October 10, 2008

My new VDARE column: Quantifying the minority mortgage money question

The conventional wisdom that emerged from the crisis of the Great Depression dominated American ideology until almost 1980. Similarly, the reigning ideas that congeal in the next few weeks about the causes of this crash may determine the course of politics for decades to come.

The truth is, we were never as rich as we thought we were. The last decade’s growth was largely driven by huge flows of lending dollars to dubious borrowers. At the bottom of an unknown but frightening number of convoluted new-fangled debt instruments were homebuyers who had no chance in hell of paying the mortgages back when the music stopped and the price of houses in California (and a few similar states) stopped heading toward infinity.

Federal Home Mortgage Disclosure Act data dug up by reader Tino suggests that the recent American Housing Bubble was, more than anything else, a Hispanic Housing bubble, as total mortgage dollars handed out to to Hispanics more than septupled from 1999 to 2006! (Is "septupled" even a word?)

Moreover, in 2006, according to Tino, 51% of subprime and other "higher priced" mortgages (for purchasing homes and for refinancing older mortgages) went to minorities. The higher priced mortgages are, of course, where most of the unexpected defaults have shown up.

UPDATE: Tino has added up all the subprime mortgage dollars for the entire disastrous 2004-2007 period. Among borrowers whose ethnicity is unambiguous, he comes up with $900 billion subprime dollars going to non-Hispanic whites, $887 billion to minorities. So, that's 50% of subprime dollars during the worst years of the Bubble went to minorities.

Someday, we'll get a count of defaulted dollars by race.

At their bubblicious peak, American homes were theoretically worth $24 trillion. The amount of wealth that has evaporated in the popping of the American real estate bubble so far appears to be in the $5 trillion range, to pick a very round number. Dr. Housing Bubble recently estimated the loss to be $4.68 trillion using Case-Shiller data. Another source estimates $6 trillion.

And we haven't necessarily hit bottom yet.

My very rough estimate is that half of the American loss in home values so far has occurred in California, with Florida being next in line.

How big is 5 trillion simoleons? How does it compare to the total wealth in the world?

At the peak, the total "assets under management" (i.e., financial instruments, but not including real estate, private businesses, and marketable luxury goods such as Van Goghs) globally reached $110 trillion, according to the Boston Consulting Group. In North America, "assets under management" were $39 trillion; let's figure $36 trillion in the U.S alone.

If we add $36 trillion in financial paper and $24 trillion in homes we get $60 trillion in wealth in America between them.

Compared to $60 trillion, a fall of $5 or $6 trillion doesn't sound so bad. But the problem is that literally countless trillions of these "assets under management" consisted of a mountain of leverage concocted by high IQ idiots on Wall Street balanced on a pebble of probability that recent mortgages handed out to Californians (and the like) would ever get paid back. The Clinton and Bush administrations were egging the lenders on to increase minority and low-income home ownership.

There were lots of other bubbles going on in the world, such as in Spain, England, and Iceland, but the California-centric American housing bubble was [Mixed Metaphor Alert!] the big enchilada that brought down the whole house of cards. [Actually, now that I think about it, the phrase isn't supposed to be Big Enchilada, it's supposed to be either Big Kahuna or Whole Enchilada. So, never mind ...]

The only way many recent borrowers could hope to get out from under their giant mortgages was if they found even Greater Fools to sell their houses to. In other words, California home prices had to grow to infinity for this movie to have a happy ending. CNN reported in 2006:
“More than 90 percent of homes in [Indianapolis] were affordable to families earning the median income for the area of about $65,100. In Los Angeles, the least affordable big metro area, only 1.9 percent of the homes sold were within the reach of families earning a median income for the city of $56,200.”

By 2007, a 500 square foot one-bedroom house in Compton, CA, the spiritual home of gangsta rap but now majority Latino, went for $340,000.

Thus, a year or two ago, when the interest rate on adjustable subprime mortgages started to reset after the typical two year "teaser" period of low interest rates began ending, housing prices slowed, then started to fall as everybody rushed for the exits.

Granted, trillions were also lost in the popping of the Internet stock bubble in 2000, but the collateral damage was milder because shares in Pets.com were considered "investments." Ever since the New Deal there have been certain limits on how much you could leverage stock investments "on margin" since the presumption is that "investments" go up and down in value.

In contrast, a half million dollar loan for a house in a slummy California neighborhood handed out to a drywaller from Chiapas who obviously must have added an extra zero to his undocumented annual income on his mortgage application is considered an "obligation" and the presumption is that it will be paid back. Defaults on "obligations" are assumed to be the exception rather the rule. After all, as they would say in the City of London when figuring out where to park some Kuwaiti oil money, mortgages for Californians were "safe as houses."

Obviously, in reality, investing in Pets.com and lending a half mil to the drywaller were both equally stupid financial transactions, but, traditionally, they've been considered different breeds of activity.

Therefore, the Wall Street geniuses felt justified in constructing vast Rube Goldberg schemes of leverage on the back of this kind of "obligation." They had data showing that borrowers in 2004 and 2005 weren't defaulting on ridiculous mortgages, but that's because there were still Greater Fools around to hand the hot potato houses to. Ignoring that, the financial wizards attempted to obtain Reward Without Risk.

Well, you can't do that. You just can't.

Of course, they were simply delaying the return of Risk until it all came rushing back in at once this autumn, just like the "portfolio insurance" schemes of the mid-1980s led to the October 1987 one-day crash.

Underneath too many of these market insurance schemes that would take a 300 IQ to understand was the assumption that out in the slums of California, laborers with fifth grade educations would pay back $4000 per month for most of the rest of their lives. Maybe they would quit their day jobs, learn to read English, go to medical school, and become doctors. (We wouldn't want to be guilty of the "soft bigotry of low expectations," now would we?) Either that, or they would find a Greater Fool who would pay even more for the privilege of living in the barrio.

