Phil Gramm Can't Bring Himself To Say It
In a WSJ piece echoing a speech he gave at the American Enterprise Institute, he called it loose money and politicized mortgages that brought the housing crash. Sailer specifies:
If you aren't a regular reader of VDARE.com, you'd need a secret decoder ring to understand what Gramm means by "politicized mortgages". The closest he manages to come to explaining what he's talking about in his Wall Street Journal op-ed is his euphemistic reference to Fannie Mae and Freddie Mac's 35 percent quota that "targeted geographic areas deemed to be underserved".You know and I know that "underserved" is Diversity Speak for black and Hispanic neighborhoods. Yet Gramm still can't come out and say it in public. (In his oral presentation at AEI, he had used the somewhat more revealing term "inner cities and depressed areas". But he didn't dare be even that clear in the WSJ, or maybe the editors wouldn't let him)
Moreover, that raises a fundamental question: How can Respectable Republicans like Gramm ever hope to persuade the public when they are terrified of saying what they mean for fear of being branded a "racist"?
I guess Gramm would prefer to go down in history as the man who blew up the world than to be accused by the SPLC of uttering hatefacts.
For example, it would strengthen Gramm's case to point out that Crash was kicked off not just by a subprime lending crisis, but one concentrated in merely four states: California, Arizona, Nevada, and Florida. In August 2008, these accounted for 50 percent of all foreclosures and the vast majority of defaulted dollars.
But if Gramm were to mention that, it would also raise the unmentionable specter of Demographic Change.
There was overlending going on all over the world--yet the collapse started in a few rapidly Hispanicizing states in the U.S. Why?
You have to look at both sides of the equation: lending and repayment. In California and Company, not only was too much money being lent relative to past rates (which was happening in lots of other places, too), but, also, the earning capacity of the new homebuyers to pay back their loans was declining--as Americans moved out and Latin Americans moved in.
That double whammy in the Sand States of increasing lending and decreasing human capital is, more than anything else, what blew the gasket on the world economy.
Of course, we also needed a third element--political correctness--to keep investors from noticing what was happening.
And that, judging from Gramm's timidity, appears to be as strong as ever.
Do you think Sailer's right on the reason it happened in California, Arizona, Nevada, and Florida, or are these just states where a lot of people want to live?
More from Sailer here, on how Angelo Mozilo pandered his way into billions:
Countrywide, which originated 20 percent of the new mortgages in the country in 2006 before collapsing and being bought by Bank of America last year, is often cited as the ultimate refutation of the theory that the Community Reinvestment Act contributed to the Housing Bubble. [11 Racist Lies Conservatives Tell to Avoid Blaming Wall Street for the Financial Crisis By Sara Robinson, Campaign for America's Future, October 2, 2008.] Countrywide, the poster child of the Bubble, wasn't covered under the CRA because it wasn't a bank. It merely originated, securitized, and serviced mortgages.But why wasn't Countrywide ever brought under a law that was frequently amended?
Because, as Gramm suggests, Mozilo constantly pledged his devotion to massive minority lending. (And, don't forget, he handed out below-market mortgages to power players like Sen. Chris Dodd). Gramm complains:
"When Countrywide came to Washington and was the first lender to sign an agreement with HUD [in 1994]-- ... a Declaration Of Fair Lending Principles And Practices--and then set about to eliminate standards in lending and become the largest mortgage lender in the world and the first major casualty of the financial crisis, what regulator after that press conference was going to feel comfortable in moving against Countrywide? Now, Countrywide became HUD's poster child for what a good home lender was like."For example, during a prestigious Harvard address in 2003, Mozilo announced Countrywide's "commitment to fund a total of $600 billion in home loans for previously underserved Americans in this decade".
After that seemingly magnanimous gesture, he went on in his speech to lobby Washington to eliminate requirements for down payments, to speed approval (i.e., to not check up on the bogus incomes claimed by mortgage applicants), and to thwart various states' attempts to rein in "predatory lending". (Countrywide's high-pressure sales techniques were often straight out of David Mamet's Glengarry Glen Ross.)
One of the recurrent paradoxes you run into when researching the history of the Housing Bubble is that complaints by liberal politicians such as Barney Frank and liberal pressure groups such as the Greenlining Institute about predatory lending are frequently resolved by the lender promising to hand out even more hopeless loans to minorities. (The secret is that the community organizers often wind up with a small cut of the action.)
