do is consider the fact that they routinely resort to this sort of tactic, whenever things get tight.

they deny that it is racist, and then, when they are trying to atone for their past sins, acknowledge, well, yeah...that was kinda fucked up. maybe we shouldn't have done it.

and then they expect black folks to just forget about stuff like this.

incredible.

Re: More on the BTN theory

ludovic — Mon, 29 Sep 2008 18:37:46 -0000

Want to track the latest in racist dog whistle politics? Go to www.stopdogwhistleracism.com for the good, bad and the ugly from the left, right and center, on race in the race.

Re: More on the BTN theory

geoff in MN — Mon, 29 Sep 2008 18:13:45 -0000

Keep this in mind: we're not hearing complaints about CRA from banks or the other lenders in trouble. Those institutions are not (at least not publicly) saying that the government forced them to float a shit-ton of risky loans, they are busy begging the government for more money, which the hard right has now denied them.

No, we're hearing this from the "nutcase meme experiment labs" of talk radio and righty blogs. A Rep from my state, Michelle Bachmann, was the first elected official (to my knowledge) to break the cherry on the idea and voice it in public.

Think about it: the emblematic villains of this piece are Wall Street pinstripers and the sleepwalking/in-in-the-tank Bush regulators. The emblematic victims are a working- or middle-class family indebted up to their eyeballs who bought in a hastily-developed exurb. This is an intramural fight between two core GOP constituencies. Let's be clear: Republican pols aren't afraid of black people but they're damn sure terrified of suburbs full of pissed-off and bewildered recent homeowners.

The problems in the housing and financial markets are incredibly complicated and politically treacherous. The urge to simplify it and find a scapegoat is huge, especially for a party already in deep shit. Blaming "government," Carter, Clinton, and those goddamned coloreds in the ghetto is a reflex on the hard right. The mendacity and outright illogical wrongness of it in this case is breathtaking in its hatefulness. We need to call it what it is: to borrow a phrase, a high-tech lynching.

Re: More on the BTN theory

patriot games — Mon, 29 Sep 2008 17:48:30 -0000

you're not trying to say that George W Bush is a brother and then doing a BTN, are you? Can't white people be blamed, at least once in a while?

Re: More on the BTN theory

4th District GA — Mon, 29 Sep 2008 17:09:09 -0000

I wish ACORN and the far left liberal radicals would pressure my congressman into supporting the bailout. Our jackass congressman, Hank Johnson, is a black freshman in one of the most reliably safe Dem districts in the country (basically Atlanta - lots of Emory folks in the 4th, people in finance, real estate, law, and lots of lower income low info voters). It's a great district, lots of diversity, but a lot of folks up and down the chain are getting hurt by the economic downturn. Mr. Johnson doesn't even have a challenger this election. Front and center on his web site is a large pic of him and Obama. Why did he vote it down? What gives? Did the Black Caucus vote in lockstep against it? I know Johnson - to his credit - was pretty active in the Refugee Alliance following Katrina. He's got to have a reason. Help us Ta-Nehisi, you're our only hope!