Akkam’s Razor

I was just forwarded the wingnut porno flick blaming brown people for our long, national, economic nightmare.   The central point of the video is that DC liberals forced minorities to buy mortgages they couldn’t afford, and it wrecked our economy.  Is it true?

No.

Low interest rates, plus speculation, plus derivatives, plus a lack of regulation and the manipulation of so called “free markets”, along with a staggering lack of trust caused the problem.  Now that it’s all going to shit, no one wants to get stuck with the check, without a seat when the music stops, or holding the hot potato.  They are counting on you being stupid enough to believe what they’re selling.

So, the question really is, how stupid are you?

See, its easy for certain people, like the angry white male, to blame other people, particularly the poor and those of the darker shades for those problems.  These are zombie myths that refuse to die, like the “welfare queens” of the Reagan years.

I’ll give you the cliff notes, with the original here via a finance blogger that I trust, Barry Ritholtz, who later clues everyone in that the answers are “no, none, and nothing at all”.

• Did the 1977 legislation, or any other legislation since, require banks to not verify income or payment history of mortgage applicants?

• 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision; another 30% were made by banks or thrifts which are not subject to routine supervision or examinations. How was this caused by either CRA or GSEs ?

• What about “No Money Down” Mortgages (0% down payments) ? Were they required by the CRA? Fannie? Freddie?

• Explain the shift in Loan to value from 80% to 120%: What was it in the Act that changed this traditional lending requirement?

• Did any Federal legislation require real estate agents and mortgage writers to use the same corrupt appraisers again and again? How did they manage to always come in at exactly the purchase price, no matter what?

• Did the CRA require banks to develop automated underwriting (AU) systems that emphasized speed rather than accuracy in order to process the greatest number of mortgage apps as quickly as possible?

• How exactly did legislation force Moody’s, S&Ps and Fitch to rate junk paper as Triple AAA?

• What about piggy back loans? Were banks required by Congress to lend the first mortgage and do a HELOC for the down payment — at the same time?

• Internal bank memos showed employees how to cheat the system to get poor mortgages prospects approved that shouldn’t have been: Titled How to Get an “Iffy” loan approved at JPM Chase. (Was circulating that memo also a FNM/FRE/CRA requirement?)

• The four biggest problem areas for housing (by price decreases) are: Phoenix, Arizona; Las Vegas, Nevada; Miami, Florida, and San Diego, California. Explain exactly how these affluent, non-minority regions were impacted by the Community Reinvesment Act ?

• Did the GSEs require banks to not check credit scores? Assets? Income?

• What was it about the CRA or GSEs that mandated fund managers load up on an investment product that was hard to value, thinly traded, and poorly understood

• What was it in the Act that forced banks to make “interest only” loans? Were “Neg Am loans” also part of the legislative requirements also?

• Consider this February 2003 speech by Countrywide CEO Angelo Mozlilo at the American Bankers National Real Estate Conference. He advocated zero down payment mortgages — was that a CRA requirement too, or just a grab for more market share, and bad banking?

See, what they, and by they I mean “conservatives”, the media, and the financial wizards that caused this mess is to take advantage of the knowledge gap, asymetric information, and tried and true hate and fear, American-style, to further line their pockets.  They want to scapegoat and entire class of people who by and large are victims and make them into villains.  They think Americans are stupid enough to fall for it, that they’ll get away scottfree, not have to pay for their mistakes, and still make even more money in the future.  They are most likely right.

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