Posted on 02/26/2009 7:34:45 AM PST by IrishMike
The present economic crisis is the direct result of our nation’s diversity and affirmative action. We can’t say so out loud because that would be “racist”. Anything other than blaming white men (openly or by using code words like “greed”) is racist. But this recession’s main issue is very clear.
The forces of political correctness try to muddy the waters in attempt to disguise the answer. We are led to believe that deregulation caused this crisis. But lending wasn’t regulated during many periods before without causing a crisis. A bank would not voluntarily give bad loans. And if it did, that bank would get quickly destroyed. Certainly, one cannot see every major bank make the same exact mistake at exactly the same time and not realize that there are greater forces - the government - at work here.
The High Priests of the Church of Liberal Orthodoxy want to make you believe that the financial issues here are complicated. ‘You wouldn’t understand. There were transactions, bundling, selling and re-selling.’
But this attempt to muddy the waters is done to disguise the basic fact that if loans were given to worthy borrowers, none of the problems would’ve occurred.
Let’s consider: Tyrone borrows $100,000 from Bob and promises to pay back $150,000 over the next 10 years. Five years into it, Bob wants the money and re-sells the promise for the $150,000 for $120,000 to Mike. Another 2 years later Mike bundles this mortgage with a few stocks and sells it as a mutual fund.
Now, if Tyrone pays back the $150,000 as he’s supposed to, there’s no problem. It doesn’t matter who sold, re-sold or bundled this mortgage.
If Tyrone doesn’t pay back the money, the bank could try to salvage its investment by foreclosing on the house, but the fees paid to attorneys, accountants and others will likely bite away most of which would be recovered.
If this mortgage had previously become part of a mutual fund, then the whole fund will suffer.
Most Americans own mutual funds in one form or another, such as pension plans. Very few know exactly what they’ve invested in. Their knowledge is limited to knowing if their money went up or down in any particular month.
When investments drop, rather than investigate what exactly is to blame, the Average Joe will often choose to get out of the market completely. All the stocks in the mutual fund will therefore drop even more, hammering at companies like McDonalds and IBM which have nothing to do with bad mortgages.
Very quickly the situation will escalate to the point where people are dumping individual stocks, realizing that they are falling regardless of their earnings.
As corporate stocks drop, people lose jobs because corporations tighten their belts when their values are falling.
If 1-2% of Americans lose their job, the rest become more cautious. They stop spending. Businesses get hammered. More unemployment results.
This part is simple and wouldn’t be controversial.
But what’s the controversial race angle in this story?
By now I am sure you’ve heard of the Community Reinvestment Act. Let’s look at the name itself.
Community. The word seems simple enough, but it isn’t. One never hears of the Santa Monica community or SoHo community. Community means a black neighborhood. A nice way of saying “inner city”.
Reinvestment. Again, the word implies that money was not earned, but rather taken out of the “community”, so now the corporations owe it to the “community” to “reinvest” their profits.
The CRA forced banks to lend to unqualified minorities. Today, the High Priests of the Church of Liberal Orthodoxy deny this, claiming that banks were supposed to lend only to qualified minorities only, but this defied all common sense.
Loan officers give mortgages to those who are qualified. That’s their job. It’s the only way to make money. If you deny a qualified borrower for any reason, you lose money. A racist would only be punishing himself, seeing as the borrower can always turn to another loan officer to get the loan he deserves at a rate that he deserves.
Those people who never ran a business nor worked on commission think that giving a mortgage at 10% of more profitable than giving one at 6%. It is not. If you charge too much, the customer will go elsewhere. Businesses must charge the lower amount that still allows them to make a profit.
The only way that a business could discriminate is if the government forces it to. In that case, all the businesses can engage in massive discrimination knowing that the playing field is level.
However, the government was not forcing banks to discriminate. Much more than that, the government was harassing financial institutions to give loans to minorities with no credit and low income, or no proof of income.
CRA and “community activists” like Barack Obama did not demand high standards. They demanded lower standards and more money. The more money they could get, the better, and to hell with standards. $50 billion? Fine. $375 billion? Good. $1.5 trillion? Excellent!
Who will get the money? Who cares!? Just as long as they are minorities.
Up to the early 1990s, studies showed that blacks defaulted at the same rates as whites. The racial extortionists played on most people’s inability to grasp basic math to argue that this means that banks are discriminating against blacks by denying loans to them in higher numbers.