Over the last year, the world's financial institutions started to wake up to the reality that underlying some uncountable but possibly terrifying fraction of all the baroque financial instruments they had been selling each other were pieces of paper "obligating" drywallers to pay each month more than their monthly income for their cruddy California houses.

Today, nobody in the financial world has much of a clue who is solvent and who will crumble tomorrow, so nobody wants to lend to anybody.

To find out how much in total mortgages (prime and subprime aggregated) were handed out by race to home purchasers in 2006, see my new VDARE.com column.

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

62 comments:

Born Again Democrat said...

Steve's conclusion: "America of 2008 doesn't have the human capital to justify the valuations of wealth it thought it had."

re: the shortage of "human capital": Would that include the quants who were over-valuing the balance sheets of the major banks and brokerage houses?

Anonymous said...

Thanks, Steve. You're a real national treasure... I just kicked in $15.

Steve Sailer said...

Dear B.A.D.

Wall Street quants are largely good human capital (e.g., physicists) badly deployed.

Physicists in the 1940s became engineers to get the atomic bomb built in a hurry at Los Alamos. We could use that same kind of talent today to, say, figure out how to make nuclear power plants safe and cost-effective.

testing99 said...

Steve, we know how to make Nuke plants safe and cost effective.

However, we lack the political will to build them. So we don't.

The mess of the economy is due to the stalemate between the elites, mostly West-East coast Finance, Entertainment, Media, Law, and Politics sectors, against the rural/inland populists, who are mostly manufacturing, mining, agriculture, and other resource extractor sectors.

Basically, a Mexican-Standoff between the "knowledge workers" and the guys who make stuff. It's an oversimplification, but a useful model in understanding the idiocy of today.

We don't build things because the elites who make up the Media for example, don't like it. But so far they haven't had all their own way either.

That will change with Obama being as Spike Lee dubbed it, "the Magical Negro" President -- the equivalent of Michael Clarke Duncan in the Green Mile, or Will Smith in the Legend of Bagger Vance.

Already, Obama's supporters are talking openly of abolishing "Whiteness" and McCain's supporters are reacting in fury to McCain's praise for Obama and concession of the race.

Basically, the Knowledge guys have won the battle, so look for a mix of San Francisco's Gavin Newsome meets Detroit's Kwame Fitzpatrick to dominate politics for the next 60 years or so.

Anonymous said...

Here is more of Nouriel Roubini from the NYT:

On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: **homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt**. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.

**for emphasis

More:

For months Roubini has been arguing that the true cost of the housing crisis will not be a mere $300 billion — the amount allowed for by the housing legislation sponsored by Representative Barney Frank and Senator Christopher Dodd — but something between a trillion and a trillion and a half dollars. But most important, in Roubini’s opinion, is to realize that the problem is deeper than the housing crisis.

“But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts.” All of these forms of debt, he argues, suffer from some or all of the same traits that first surfaced in the housing market: shoddy underwriting, securitization, negligence on the part of the credit-rating agencies and lax government oversight. “We have a subprime financial system,” he said, “not a subprime mortgage market.”

http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html?pagewanted=1&_r=1

Anonymous said...

Basically, the Knowledge guys have won the battle, so look for a mix of San Francisco's Gavin Newsome meets Detroit's Kwame Fitzpatrick to dominate politics for the next 60 years or so.

Well I don't expect the NAMs to change, but a lot of the "creative class" European & Asian knowledge workers will come around after the multiple train wrecks of both the literal and figurative kind. Especially when they start finding themselves doing resource extraction along with the rest of the country. It may not be glorious, but it's real wealth you can eat, sleep in, wear, drive and keep warm with.

Anonymous said...

Testing99,

We make plenty of stuff in this country, more than we ever made before. Manufacturing has been booming in recent years, led by big firms like John Deere and Boeing, and hundreds of small firms you've never heard of. It just doesn't take as many people to make stuff anymore, since our manufacturing is high-tech, so it doesn't employ as large a percentage of the population as it used to.

The non-financial sector of our economy is strong, and, for that matter, so is the non-Wall Street financial sector -- all the local banks that demanded down payments on their mortgages. The financial sector will shrink, the non-financial sector of the economy will expand, and labor and capital will be employed more efficiently there. Doomsday will have to wait.

- Fred

Jim Bowery said...

The cause is centralization of wealth. Immigration is related because it lowers wages hence contributes to centralization of wealth.

The alternative is to recognize nations as land trusts with the posterity of the founders as the designated beneficiaries. This means dispersal of economic rent directly to the citizens as citizens' dividends -- rather than through political processes that require people to form political armies to fight for their piece of the economic rent stream.

Indeed, the most prominent proposal out there right now for this kind of restructuring is out of the GOP "insider" think-tank: The American Enterprise Institute. It is described in detail by the AEI's Charles Murray in his book "In Our Hands."

It only makes sense to support a structure from the foundation.

Now, the question is why are we, instead, centralizing ever further toward "big man politics" via Obama -- who will extend the draft, (a draft so violently opposed by his friends, the Weathermen), to encompass "voluntary" national service which is only as "voluntary" as obtaining a roof over your head and your next meal?

The answer is Africanization.

Anonymous said...

Of course pointing out the BIG ENCHILADA will only result in cries of "racism." This one word has the ability to make the strongest of men, cower in fear. Useful idiots will then say "oh ya, blame the minorities" when no-one was doing that in the first place.

And this is what everyone needs to make clear. No one is blaming the people who can't think for themselves. We're blaming the politicos, elected "leaders" and bankers who are responsible for all of this. I repeat, NO MINORITIES ARE TO BLAME! This would be like blaming a child for shooting himself after daddy left his loaded shotgun on the kitchen table.

I afraid the only way the elites will face reality is when diversity starts affecting them.

