Archive for December, 2008

affirmative action, bad loans, bailout, crisis

Sunday, December 28th, 2008

The New York Times explains:

creditors came to believe that their loans to unsound financial institutions would be made good by the Fed — as long as the collapse of those institutions would threaten the global credit system. Bolstered by this sense of security, bad loans mushroomed.

Of course any crisis is multicausal. I have been blaming affirmative action loans. But instead of pushing back against government pressure to make bad loans to protected minorities, lenders eagerly embraced bad loans – because of an entirely correct expectation that they would be bailed out


No warming trend in raw surface temperature data

Monday, December 15th, 2008

You have all seen those GISS graphs of global warming.  Anthony Watt checked the raw data on which they are based.
raw data vs cooked.
The cooked data shows warming, the raw data shows cooling. Of course this does not mean the data is necessarily fraudulent – but the adjustments are largely guesswork, so when they compile these graphs, they are merely guessing that the earth has warmed.

The cause of the crisis

Wednesday, December 10th, 2008

Capitalism and free markets are prone to bubbles, and a great deal more prone to bubbles when speculators can expect that the government will print as much money as needed to keep the bubble going, but bubbles do not in themselves lead to massive financial defaults, because normally lenders only lend to people who are in a position to repay, even if the bubble pops.

If one reads what purport to be analyzes of the crisis, they usually use windy evasive language such as “financial conditions deteriorated” – which tells us nothing about what was happening except that it is something that cannot be spoken, for fear of getting in trouble.

“Financial conditions deteriorated” in that people were not making payments on their loans, but if one was to say such a thing, this would immediately imply the question:  Which people are not making payments on their loans? And that is a question that no one dares ask, for fear of the answer.

The answer, of course, as everyone knows, but no one dares say, is that members of protected minorities, the beneficiaries of government mandated affirmative action lending, are not making payments on their loans.

Foreclosures in Palo Alto west of the freeway (white and some chinese, chinese being an unprotected minority):
One foreclosure at the time I post.

Foreclosures in Palo Alto east of the freeway (black and hispanic, all protected minority):
ninety eight foreclosures at the time I post.

Foreclosures in Gilroy (wholly hispanic, all protected minority)
two hundred and sixty three foreclosures at the time I post.

If no money down loans had been available to white people with no income, no job or assets, there would have been a lot more defaults in Palo Alto west of the freeway.

The distribution of foreclosures by suburb implies that ninety nine percent of the defaulters are blacks and Hispanics, the beneficiaries of affirmative action lending.

All house purchase loans are governed by affirmative action, for since 1999 CRA requires that race must be reported on all house purchase loans, and regulators are required to take the racial distribution all loans into account when making all regulatory decisions – which implies that if a banker does not make enough loans to members of protected minorities he will be punished, but to preserve deniability, nominally punished for something completely unrelated to race.

The financial crisis is wholly caused by affirmative action lending enforced by HUD and CRA.

Therefore, if the same standards had been applied to people in Palo Alto West of the freeway, as in Palo Alto east of the freeway, if CRA and HUD had not imposed racist lending policies in favor of protected minorities, there would be no financial crisis, therefore no need for financial bailouts.

The defaulters are not normal middle class people like you and me. Most of the people that I saw buying houses in Sunnyvale in 2006 were no hablos English, and I could tell in two heartbeats at twenty paces that there was no way in hell they were going to make the payments – I conjectured that they were functioning as straw men for a purchaser more literate than themselves, and perhaps of a race less eligible for a loan with no money down, no credit record, and no evidence of income or assets.  In Malaysia they call these “Ali Baba loans” when a member of the favored religion (Islam) fronts for a member of a disfavored religion.

The crisis

Wednesday, December 3rd, 2008

Fred Thompson argues the solution is thrift – which exactly what the government is trying to prevent.

Obviously he is right – and yet wrong, for one person’s savings have to be another person’s obligations.

What we need is a financial system that mobilizes savings for sound investments – such as mortgages on reasonably priced houses secured by twenty percent down payments, mortgages on farmlands, mortgages on mines and oilfield with secure property rights, mortgages on commerical facilities such as gravel pits that generate secure and reliable income, mortgages on semi government enterprises such as toll roads, harbors, and airports that generate secure and reliable income, mortgages that are subject to proper scrutiny to ensure that the underlying enterprise supports the mortgage payments and valuation.

Without such a financial system, everyone attempting to save will merely throw more and more people out of jobs, and if on the other hand the government enables everyone to spend irresponsibly, it will set us up for bigger catastrophe down the road