However, these studies did not test all blacks’ ability to repay loans, but merely those already chosen by banks as qualified borrowers. If black and white borrowers defaulted at the same rate, it means that banks’ standards were not only the same, but that they were also fair, just and proper.
If African-Americans were discriminated against, the ones who actually got mortgages would’ve been “super-qualified” and certainly would’ve defaulted at lower rates than whites. That did not happen.
Nevertheless, the race hustlers and the liberal media waged a Jihad against banks.
As Steve Sailer explained, only those banks that played according to the CRA rules were allowed to acquire others and expand. Those like the First Bank of Beverly Hills who did not cooperate with the CRA, stayed small. Washington Mutual was run by a PC cool-aid drinker who promised hundreds of billions for minorities. Their acquisition of New York’s Dime Savings bank alone resulted in a promise to “reinvest” $375 billion in “communities”. Naturally, WaMu quickly expanded from being a small Seattle bank to being one of the nation’s biggest financial institutions.
The “non-compliant” banks also suffered from brain-drain. Realizing that these banks’ limited potential, talented individuals left for bigger institutions.
Eventually, the smaller banks got bought out by the new banking conglomerates which chose to “reinvest” tens of billions, hundreds of billions and in the case of Bank of America, a $1.5 trillion ($1,500,000,000,000.00).
For the new mega-banks, things couldn’t be better. Rather than earning $500,000 for running a small bank with a few branches, CEO’s were receiving tens of millions of dollars per year following their CRA-approved mergers and acquisitions. Every other high-ranking officer got a massive pay raise as a result of their bank’s rapid expansion.
And best of all, because the non-compliant banks could not bid to buy available financial institutions, and were even desperate to sell themselves to bigger banks due to their inability to keep talented high-end workers, the law of supply and demand dictated that these acquisitions could often be made by WaMu and others at a discount.
Some bank officials realized that the mortgages they were making to those minorities who were previously “under-served” were terrible investments.
As credit was extended to more minorities, their foreclosure and bankruptcy rates began to skyrocket. To all those aware of these statistics, it was clear that undeserving blacks and Latinos were receiving loans.
But to admit that would be racist and would invite law suits which would destroy the banks. We are supposed to believe that whites, blacks and even illegal immigrants who have no right to work in this country qualify for loans at the same rates. Arguing anything else is racist.
So mortgages to minorities kept pouring, and CEO salaries kept rising.
Those people who realized that the bubble is about to burst began dumping these mortgages. There’s always a bigger fool out there who would buy this mortgage from you.
A particularly big fool was the Average Joe who knew nothing about the funds into which his pension plan went. He thought he was trying to save for retirement. Instead, his money was used to prop up “communities”.
Bundling real estate mortgages - good and bad - together with other investments (stocks, bonds) made the bad CRA loans disappear into the vast sea that is mutual funds.
One after another, institutions bought/insured and dumped these mortgages while making a quick profit.
Eventually, the house of cards fell when the minorities who were previously denied loans - by all the loan officers at all banks, including by their fellow blacks - were now proving what banks have already known: that they are incapable of paying off their mortgages.
Trillions of dollars were given to these “under-served” minorities. Before claiming that minorities make up a relatively small percentage of Americans, one must stop to think about the numbers involved. Trillions of dollars. A trillion is one followed by a dozen zeros. Think about that number.
Bank of America alone promised $1.5 trillion in CRA mortgages. That would be enough for every black and Latino man, woman and child can get $20,000. Every minority family of four can get an $80,000 mortgage. And that’s just one bank!
In total, banks promised over $4.5 trillion (4,500,000,000,000.00), enough to give $60,000 to each and every black and Hispanic person in the United States. (Obviously not all minorities got such loans, but that's only because some people of color wound up getting million dollar loans that they couldn't afford.)
Now consider that the banks that grew to become America’s biggest, were precisely those who made these terrible loans. Banks which failed to cooperate with the CRA became insignificantly small or were acquired by the new conglomerates.
When the house of cards built by this affirmative action shakedown fell, the collapse of banks that still had bad loans was as sudden as it was inevitable.
Real estate prices and sales collapsed.
But not every region was hit. Beverly Hills did not have a real estate problem. Foreclosures did not skyrocket on the Upper East Side. While prices stopped rising, there is no out-of-the-ordinary foreclosure problem in Wyoming, South Dakota or Vermont.