Mozilo always wrapped himself and his ludicrous loans in the sacred mantle of diversity, just as George W. Bush did. Mozilo orated at the Harvard conference:
"As President Bush said last October: 'Two thirds of all Americans own their homes, yet we have a problem here in America because fewer than half of the Hispanics and half of the African Americans own their home. That's a homeownership gap. It's a gap that we've got to work together to close for the good of our Country, for the sake of a more hopeful future. We've got to work to knock down the barriers...'"And as President Bush pointed out, the homeownership rate for African Americans is 47 percent and for Hispanic Americans it is 48 percent, a stark contrast to the homeownership rate of 75 percent for white American households. ... My friends, that gap is obviously far too wide. It has been far too wide for far too long. And when adding new factors into the equation - like an influx of new immigrants or continued reduction in the supply of affordable housing - it has the potential to become far worse."
Thanks a lot, Angelo and George!
Mission Accomplished!
Links are live over in Sailer's originals.
Banker Steve: Waaah! All those bad people borrowed money from me! I knew they couldn't pay it back, but the bad government made me lend the bad people my money! Waaah!
Sailer is okay on somethings, but this column is ignorant. Poor bankers, they had no choice but to make those liar loans and resell the risk to others converting liar loans into their own cars, homes, and islands for themselves. Again. And again and again.
jerry at February 23, 2009 8:49 AM
I am not a demographer, but as I travel around Phoenix I see enormous planned communities surrounding golf courses or very close by to an enormous and new shopping mall. The new houses there are huge, and these are not homes targeted to the upper class, these are often big homes targeted to middle or upper middle class. See, because we had lots of desert, and your California housing money would go so much further here, and if you moved here you wouldn't have all those other Californians to deal with in your new gated communities. So buy here, it's big and it's new and there are lots of expensive stores.
The buyers are not the poor underserved, the buyers are white and blue collar workers that work for the companies that abandoned California when housing became too expensive there.
If Sailer has demographics, he can post them, but if one removed the poor underserved from the Phoenix market, we'd still have had the same enormous planned communities and the wasteful sprawl.
My guess, and I truly have no clue other than what I see by driving, and by reading in the "paper" where the big rates of foreclosures are, that it's in the new and enormous planned communities on the far outskirts that were fueled by liar loans and the like to white and blue collar workers. The role of the underserved, if any, would probably be to be able to buy the 10-20 year old homes in the parts of the city that the others left behind. And those parts of the city aren't inner city, they were the planned beautiful new communities of 10-20 years ago.
(Phoenix sucks. If you believe in the free market you can ask yourself why a home in LA/SD/SF would have cost $500K and only $150K in Phoenix. It's because Phoenix sucks in comparison.)
jerry at February 23, 2009 9:05 AM
Amy:
Did you see Niall Ferguson's "The Ascent of Money" on PBS a little while ago? He specifically mentioned how Fannie and Freddie had discriminated against black Americans by refusing to guarantee loans on houses in black neighborhoods. Of course, this was in the post-World War II period where the overall rate of home ownership increased dramatically.
In that context, something like the Community Reinvestment Act makes sense---it's an attempt to right a past wrong. Unfortunately, there is always The Law of Unintended Consequences. Whether Countrywide was actually covered by the Act makes little difference. There was an effort by government to expand home ownership, which coincided with easy money from the Federal Reserve. Really, a recipe for disaster.
Tyler at February 23, 2009 9:31 AM
the thing with avalanches is that it doesn't take a very big rock to start one...
SwissArmyD at February 23, 2009 10:26 AM
It is not a coincidence that the explosion in sub-prime lending occurred mostly in the last two Bush years under Dem control of the house.
The Dems caused the housing catastrophe by pushing its philosophy through Fannie Mae and Freddie Mac. Bush objected only weakly.
It doesn't matter who originated the loans. Mozilla was a non-bank originator of these loans. Fannie and Freddie were buying them, and the government encouraged everyone to buy them. The ratings agencies were dependent on government business, and stamped AAA on the bonds that represented those loans.
Funding through Fannie and Freddie was off-budget and infinite, because the government implicitly GUARANTEED repayment to the bond buyers, in fact if not in law. There would be no buyers of the loans if Fannie, Freddie, and the ratings agencies had not arranged it.
Fannie and Freddie are still in operation, and are still buying sub-standard loans, to "help the poor".
We are experiencing now the after-effects of a giant stimulus plan financed through government borrowing under guarantees. Obama is attempting to duplicate this.
"We Guarantee It"
A collection of news and analysis about the causes of the mortgage and financial crisis. How the government directed massive resources by implicitly guaranteeing the actions of Fannie Mae and Freddie Mac.