Jun said...

anonymous @ 10/10: “But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts.” [says Roubini]

And let's not forget the National Debt.... :-/

Anonymous said...

"And let's not forget the National Debt..."

Right now, that's actually not a problem. Foreigners are tripping over themselves to loan the U.S. government money at interest rates of less than 4%. That's the one huge thing we have going for us right now, and we should take advantage of it while we can: borrow another few hundred billion dollars if necessary, recapitalize the banks, and then throw some extra in the beaten-down shares of American industrial companies. In five years, when this financial crisis and its related recession are far behind us, the government could sell those shares for big gains and use those gains to pay down the debt by a trillion dollars or more.

- Fred

Anonymous said...

From the Dilbert Blog:

"In one of my earlier career incarnations I was a banker. My job for a few years included reviewing and approving commercial loans for doctors and dentists. One day I declined a loan application for a dentist who, according to his recent tax returns, didn't have enough cash flow to repay the loan. My boss at the time reviewed my work and turned the decline into an approval without even looking at the financials. When I asked why, he explained that the borrower had a Chinese name. I questioned the wisdom of this lending procedure and he directed me to the files of delinquent borrowers, challenging me to find any Chinese names in there. There weren't any. I'm not judging, just telling you what happened."

Anonymous said...

Looking through the data, I see little in the way of risk adjusted pricing. Granted, the pricing data by race is very incomplete, but the interest charged to hispanics/non-hispanics are roughly the same. The interest rate charged to blacks is within the same range as whites. While, the rejection rates for mortgages are higher for certain ethnic groups.

J said...

"America of 2008 doesn't have the human capital to justify the valuations of wealth it thought it had."

Correct. But that was true also ten years ago, in fact, it is known since Lynn published his table of correlation between IQ and GNP. America was among the few nations (like South Africa) with a GNP much higher than justified by its human capital.

With about half of its population Mexican, it is obvious that the new California should resemble Mexico. It seems that the country's elite has yet to digest this change, and adjust the educational, financial, etc. systems to it. In fact, it seems that there is a very strong resistance even to aknowledge the fact that a deep change has taken place.

Hope the current crisis will serve to adjust those system that are based on a different America to its new demographic profile. I know many would like to change demography instead, but that seems improbable.

Jun said...

Fred: Foreigners are tripping over themselves to loan the U.S. government money at interest rates of less than 4%. That's the one huge thing we have going for us right now, and we should take advantage of it while we can: borrow another few hundred billion dollars if necessary....

You're kidding, right?

The whole mess we're in right now is due to the fact that everyone from the ghetto to our federal gov't is leveraged/in debt up to their eyeballs. We have to stop living this way. It's not functional.

When you're in debt to someone else, they own you. I don't particularly like the fact that China owns us as a nation. :-/

Steve Sailer said...

Whatever happens
We have got
Twelve carrier groups
And they have not

Chrisl said...

This 2 bedroom house just a half block from Nickerson Gardens in Watts sold for $330,000 about two weeks ago. Things still seem way way overpriced here.

Dennis Mangan said...

Great insights as usual, Steve. One thing I clearly remember when house prices were rocketing were all the justifications that real estate pros made. They said that California had a real housing shortage, that prices never fall, get in now while there's time, etc. Most of the public parroted these. Combine that with seeing friends and neighbors making piles of money, and you've got trouble.

I remember the first time I heard the expression "flipping", as in a house; it was from a Lutheran pastor here in California.

rightsaidfred said...

>>>>mountain of leverage concocted by high IQ idiots on Wall Street

Good line.

>>>>...there were still Greater Fools around to hand the hot potato houses to.

This reminds me of a theme in Atlas Shrugged, where in the collapsing society decision making and responsibility were passed down to lower level clerks.

Jun said...

OT, but you might find this of interest:

Apocalypse Now - Genetic Warfare and the 2008 Presidential Election

Anonymous said...

I've read all of Steve's articles and blog entries on the "Minority Meltdown" but have found nothing indicating that the government was threatening lawsuits if banks did not lend to minorities. To the contrary, it seems banks were happy to do it. Steve has a link in his Vdare article, but the page doesn't lead to any useful information.

Anyone have a good link?

daveg said...

Can't you dupes see that Obama will NOT the one to draft people or socialize the country?

First, he is not that bold. Obama is a self-promoting compromiser, for the most part. He is not a true ideologue.

Second, and more importantly, people are very wary of him and will be prepared to fight any moves towards socialization he may offer.

The ones to worry about are the Republicans who have just socialized the banking system and would probably implement a draft if they could. Anyone who is worried about socialism and who is not violently opposed to the current administration needs to rethink his priorities.

Someday a black thug may run for president and win and transform the nation, but that day is not today.

The real thugs you really need to worry about today are the neocons.

Anonymous said...

Wall Street quants are largely good human capital (e.g., physicists) badly deployed.

Yes. But any discussion of this topic must acknowledge that there are very few places in the deindustrialized US for this human capital to go. The universities can absorb only so much.

When I was a young student, GM used to print ads in Scientific American describing their advanced research. I remember reading them and thinking, "Hey, GM of all places does cool stuff."

How very glad for my career I am that I did not go there.

Weaver said...

Wage controls through immigration. (Once upon a time a drywaller could afford a mortgage!)

BLS Employment Growth over NonInstCiv Population

Growth by Decade:


1950s
Population Growth = 11,516,000
Employment Growth = 7,215,000 (63%)

1960s
Population Growth = 19,449,000
Employment Growth = 13,862,000 (71%)

1970s
Population Growth = 30,811,000
Employment Growth = 21,224,000 (69%)

1980s
Population Growth = 20,865,000
Employment Growth = 17,685,000 (85%)

1990s
Population Growth = 21,667,000
Employment Growth = 16,998,000 (78%)

2000s
Population Growth = 24,795,000
Employment Growth = 11,953,000 (48%)


Looking at foreclosure filings, the high immigration States are closely coorelated to foreclosures.


http://immigration-weaver.blogspot.com/2008/07/housing-foreclosures-immigration.html

Captain Jack Aubrey said...

