Posted on 09/30/2011 6:52:50 AM PDT by dangus
In the late 1990's, a terrible bargain was struck: Banks would agree to federal "anti-discrimination" policies, but in return, they could trade the risks of making bad loans, bundling good loans and bad loans into CDOs, or "collateral debt obligations."
While the very intelligent Sen. Phil Gramm (Republican of Texas), was a major proponent of this deal, he doesn't really deserve the blame. If both sides of the deal played honorably, it was a reasonable deal apart from its color-consciousness: Blacks did not default on loans any less than whites did, despite greater difficulty in getting loans. Based on long term financial history, home location, educational attainment, etc., a black person earning the same money as a white person would be less likely to successfully pay off the loan. But that meant that bank loaning policies had a "disparate effect" on blacks. And given the federal role in insuring mortgages, this "disparate effect" was arguably illegal under Civil Rights law.
The problem was that the Clinton administration shortly issued an executive order (#13166) which broadened "discriminated groups" to include "language minorities." President Bush then expanded the scope of EO # 13166 to include Sallie Mae and mortgage lenders.
If you went to school in America, you're supposed to learn English. If you legally immigrated to America, you're required to know English. So who in America doesn't know English? Some elderly people who didn't attend public school way back before it was mandatory. (Such people typically spoke German and French.) But most are illegal immigrants, amnestied former illegal immigrants, refugees, and reunified family members given special exemptions to language requirements.
Such illegal and quasi-legal immigrants and refugees are not going to be good candidates for loans. But the Bush administration made clear: unless you give as many loans to these people as to English-speaking, American-born citizens, we're going to label you racists, sue you, and destroy your bank.
For years, the banks didn't mind. If a house was foreclosed on, the bank reacquired an asset which had probably appreciated in the meanwhile. But still, there weren't enough loans being made to non-English-speakers because non-English-speakers couldn't begin to apply for a loan. Banks were soon offering zero-money-down loans to illegal aliens to bulk up the proportion of loan recipients who were "protected language minorities." When that didn't work, the Bush administration forced Sallie Mae to develop an army of people to convince illegal aliens to sign up for mortgages.
Meanwhile, states and the government created an artificially tight housing market by using unreasonably zoning and environmental regulations to all but ban private development of housing across countless metropolitan areas. So illegal aliens weren't getting mortgages on reasonable, $80,000 homes, but were bidding up the prices on $600,000 homes!
Then the housing market stalled. Now banks weren't guaranteed to recoup delinquent mortgages by selling the house at prices higher than the mortgage value. But the banks COULDN'T just quit lending to "langauge minorities." They quit lending altogether. Declines in house prices accelerated.
It was very, very easy for illegal aliens to end up under water. Their jobs were the easiest to eliminate, once American citizens were also desperate to find work. But since they had paid no money down, and were financially incapable of refinancing or getting ahead on their mortgage, they were under water with slightest drop in housing prices.
Worse still, it's very difficult for an American professional to simply walk away from their identity. Their assets include not only liquidatible assets such as the mortgage, but also intangible assets such as their college degree. On the other hand, illegal aliens have few of these other assets. THE MOMENT AN ILLEGAL ALIEN'S MORTGAGE IS UNDER WATER, WALKING AWAY IS THE SENSIBLE THING TO DO.
(Is this slamming on illegal aliens? No. If someone gave me impossibly low mortgage rates to buy a house with no money down, I'd take it. Who turns down a "free house?" But who would gives illegal aliens free houses? Only someone forced by the government to do so.)
Look at where all the underwater mortgages in 2008 were: Every county in the top twenty counties had experienced massive growth between 1998 and 2008. And in every case, illegal immigrants were a massive portion of that growth: Prince William County, VA (DC metro), southern Florida, Las Vegas metro, Phoenix metro, outlying regions around Los Angeles, and so on.
Only once housing prices had fallen so far (20% or more) did defaulting mortgages go mainstream.
So which banks went under? Those who specialized in CDOs (such as Bear Stearns), community banks in communities dominated by illegal aliens, and lenders who specialized in high-risk loans (Fannie Mae).
But the economy continued to worsen. Usually, housing sales lead a recovery. Once prices are low, people who have deferred buying a house make up for lost time. Not now. Banks are still terrified to lend, because for every so many safe risks, they have to loan to someone who has no motivation for successfully paying his mortgage. Immigrants go home when the economy goes bad. That frees up jobs for American workers, but it also means fewer houses are needed. So DESPITE the lack of housing construction, there is still an excess of housing on the market.
Without such massive immigration, employers would train more workers, or improve productivity through automation, during tight labor markets. These gains in production would last through economic downturns. Instead, companies relied on a cheap workforce which is no longer available.
To fix the economy, we need a presidential candidate who recognizes that illegal immigration is a chief cause of the economic downturn, and is resolved to remove the regulations that require banks to loan to "language minorities" who are illegal immigrants and prevent employers from relying on illegal immigration as a cheap alternative to increasing productivity.
The last thing we need is to elect the governor who is the single biggest to effective border control in America, believes that massive illegal immigration is good for the economy, and who would give illegal immigrants $100,000 in tuition benefits when they can't even legally drive in Texas.
It destroys everything it touches.
Think about it.