Andrew_M_Garland at February 23, 2009 10:40 AM
Sure Andrew, blame Mozilla. Damn those open source hippies! They caused this with their free as in speech software sucky browser. Damn commies!
You get your check from Bill Gates, right?
jerry at February 23, 2009 11:12 AM
To use the avalanche metaphor, the risk to the public is not the small rock, but the enormous massive snow heap on top of the mountain. That snow heap is the massively overleveraged banks.
Sweeping the mountain of rocks isn't going to remove the snow or make the town below safer.
Regardless, I blame Mozilla.
jerry at February 23, 2009 11:15 AM
How can Respectable Republicans like Gramm ever hope to persuade the public when they are terrified of saying what they mean for fear of being branded a "racist"?
They never can. And once the label has been applied, its like you've been branded with a scarlet R on the forehead that will never go away. How Strom Thurmond got away with it and Trent Lott didn't still surprises me.
It is all a part of the Liberal/PC side that can conveniently find a way to label the facts as racist because the facts don't fit into their world view. Pretty soon you'll have people calling others for saying that the bailout money went into a black hole.
Just to be fair -- before you Conservative right-wingers pat yourselves on the back too hard -- calling someone an atheist, commie, un-American scum for believing that Iraq wasn't needed -- you aren't to far off either.
Jim P. at February 23, 2009 12:52 PM
Jerry,
Your comment, although correct, has caused great suffering. I have fired my fact checker. (smile). Mozilo it is.
------------------
Jim P,
Could you provide a link or two to a widely-read Conservative right-winger who "calls people atheist, commie, un-American scum for believing that Iraq wasn't needed".
I would like to denounce those people also.
Andrew_M_Garland at February 23, 2009 1:08 PM
Andrew,
I don't have the original links, but here are 2 stories that reference the comments -- I admit I may have gone too far in the description; the term used in public was "unpatriotic".
http://www.washingtonpost.com/wp-dyn/content/article/2006/08/29/AR2006082900585.html
http://www.house.gov/paul/congrec/congrec2005/cr090805.htm
Jim P. at February 23, 2009 1:52 PM
Oh, and I meant to say:
Pretty soon you'll have people calling others racist for saying that the bailout money went into a black hole.
Jim P. at February 23, 2009 1:57 PM
Jim P,
At the Washington Post, Donald Rumsfeld is quoted:
Sen. John Kerry said: "We're not confused, you are confused".
Sen. Jack Reid's said: "he took exception to what he considered the implication that critics of the administration's military policies are unpatriotic."
Rumsfeld did not accuse anyone of being unpatriotic, he accused them of being confused about the right policy. Reid used the old "implied slurr" tactic, accusing his opponent of "implying" improper things.
At house.gov, Ron Paul uses "unpatriotic" in two places:
Again, a rhetorical device, claiming that unnamed others have crossed the line of decency.
Probably there are some who accuse others of being un-patriotic, but these articles don't provide who these widely-read people are.
Andrew_M_Garland at February 23, 2009 2:49 PM
Amy Alkon
https://www.advicegoddess.com/archives/2009/02/phil-gramm-cant.html#comment-1635720">comment from jerrySee, because we had lots of desert, and your California housing money would go so much further here,
An L.A. journo friend of mine moved there. He had a one-bedroom Santa Monica apartment, and his bike was a prominent part of the living room decor. In Phoenix, for the same price, he got a house with a bunch of bedrooms, a circle driveway, and a pool! (Which I guess you need there, considering it's about as temperate as my oven.)
Amy Alkon
at February 23, 2009 3:14 PM
Take the one-bedroom Santa Monica apartment. It comes with beaches, mountains, surfing, hiking, skiing, nearby actual backroads roads for driving or riding your motorcycle. It comes with good colleges and world class universities. It comes with a diverse group of people from all backgrounds. It comes with major industries, not just one or two companies, but clusters of industries, Hollywood, Aerospace/engineering, Software, ...
My girlfriend in 1990 paid an apartment hunter a month's rent $1200 to score her an apartment, it was a one br too, about 5 blocks from the beach. The br was about 7x8 feet. Just big enough for a full bed. Living room, small kitchen, bathroom. Small, old, spanish architecture, garden.
I'd love to be in a similar place. Your friend can ride his bike in Phoenix maybe 7 months out of the year, and there are no bike paths here like the one on the beach, or even the ones that often line the storm drains.