Whatever happens
The Chinese have got
300 million men for cannon fodder
And we have not.

Although a universal draft and a nice, big war would do wonders to rid us of large immigrant populations.

With about half of its population Mexican, it is obvious that the new California should resemble Mexico. It seems that the country's elite has yet to digest this change, and adjust the educational, financial, etc. systems to it.

And that, therefore, is the problem. Maybe the changeover from First World to Third World isn't a slow, uneventful slide into poverty. Maybe it happens in fitful stages. Maybe it's quantized.

Capitaine Jacques d'Aubrey said...

This is due to higher average mortgage sizes for minorities ($188,000) than for whites ($183,000).

This is yet another one of RKU's fallacies. The mortgage amount is the amount of the home that is financed, not the full value of the home. Even if Europeans and Asians are buying more expensive homes, subprime borrowers are financing more of their home. A European buyer of a $240k home who puts 20% down has a smaller mortgage than the Hispanic subprime buyer of a $200k home with no money down.

And there's no reason to think that Europeans/Asians buying $600k homes are financing anything near 80%. People in that price range are likely rolling over money from the sale of a previous residence.

Just because Europeans and Asians have more expensive homes does not mean they have larger mortgages.

Toadal said...

Can the US no longer support productive people in the manner to which they deserve?

Yesterday we had the financial results of misguided US policies that devoured millions of warm bodies under the fallacy that population size equals wealth and power. So this weekend while many create plans to ride out the coming recession (Netflix's stock up 5.88%) others plan to escape the inevitable higher taxes and limited choices an increasing US debt burden will create.

Clever people in their 20s and 30s can investigate those prudent countries willing to attract a quality workforce. Clever parents can broaden their childrens horizons by encouraging learning new languages and investigating new hemispheres. And clever multinational corporations can open foreign sites to take advantage of any growing knowledge pools bad domestic policies have encouraged.

Anonymous said...

Oh my God! I actually kind of agree with something testing99 wrote! Are you feeling ok man?

rast said...

market insurance schemes that would take a 300 IQ to understand

Steve, you of all people should know better than to use sloppy terminology like this. 175, 190 IQ is realistic.

Alyssa Finegold said...

The stock market is beginning to discount an Obama presidency in advance. The current mortgage credit crunch will be forgotten in the much greater collapse as capital wakes up to an Obama-Nation. It will be one hell of a financial hangover and stampede.

Weaver said...

For Anonymous:

Anatomy of a Train Wreck
Causes of the Mortgage Meltdown

http://www.independent.org/pdf/policy_reports/2008-10-03-trainwreck.pdf

Anonymous said...

"but have found nothing indicating that the government was threatening lawsuits if banks did not lend to minorities"

See the merger of JP Morgan and Chase Manhattan. Activists had accused Chase Manhattan of redlining and threatened the planned merger unless they were paid off. The government prevents or approves corporate mergers based whether the merging companies benefit minorities. In an industry with highly repetitive tasks, consolidation of banks offers rewards. The consolidated entity does not have to maintain two sets of IT departments, for example.

Black Sea said...

I'm seconding weaver's recommendation of "Anatomy of a Train Wreck."

However, as it is a 29 page report and takes a while to download and sort through, I've copied a passage that reponds to anonymous's question:

"Within a few months of the appearance of the Boston Fed study, a new manual appeared from the Boston Fed. It was in the nature of a “Nondiscriminatory Mortgage Lending for Dummies”3 booklet. The president of the Boston Fed wrote in the foreword:
The Federal Reserve Bank of Boston wants to be helpful to lenders as they work to close the mortgage gap [higher rejection rate for minorities]

. . . .

Early in the document, the Boston Fed gracefully reminds its readers of a few possible consequences of not paying attention:
Did You Know? Failure to comply with the Equal Credit Opportunity Act or Regulation B can subject a financial institution to civil liability for actual and punitive damages in individual or class actions. Liability for punitive damages can be as much as $10,000 in individual actions and the lesser of $500,000 or 1 percent of the creditor’s net worth in class actions.

The part of this document that is of greatest interest to us is the section on underwriting standards. This is where we find the seeds of today’s mortgage meltdown. It starts out:
Even the most determined lending institution will have difficulty cultivating business from
minority customers if its underwriting standards contain arbitrary or unreasonable measures of creditworthiness.

You might think that it would be difficult for a bank to cultivate business with any mortgage applicants, or merely to stay in business, if it had arbitrary and unreasonable measures of creditworthiness. But then you would be failing to understand the doublespeak that is actually the point of this quote. What the quote is really saying is that if a bank’s underwriting standards do not allow a sufficiently high percentage of minority mortgage approvals, they must be arbitrary or unreasonable. “Arbitrary and unreasonable” include the standards that prevailed in the several decades prior to the 1990s."

Lucius Vorenus said...

Anonymous: I've read all of Steve's articles and blog entries on the "Minority Meltdown" but have found nothing indicating that the government was threatening lawsuits if banks did not lend to minorities.

Justice Cracks Down on Redlining
August 26, 1994
query.nytimes.com

The Justice Department dramatically sharpened its attack on discriminatory lending practices this week when it got Chevy Chase Federal Savings Bank, the largest in the Washington D.C. area, to agree to set up branches in black neighborhoods. Justice has gone after banks that discriminated against black loan applicants, but until the Chevy Case case it had never used anti-discrimination laws to challenge where banks provided services or placed branches...

Under the settlement, Chevy Chase will set up new branches and mortgage offices in the excluded neighborhoods and recruit blacks for loan-production positions. It will also spend $11 million to set up special loan programs to provide mortgages at below-market rates in the excluded neighborhoods...