30 million illegals create a lot of congressional districts simply by being here. That’s some 50 congressmen all screaming for more money for their districts and it makes a lot tougher fight for us in congress.
Let's get to the root cause:
"How Liberal and RINO politicians Destroyed America's Culture and Economy"
as a result of the credit modernization act, gramms wife was appointed to the board of enron. Cronyism at its worst.
Illegal immigration is a fellow traveler along with Benedict Arnold U.S. manufacturing CEO’s that can’t be satisfied with
a 10K sq ft mansion, ski lodge, beach house, yacht and Porche for the 16 year old... so they have to send even more factories to China.
I don’t believe this article successfully argues its thesis. In fact, I find the article an exercise in logical rambling that sabotages its thesis by oscillating between two or more theories. If the article/author wants to claim that “too easy lending” was the underlying cause of the current economic malaise, then illegal immigrants and the CDOs that Bear Stearns wrote aren’t to blame, “too easy lending” is to blame. Focus = lacking.
It was a bad bill, and Gramm was officially partly responsible for it, so I’m not going to try to convince you Gramm was a good guy. Question, though: was Gramm’s wife actually given an MONEY? Which board? If there’s signs Gramm was being a crony capitalist, I wouldn’t want to continue to implicitly whitewash him, but I also don’t want to slander him by passing on poorly established cronyism.
So it’s your position that a creditable explanation for any exceedingly complex situation can’t possibly admit more than one contributing factor? If X is to blame, Y is flawless? Anything else is “rambling”?
On the other hand, if you don’t understand that too easy lending was a product of CDOs, then maybe I should have used smaller words.
I’ll go one step further:
As evil as it is, I’d rather the traitorous CEOs hire people oversees, then import people here in order to hire them, and leave the American communities the bill for the education, infrastructure improvements, medical coverage, welfare payments, etc.
WHOOPS! DANGEROUS TYPO.
I meant,
I’ll go one step further:
As evil as it is, I’d rather the traitorous CEOs hire people oversees, THAN [for them to] import people here in order to hire them, and leave the American communities the bill for the education, infrastructure improvements, medical coverage, welfare payments, etc.
___________________
“Then” makes it sounds like I want them to do both!
WHOOPS! DANGEROUS TYPO.
I meant,
I’ll go one step further:
As evil as it is, I’d rather the traitorous CEOs hire people oversees, THAN [for them to] import people here in order to hire them, and leave the American communities the bill for the education, infrastructure improvements, medical coverage, welfare payments, etc.
___________________
“Then” makes it sounds like I want them to do both!
“Blacks did not default on loans any less than whites did, despite greater difficulty in getting loans. Based on long term financial history, home location, educational attainment, etc., a black person earning the same money as a white person would be less likely to successfully pay off the loan. But that meant that bank loaning policies had a “disparate effect” on blacks.”
The first sentence appears inconsistent with the next two. In any event, blacks are less creditworthy than whites based on default rates. East Asians are the most creditworthy. We have known this since the 70’s when the Carter Administration ginned up the bogus mortgage banking “redlining” issue.
Black leaders and their supporters, i.e. about 90% of blacks, were very much behind pushing the CRA and all the other destructive policies that created the mortgage market disaster. Illegals were also a major part of the problem, but the CBC, allied with leftists such as Jimmy Carter, Barney Frank and AA incompetents such as Franklin Raines and Janet Reno, are mainly to blame for creating and expanding the policies that led to the mortgage crisis.
Don’t liberal-argue me, pal. It’s not a credible explanation.
I’ve studied this in significantly more depth than this type of handwaving argument and can point you in a dozen directions to sources much closer to the original actors, none of whom have single topic disease.
I agree. Too many assertions that sound just a little off.
Too-easy-lending, encouraged by well-intentioned but economically-unsound government interference in the market, led to an out-of-control lending environment. The result was the housing bubble and a lot of mortgages that should never have been written. Throw in a heaping helping of greed by the mortgage brokers and loan originators who could write all kinds of crap loans without fear of living with the risk and you had the perfect recipe for disaster.
No, it’s not too easy lending by itself. Even with easy lending, you needed a target population to soak up those easy loans. Without the illegals to suck them up, those loans would not have been issued. You need a customer for your product. For subprime loans, it was illegal aliens.
That target was the housing needs of 20-30 million new illegal aliens (the real number, not the “11 million” that has been used since 2002).
See this article from over two years ago: http://www.humanevents.com/article.php?id=33821
“As evil as it is, I’d rather the traitorous CEOs hire people oversees, THAN [for them to] import people here in order to hire them, and leave the American communities the bill for the education, infrastructure improvements, medical coverage, welfare payments, etc”
_________________________________________________________________________________________
I would agree, except that in the case of upper midwest manufacturing, Mexican illegals aren’t hurting nearly as badly as the China outsourcing is.
In the case of the high tech sector, importing people (H1B visa Indians and etc..)is doing a lot of damage to careers of folks who went to college for computer science and such in the last 20 years.
WHOOPS! DANGEROUS TYPO.
Oversees might be overseas?
Some people just like to hear themselves talk with big words and long drawn out articles that really don’t say anything or get to the crux of the problem. Illegal is illegal and Mexicans are the problem.
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