Friday, September 19, 2008

The poor are revolting

Conservatives have been struggling for an explanatory meme for a financial crisis that has blown up after 8 years of Republican rule. They are inching towards one --

[National Review - Lisa Schiffren]

I always listen to Mark Levin while making Friday night dinner. Tonight he is giving the most serious, intelligent, cogent explanation of the current economic crisis I have heard or read anywhere. He is giving a precise political and legislative history going back several administrations, but concentrated in the Clinton Administration, where the major changes that led down this road were initiated. Funnily enough, he has explained just what it is community organizers do. Advocating, for instance, for affordable housing for the poor — the poor who traditionally rent, because they are bad loan risks. The day that reasoning by banks was junked as "racist," was the day this crisis became a possibility.

That's right: the crisis is due to poor black people getting too many loans. David Brooks, channelling Megan McArdle, comes close to embracing similar reasoning (as does Jonah Goldberg). You'd think someone might stop to wonder how people who own so little could cause so much damage. Here are homeownership rates by ethnicity from 1994 to 2007. Blacks had a 42% ownership rate in 1994 and 47% in 2007. So a 5 percentage point increase in their rate brought the system crashing down?

In fact, the increase for non-Hispanic whites was nearly the same, but the key point is: there are way more white people. If you're looking for hundreds of billion dollars of dodgy mortgages, that's where to look for them. Anyway, virtually all the increase in black home-ownership happened under Bill Clinton, so the conservative theory requires believing in an 8 year mortgage time bomb -- as opposed to role, for example, of Alan Greenspan. If you're trying to understand how huge valuations can disappear, you look where the money is.

[Here is the Census Bureau homepage for relevant statistics]

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