Strong, silent type
OBAMA'S LEGAL CAREER
BY ABDON M. PALLASCH
December 17, 2007
suntimes.com

Obama represented Calvin Roberson in a 1994 lawsuit against Citibank, charging the bank systematically denied mortgages to African-American applicants and others from minority neighborhoods...

His final bill on the case was 138 hours, or $23,000...


Next I'd alert you to a caller on the September 19th Rush Limbaugh show, who said that Countrywide had automated their software to upgrade the NAMs from non-mortgage-worthy status to mortgage-worthy status [and from what I've heard, software packages like this were fairly common in the mortgage industry, as pretty much everyone was terrified of Justice Department lawsuits].

If you have Rush 24x7, then you should be able to read about it at the archives; if not, then here are some google searches:

GOOGLE: Countrywide Loan Underwriting Expert System

GOOGLE: automated underwriting program

Along those lines, another recent Steve Sailer thread mentioned a [grotesquely misleading and undoubtedly fraudulent] report by an outfit called "Compliance Tech", which is run by a scam artist and racial spoils racketeer named "Michael Taliefero" [husband of another real piece of work, named Debra Lindsey-Taliefero, who is at employed Howard University's School of Business].

If you google Taliefero, then you'll see that he was getting into the racial shakedown business in the same general timeframe as Obama and the Reno Justice Department - for instance, Taliefero was writing articles in a rag called "Mortgage Banking" as early as 1990.

Finally, you can google to learn about the Boston branch of the Federal Reserve and their complete fabrication of lending data in their original 1993 propaganda & disinformation campaign [which stretched out through 1996 and beyond].

The key name to google in connection with the Boston Fed is "Stan Liebowtiz":

GOOGLE: Stan Liebowitz Boston Federal Reserve

So, in general, the legalistic groundwork for this disaster was being laid in the 1990-1994 timeframe.

What would be really interesting is to learn the genesis of this onslaught - who was it working behind the scenes - probably in the mid-1980's - to create the academic and political and propagandistic and legalistic framework which would subsequently explode onto the scene in the early 1990's, in this coordinated assault involving the likes of Barack Hussein Obama, Michael Taliefero, the Boston Fed, the Reno Justice Department, etc etc etc?

I imagine that if you had a subscription to Lexis-Nexis, then you could probably recreate the graph [or neural net] of the associations fairly quickly, and soon realize just who the puppet master was.

PS: While you're at it, you can also learn how Fannie Mae was corrupting the academic world and purchasing whores like the Nobel-Prize-winning "economist", Joseph Stiglitz, to peddle their snake oil for them:

The Last Trillion-Dollar Commitment
The Destruction of Fannie Mae and Freddie Mac
By Peter J. Wallison, Charles W. Calomiris
Posted: Tuesday, September 30, 2008
aei.org

...In the same vein, Fannie and Freddie hired dozens of Washington's movers and shakers--at spectacular levels of compensation--to sit on their boards, lobby Congress, and in general help them to manage their political risk. (An early account of this effort was an article entitled "Crony Capitalism: American Style" that appeared in The International Economy in 1999.[4] A later version of the same point was made in Investor's Business Daily nine years later.[5]) The GSEs also paid for academic research to assure the public that the GSE mission was worthwhile and that the GSEs posed minimal risks to taxpayers. For example, Nobel laureate Joseph Stiglitz coauthored an article in 2002 purporting to show that the risk of GSE default producing taxpayer loss was "effectively zero"...

PhysicistDave said...

Steve,

You wrote:
>Wall Street quants are largely good human capital (e.g., physicists) badly deployed.

You may be over-estimating the value of many of my fellow Ph.D. physicists.

In the late ‘70s, I was a doctoral student in physics at Stanford. One of the Teaching Assistants marked the homework of a friend of mine wrong because, the TA insisted, my friend should have cancelled the integral signs between two definite integrals. To make things worse, one of the integrands, was 2-D and one was 3-D, so the units would not even have worked out if you followed the approach the TA insisted on. My friend and I spent some time with this fellow, patiently working through simple examples, trying to explain to him why you could not naively cancel definite integral signs.

A few years later, Stanford granted this incompetent fool a Ph.D. in physics.

I could give numerous similar stories: one of my fellow doctoral students, who now holds a named chair at Caltech, wrote a paper right after getting his Ph.D. in which he analyzed the physical meaning of a trivial calculation that would have clearly been zero had he not carried out one part of the calculation to higher order than another part. Aside from his (often meaningless) work in elementary-particle and quantum physics, he has, as it happens, also published on mathematical models for finance and risk assessment.

I’ve worked both in academic research and in integrated circuit and digital-systems design in industry. I know a few academic physicists who could be decent engineers. But, frankly, a very large number of the physicists I have known in the academic world are simply not bright enough to do decent engineering work. If I were working at a firm considering hiring either of the fellows I just mentioned, or many others I knew in the academic world, I would recommend against hiring them on the grounds that they lacked the basic technical competence I would expect of anyone with a bachelor’s in a technical field.

Let me emphasize again that one of these gents now holds a named chair at Caltech, my own undergrad alma mater, and one of the country’s premier scientific schools.

The profession of physics is in much deeper trouble than most of you non-physicists, too generously, suppose. The crack-pot, once-physicist “quants” are only the tip of the iceberg.

Dave Miller in Sacramento

testing99 said...

Ah but Steve, THEY have nukes.

Pakistan has 100+ nukes, under poor control, in a nation half-run by the Taliban and AQ (under treaty). Basically, a tribal or would-be tribal leader can decide if NYC lives or dies.

This is reality. And it will only get WORSE when Iran's nukes go online in the next few years -- they can pump about 60 over the next three years. Delivery by shipping container to where ever they want to go. And Iran is as factionalized as every other place. Whoever can hit a far away enemy, with a nuke, attracts men, money, power, prestige.