It is the high-minority states like California - the ones which in recent years benefited from the CRA-forced “reinvestment” - which were particularly severely hit by today’s recession.
Along with financial institutions who were compliant with the CRA, mutual funds began falling and within days, there was wholesale dumping of individual stocks, even those that have nothing to do with lending institutions.
Welcome to the Great Diversity Depression!
No, Mr. President, wasting money on “green projects” will not solve our crisis. Neither will tax cuts or low interest rates.
What we need is an end to the affirmative action. It destroyed many of our schools in the 1970s and is now destroying our financial institutions.
Let’s end the madness.
Banks should be allowed to lend to whoever they want. If they choose to “discriminate” by charging higher rates or even refusing to serve minorities, they will merely lose business and the non-racists will get very wealthy serving our 75 million person minority market.
But let’s not kid ourself. Blacks do not earn as much as whites, and even when they do, they do not save as much. They are less likely to be part of 2-income families, and less likely to have the high education that is often needed for job security.
Minorities will not get loans at the same rates as do whites, and it has nothing to do with racism. Forcing banks to lend money in identical rates to all races will merely destroy not just our financial system, but our economy as a whole.
End affirmative action now. Save Our Economy.
I agree.Ironically,was written by a guy named White!
The author is correct about one of the roots of the problem.
Financial geniuses took this root, manageable even if all of them defaulted, and sliced and diced the bad mortgages into derivatives and managed to inflate the damage by between 1 and 2 orders of magnitude. Then a lot of them walked away with a bunch of money.
The government is involved, but the financial geniuses we’ve idolized for the last 10 or 15 years are a great deal more responsible.
Nail. Hit. Head.
bttt
Obama, the one-word incantation – Oh-Bah-Mah! – would not be denied. The sea of humanity lapped at his feet, as the mountain had come to Muhammad.
“They cheered in acknowledgement of their shared culpability in the ‘collective failure’ that had destroyed the global financial system.”
Glen Ford
Excellent article!
Too bad it’s all true... :(
Too late. Our economy is already destroyed. And PresentObama is making sure we’ll never get up off the mat.
Break down all forclosures as to race. Asian, Hispanic, White, Black, etc. See where it ends up. How many in each race? Bet they won’t do it.
Or:
White, Guy
Great explanation of a somewhat complicated topic
bttt
He’s right, but don’t expect anyone in the political world to have the courage to agree. The official party line is that DIVERSITY IS OUR STRENGTH. You know, like the way it’s turned California into such a great place to live.
A few weeks ago, I saw an article posted to FR that made the claim that AA costs the US 40% in productivity. IOW, US productivity would be 40% higher if not for AA in college admissions and in hiring, among other things. My settings don’t save articles for more than 7 days-perhaps someone who has the link could post it to this thread? IIRC the link was posted in a reply to an article, not as an original article-and I can’t remember what the article’s title was. :-(
I wonder why the author didn’t include Fannie and Freddie in this very excellent discussion. As I understand it, the big banks didn’t hold these bad mortgages for long - Big F&F guaranteed it all just to keep the $$$$$$$$$$$$$ flowing.
All of these economic plans are simply reparations without calling it that.
dRATs in DC don't give a rats @$$, people are too stupid to know what's good for us !
Nobama’s inner circle on banking and the economy, more of the same banking / wall street clowns who invented this ponzi scfheme mess.
The Sec of the Treasury ....... didn't pay taxes.
Yet we need him to ‘save’ the economy ????
We need at this time of a fiscal National emergency crisis
..... a better quality thief / cheat ????
Think about that .... think about it some more !!!!
posting it on twitter, not a really receptive crowd there
Bingo....We have a winner!
I wish you remembered the article’s title,
Perhaps hit a topic (ie ... economy) and scroll back, or if you have the time search by key word(s) or date !
Meanwhile, I did some googling on 'US productivity reduced by affirmative action'. That pulled up tons of links-but all the articles were for very specific sectors of the economy or academia, not a US overall. I did find this article-but the site just baldly stated that AA had reduced US productivity w/o (so far as I can see) showing the data that proves it. I will post THAT link, anyway, in the hopes that it will lead to someone else with better data posting that data as a reply to my post:
When I did an advanced search via google on just FR, I found this reply #16 , in which the poster said he heard it on the radio in November 2008...Blam, can you tell us what radio program or station you heard it on? Maybe searching (eg) Rush Limbaugh's archives will pull up the original data for which the radio personality made the claim.
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