The housing was cheap here, and there's a good reason why. It got expensive, not LA/SD/SF Bay expensive, but it got expensive for awhile, and it wasn't due to the underserved population.
It was due to the bankers and their liar loans and the vast amounts of money they made available to people buying overly large overly priced homes.
And now there are articles in the paper about how many of these planned communities are about 30% filled but with no schools being built, none of the local strip malls being filled, no local grocery stores, and an enormous and traffic heavy commute.
The heat really plays a huge role in how the area developed. Before we had a/c and the country's largest nuclear power plant, growth was limited. Think Psycho (1960) shot downtown, a small city, where small homes had swamp coolers and there were no freeways.
Once a/c came of age and central air and the nuke plant was built (it has one of the country's worse safety records too), the sprawl really began.
It is too hot to walk to nearby parks or stores -- everyone has to have a car, and the communities reflect that. The walkability scores are abysmal for anywhere but downtown. But who needs to walk? With enormous houses, with their pools, A/C, and giant screen TVs, nobody walks in Phoenix. Nobody can walk here.
You drive to the mall, and we've got lots and they are huge, and that's where everything is, including (and this still weirds me out) the good restaurants.
Anyway, the grass is definitely greener in Santa Monica.
jerry at February 23, 2009 4:20 PM
"It is too hot to walk to nearby parks or stores -- everyone has to have a car, and the communities reflect that."
No kidding? In Iowa, it's the friggin' cold. I guess no amount of being human, with our tender skin instead of leather, scales, or fur, is going to get us around that.
Damn evolution.
Pirate Jo at February 23, 2009 6:34 PM
Andrew,
The point being that the both sides will use invective, hyperbole, false accusations, strawmen and just about any other tactic to discredit their opposition; not on the factual that can't be argued.
This is just one more tactic.
Jim P. at February 23, 2009 7:29 PM
Jim P. writes: "Pretty soon you'll have people calling others racist for saying that the bailout money went into a black hole."
Don't laugh - it's already happened. Granted, the guy seems to be a clueless nitwit who slept through his science classes - but that just puts him on par with most politicians and lawyers...
bradley13 at February 23, 2009 11:30 PM
Today's WSJ on Arizona. Not a whole lot about underserved communities. More about big houses way the hell out in nowhere and people moving from California and Phoenix to get them.
http://online.wsj.com/article/SB123543721679054667.html
Maricopa, Ariz.
Builders rushed into this one-time agricultural crossroads during the housing boom. They put up beige stucco houses on winding streets, with names like Heavenly Place and Good Vibrations Lane. They lured young people who couldn't afford homes in nearby Phoenix or its costly suburbs. The population soared to 37,000 last year from 1,400 a decade ago, making Maricopa one of the nation's fastest-growing towns.
Now, it's become a dead end for some of those people.
"We're trapped," says Tracy Campbell, as she watches her 2-year-old daughter romp on a playground.
In 2005, her husband, Zachary Campbell, accepted a transfer from San Diego to Phoenix to manage a recreational-vehicle store. For the first time, the Campbells figured, they could afford their own home, though that meant moving to Maricopa, about 20 miles from Mr. Campbell's store. They scraped together a $50,000 down payment to buy a new four-bedroom home in Maricopa, for $250,000. It came with black granite countertops, cherry kitchen cabinets and a pool in back.
Today, Ms. Campbell figures, the home is worth perhaps half what they paid in 2005.
Even that might be optimistic. Along a nearby highway, young men hired by a local real estate brokerage wave red signs touting "Homes From $69.9 K."
The Campbells planned to sell their house for a profit after a few years and move back to San Diego before their daughter starts kindergarten. Today, they couldn't hope to sell the house for enough to pay off the mortgage. They fear the down payment they made on the house is money they won't see again.
...
jerry at February 24, 2009 6:18 AM
And why would the Campbells go with a quarter million dollar, pool having starter home? Insane decision on their part.
Pool are money-pits. No one should have them.
momof3 at February 24, 2009 11:57 AM
They live in Arizona. Having a nice pool ups the quality of your life about 10,000%. A pool, deck, bbq here replaces park picnics because the parks are way too hot. It's a place to entertain -- the one redeemable feature of this hellhole are the nights and nighttime parties. A pool near your door makes it possible to endure the heat by allowing you to come home and go for a quick swim.
Having some sort of pool in Phoenix is certainly understandable. It is likely that like most recent buyers the pool/deck/bbq they put in was heavily stocked with unnecessary features.
The granite countertops, that was unnecessary.
jerry at February 24, 2009 4:38 PM
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