Our carriers are important, but relying on them alone is like the Maginot Line.

As far as who "won" the political battle, it's the "Knowledge Workers." Jim Bowery is quite correct, Obama will conduct "Big Man" politics, which is the whole point for the Knowledge guys, who want to OBLITERATE the manufacturing and other folks, to maintain a total grip on power. Hence all the "green" stuff and so on. The sign of a decadent, static elite.

Obama is under constant pressure to prove he's "Black Enough" by engaging in White baiting. Affirmative Action under a recession -- who gets fired? Whites! will only be one of the battles. Obama and his entire team want sky-high ($10 a gallon gas) energy prices, with "green" jobs designed to rip apart manufacturing and resource extraction. His resume consists of race baiting and distributing hand outs to Chicago from Springfield or DC.

The market will continue to crash as Obama's victory and insane policies drive the nation into a deep depression that lasts years -- with Affirmative Action and other policies deeply divisive and unaffordable.

Already Harold Myerson is writing about how our Multicultural Future requires us to "abolish Whiteness." Imagine that with lots of White guys out of work. Heck the Democrats wrote a "So Long White Boy" article saying how White guys are irrelevant to political power. Which is probably true ... for now.

It's going to be extremely ugly, sadly.

Anonymous said...

The market will continue to crash as Obama's victory and insane policies drive the nation into a deep depression that lasts years -- with Affirmative Action and other policies deeply divisive and unaffordable.

This is not 1936. This is a country that remembers prosperity and won't tolerate the lack of it for very long. A serious, long-term recession that lasts that long will anger even the "knowledge workers," who rely on economic activity every bit as much as the rest of us. How the hell will all those cute, Sean Hayes-lookalikes working at ad agencies pay for their AZT if businesses have no money to advertise?

The real problem is that a diversity recession is permanent. NAMs quite simply produce less, and a country that suddenly goes from 15% NAM to 30% NAM, even as its major competitors get leaner and meaner, isn't going to be able to sustain its old level of prosperity, not just because the NAMs are economically less productive - that in itself isn't too big a deal - but because NAMs want so much money redistributed to them and they keep throwing monkeywrenches into the machine of commerce. In fact, instead of calling them "NAMs" let's just call them the the Monkeywrench Gang.

Michael T said...

It's going to be extremely ugly, sadly.


Welcome to the rude awakening club, testing99.

As for the physicists, careerism + a largely theoretical field = playing fast and loose without regard for consequences. A stockmarket saying says that in a bull market, the market pays for your mistakes, in a bear market, you do. Careerists, likewise, can get away with slipshod practices during years of plenty, but when the wheel turns...

Lucius Vorenus said...

Humpty Dumpty must have seized possession of the English language if sodomite advertising executives possess "knowledge", but mechanical, chemical, and electrical engineers do not.

Lucius Vorenus said...

As for the 12 carrier battle groups, I wonder about this in re the situation with China.

Circa 1900, the USA had already surpassed Victorian Britain & Wilhelmian Germany to become the greatest industrial power in the world, but it's possible that the Victorians might still have been able to muster a greater battle fleet in 1900 [I'm not an expert, and I'll leave it to the naval historians to quibble over just when it was that the USN finally surpassed HMN once and for all].

Anyway, it's entirely possible that military prowess might lag behind industrial prowess by a good generation or so.

But beyond that, I'd like to make two further points:

1) Because of 30 years of the 1-Child policy in "Communist" China, the Chicoms are about to experience the greatest collapse in population the world has ever seen.

Indeed, all of high-IQ Pacific Rim Asia is going extinct before our very eyes:

1 Hong Kong IQ 107, TFR 0.97 [UN]
2 South Korea IQ 106, TFR 1.21 [UN]
3 Japan IQ 105, TFR 1.27 [UN]
4 Taiwan IQ 104, TFR 1.13 [CIA]
5 Singapore IQ 103, TFR 1.08 [CIA]

SOURCE: List of countries and territories by fertility rate
SOURCE: IQ and the Wealth of Nations

As things stand now, Hong Kong does not the represent the future of the world - it's folks like the Palins and the Romneys who will persist into the 22nd Century.

2) I am not entirely convinced that China is going to be prove to be our mortal enemy in the 21st Century.

I am certainly aware that there are elements within Chinese society who would wish that it were so [that we would prove to be mortal enemies], but I am also aware that there are other movements within Chinese society which could mold a future China into our closest ally in the world.

And it's difficult to follow the saga of Yang Wu & Wu Ping, of Chongqing, and not wonder whether the Chicoms might be developing a stronger sense of private property rights than we will enjoy under the "economic justice" regime of a certain Luo tribesman named Barack Hussein Obama.

totalcojones said...

Actually, now that I think about it, the phrase isn't supposed to be Big Enchilada, it's supposed to be either Big Kahuna or Whole Enchilada.

John Prine has an old song:

It's a half an inch of water
And you think you're gonna drown
That's the way the world goes round

A woman once came up to him before a show, and asked if he was going to be playing his "happy enchilada" song.

He frowned, and told her he didn't have a song about a happy enchilada.

"Yes you do!" she said. "You know, the one that goes: It's a happy enchilada and you think you're gonna drown."

Applying that to the subprime enchilada ... I mean mortgage crisis, there's no reason to panic. It's just the way the world goes round.

Who's up for Mexican-diversity food with a side of mixed metaphors tonight?

headache said...

testing99 sed,
"Basically, the Knowledge guys have won the battle, .."

I have to disagree. Obviously making SUV's is not going to cut it anymore. But knowledge workers cannot live off their own produce. Nobody can eat analyses, flow charts or newspapers. And you need machines to create food. And factories to make modern weapons with which to defend yourself. Manufacturing can only survive if it goes high-tech. In countries like Switzerland or Germany high-tech manufacturing is living well alongside the knowledge workers, which are under the pressure of automation themselves.

Obama will have a nice 8 years because he can tax the whites to death and there is still a lot of wealth in the US [Expect much of that to be drawn off and placed in Europe]. It didn't work out so nicely for Mugabe and in South Africa the ANC concept of bleeding the whites dry is also starting to sputter. Simply because the rich whites have moved offshore so there was less to parasite off. The anti-white crowd can only function when there are enough whites to rail against and bleed dry. Once whites become politically irrelevant the country just turns into another failed state, or in your analogy another Detroit.

headache said...

In 1994 I had the choice where to emigrate to; from the once white-ruled South Africa which had just been taken over by the Obama of Africa, Mandela. I decided to return to Europe where my ancestors came from; this in spite of everyone telling me to go to the US. Now I'm so glad I made that move, in spite of the Islamification problem in Europe.

Anonymous said...

www.HotAir.com has a posting of a video by Andrew Cuomo, Clinton's HUD Secretary. Cuomo explains how HUD sues lenders like Accubank of TX for discriminating and forces them to specifically lend to low-income and minority mortage applicants who don't qualify under standard sound lending guidlines.

http://hotair.com/archives/2008/10/12/the-quotes-that-explain-the-entire-financial-meltdown/

Anonymous said...

David Broder makes a wonderful point and it kind of goes to a question I've had: When the dust has settled and other countries, particularly the Chinese, examine what went wrong, what will they conclude?

Broder:
"The fallout from this financial collapse will be felt in so many ways one can hardly begin to describe them. Old allies such as Britain, France and Germany that have been dragged into this morass by the United States will think twice about following our lead on anything."

Steve, you once said that the catastrophic and fast failure of liberal policies vis a vis crime tarred liberalism and the Democrats for a generation because of their effect on blacks.

I wonder if we have just provided a lesson to the world on egalitarianism.

Think of the Chinese holding toxic junk and what must be going through their heads. Or the British. Or just about anyone else. Our politicians are scared, but the foreigners who were literally sold a bad bill of goods must be enraged.

Anonymous said...

"When you're in debt to someone else, they own you."

It depends how much debt you're talking about. If you owe the bank a $1 million, it owns you, but if you owe the bank $1 billion, you, effectively, own the bank. The U.S. debt China holds is a liability for them, not us. They couldn't dump those Treasuries without moving the market against themselves and losing literally hundreds of billions of dollars. Yes, the result for us would be a spike in interest rates and a sharp recession, but what effect would a recession in their largest export market have on China?

Think about this carefully, not hysterically.

"The real thugs you really need to worry about today are the neocons."

Right, because they're really ascendant right now. Try looking through the windshield, and not the rear-view mirror.

- Fred

Anonymous said...

Steve,

Check out Ross Douthat's WaPo op/ed about the housing bust today, "Not So Wonderful Now". As much as Ross (and other pundits) 'borrow' from you, they ought to be tithing their paychecks to you.

If you had toned down the black stuff a little, you could probably be making a lot of money now as a syndicated columnist. You've got the influence though, which is what you probably care about more anyway.

- Fred

seve said...

This is a bit off-topic, but Obama's mother spent the last years of her life encouraging microfinance systems in indonesia, which gave the credit-poor loans..

Anonymous said...

"In 1994 I had the choice where to emigrate to; from the once white-ruled South Africa which had just been taken over by the Obama of Africa, Mandela. I decided to return to Europe where my ancestors came from; this in spite of everyone telling me to go to the US. Now I'm so glad I made that move, in spite of the Islamification problem in Europe."

You should have moved to Australia like many South Africans did.

"This is a bit off-topic, but Obama's mother spent the last years of her life encouraging microfinance systems in indonesia, which gave the credit-poor loans.."

Microfinance (as it's practiced by hard-headed lenders in the third world) makes infinitely more sense than the nonsense we've had here. First, lenders designate borrowing pools, and make their access to further credit dependent on limiting defaults of their members. So basically, if you try to walk away from you loan, your neighbors in the hut next door are are going to put the heat on you to pay. Second, lenders charge interest rates commensurate with their risk, i.e., triple-digit interest rates. You can make money lending to high-risk borrowers if your interest rate is high enough to offset your expected default rate. Third, lenders borrowed long and lent short (generally). Most of the financial institutions that got in trouble in this country did the opposite: they borrowed short in the commercial paper markets and lent long (mortgage assets).

- Fred

Captain Jack Aubrey said...

"The real thugs you really need to worry about today are the neocons."

Right, because they're really ascendant right now. Try looking through the windshield, and not the rear-view mirror. - Fred

But what's quite clear about the Neocons is that they, just like all of our elected officials, will refuse to take the blame for the catastrophe they have caused. Take David Brooks today. He blames the conservative decline on "anti-intellectualism" and social conservatives. He credits the Democrats as governing with "deliberation and self-examination" while Republicans govern "from the gut."

Well, I guess you can say that all those Democrats were defending Freddie and Fannie's disastrous business policy "deliberately," but there was nothing "deliberative" about it.

Then he goes on to say that Bush "restrained some of the populist excesses of his party — the anti-immigration fervor, the isolationism — but stylistically he fit right in."

Yes. And what's been Bush's problem, his "stylistic" behavior or his anti-conservative decisions regarding Iraq, immigration and mortgage lending? Was James Dobson pushing for those policy positions? Or Jerry Falwell or Pat Robertson?

As I said, these idiots will never take the blame for their own bad policy advice. Fred Barnes, Bill Kristol, and now, absurdly, Karl Rove, all retain their positions as talking heads on Fox and elsewhere.

I would like to think, Fred, that the Neocons are safely in the rearview mirror. They're not - they're still in the car and they're trying to push the people who didn't screw up the Republican Party out of the trunk and onto the road.

TGGP said...

Nuclear power is already safe in France and Japan. I have a post on some potentially very important advances in FUSION power here.

PhysicistDave said...

Lucius wrote:
>I am not entirely convinced that China is going to be prove to be our mortal enemy in the 21st Century.
>I am certainly aware that there are elements within Chinese society who would wish that it were so [that we would prove to be mortal enemies]…

Lucius, I married into a Chinese immigrant family, and, from what I see among the in-laws (and also from what I have read about Chinese history and culture), the Chinese have little desire to conquer us, much less get into a world war against us.

However, they do feel a great deal of contempt for us, for reasons anyone here can understand: the irresponsibly low savings rate in the West, the failure to value education, etc.

And, they are getting increasingly clear about the idea that they will not tolerate hectoring from America about, say, Tibet, especially considering the US’s proven lack of judgment in so many ethnic and geopolitical conflicts.

If anything, they seem to be looking on with bemused indifference as the US destroys itself.

On the other hand, they place a great deal of value on some of the greatest achievements of Western culture: not just science and technology, but also classical music, etc.

One of my wife’s nieces, born under the Communists in China, took most of her humanities at Berkeley in the classics department, partly because they were less infected with “political correctness” than many of the other humanities departments, but mainly she because she has always been fascinated by Hellenic civilization.

So, my Chinese-born niece knows much more about the Western heritage, and has greater respect for it, than most Americans do. (She has less respect for America as it currently exists, though she is too polite to say so openly unless you draw it out of her.) Needless to say, neither she nor any other Chinese I know considers socialism to be anything but a discredited relic of a failed past.

Dave Miller in Sacramento

Captain Jack Aubrey said...

Speaking of Karl Rove: there's a saying in the military. The first time I heard it was from the late Admiral William Crowe, discussing Desert Storm. It goes, vaguely, 'When fighting a war, the amateurs talk about tactics; the pros talk about logistics.'

That is, simply, that in winning a war, getting your men and materiale on the field is more important than how exactly they're going to fight.

It occurs to me that Karl Rove, for all his brains, is an amateur. He was always concerned with Bush's tactics. He never cared about how he'd supply his men once they took the field.

Karl Rove won his battles. But he outran his supply lines, and left his successors with not enough men and materiale to win the war, and now we are surrounded.

Anonymous said...

With all this information at his disposal, Sailer has the makings of a book on the Diversity Recession. And if he writes it fast before others get around to it, he'll be the one breaking new ground.

Anonymous said...

With all this information at his disposal, Sailer has the makings of a book on the Diversity Recession. And if he writes it fast before others get around to it, he'll be the one breaking new ground.

I already suggested it. I think it's a great idea, and if Steve can't do it alone there's plenty of material alreday out there. Perhaps VDare could do it.

Getting it out quickly would be important. Not too quickly, but fast enough that it's one of the earliest serious examinations of the problem, before the left pulls an Anita Hill on us and defines the problem their way.

Anonymous said...

Captain Jack Aubrey,

David Brooks is a newspaper columnist. How many neocons are still in positions of power in government? How many do you suppose will be in positions of power next year?

While you continue building your Maginot Line against the neocons, a Leftist blitzkrieg is gearing up to outflank your defenses.

- Fred

Voodooman said...

steve sailer:
We could use that same kind of talent today to, say, figure out how to make nuclear power plants safe and cost-effective.

Nuclear power plants already are safe and cost-effective. It's just that so many unthinking people have this unjustified fear of the Nuclear Satan. Decades of Soviet propaganda, plus real problems at a certain poorly-run reactor at Harrisburg in 1979, have poisoned public opinion.

Captain Jack Aubrey said...

While you continue building your Maginot Line against the neocons, a Leftist blitzkrieg is gearing up to outflank your defenses.

I'm not building my Maginot Line, it's the neocons telling us to keep our troops in Iraq, er, on the Line while the Mexicans, er, Germans are coming up across the Rio, er Belgium, and the "impenetrable" Ardennes.

Look, I'm not generally big on picking on neocons (as a group) because 70% of the people using the term don't even know what it means and most of the rest use it as an epithet for "damn dirty Jew."

Yes, if Obama wins next year not a lot of neos will be in power in the White House. But they'll still be busy trying to shape the Republican Party and one way they're already trying to do that is by blaming the religious right for the mess we're in.

Yet I struggle mightily to think of one single piece of policy that James Dobson or his crew have advocated that has caused the GOP anything near so much grief as the Iraq War or immigration non-enforcement.

The neocons bare more blame for the GOP's current mess than anybody, but come next year they'll still have way more influence than a faction that actually turns out voters.

Anonymous said...

So, my Chinese-born niece knows much more about the Western heritage, and has greater respect for it, than most Americans do.

Well that's fantastic, Dave Miller. Who needs real Americans to understand and respect western heritage when you can get better people like the Chinese to do it for you? Appreciating their own heritage, just another job Americans won't do.

Anonymous said...

If you're asian, shake your head and say, "tsk tsk."

Ronduck said...

The conventional wisdom that emerged from the crisis of the Great Depression dominated American ideology until almost 1980.

I'd say that the conventional wisdom of the 1930's is alive and well *right now* here in America. No matter what Bill Clinton said the bank bailout/buyout show what beliefs are really guiding our policies.

Mr. Anon said...

"Anonymous said...

>So, my Chinese-born niece knows >much more about the Western >heritage, and has greater respect >for it, than most Americans do.

Well that's fantastic, Dave Miller. Who needs real Americans to understand and respect western heritage when you can get better people like the Chinese to do it for you? Appreciating their own heritage, just another job Americans won't do."

I see you're point about Mr. Miller's post, and I understand and sympathise with what you're saying. The sad fact though is, that there is a lot of truth in what Mr. Miller says. A lot of Americans don't appreciate their own heritage.