Sunday, January 27, 2008

HUD, Racism, and lending crises

The US Department of Housing and Urban Development or HUD seems to exist to sue companies on behalf of poor people. Unfortunately in this country, due to reasons we've discussed here in the past, poor folks in the US are disproportionately black. Don't forget that now. When you hear things about "unfair lending practices" what they're really talking about is race, and when you hear "racist lending practices" what they're really talking about is poor people. So re-read the first sentence of this paragraph. It's not surprising, though, when you consider that HUD is itself a massively racially motivated organization:

The U.S. Dept. of Housing and Urban Development long has had an aggressive minority hiring quota program. An Office of Personnel Management report released this year shows that HUD has deliberately over-hired blacks by 382.9% more than their proportion in the civilian work force. White employees are routinely denied advancement within the agency in order to give preference to designated minorities.
But I digress...

So the All-Fathering Federal Government lays down a few lawsuits to fight racist unfair lending practices. Now, banks and real estate companies like their money and don't want to lend it to black poor people because traditionally poor people of all colors are very bad people to lend money to; that's why they're poor. But because poor people in this country are more often black than any other color, this is seen as banks not lending money to poor black people. See the game now?

The next step is for Uncle Sugar to force lenders to loan money to poor disadvantaged urban people by suing the pants off of them every time they turn someone away who is a minority, a woman, or who has bad credit. Banks react to this by a game of cover-your-tail; they'll grant a loan to anyone, provided they can make sure they get what they want out of it -- namely, some money to show for the risk they take on.

Enter the famed Adjustable Rate Mortgage! No money down, an attractive loan for folks who can't manage their money (also known as poor people). Not to mention the fact that hippies against urban sprawl have incited an near-national land crunch leading to a housing shortage which has caused a supply-side real estate bubble.

Now the stage has been set, the die cast. We've got lenders acquiescing under pressure to loan money to high-risk borrowers, people who have no business getting loans being granted credit, and pressure from the underside forcing real estate prices up. More and more people are buying stuff that they can afford today...but not tomorrow.

Because, you see, when the value of your property goes do your taxes. And when the Fed raises rates to fight inflation, your payment rises with it. Just like magic, a payment that was $900 per month can blossom into the lovely figure of $1,400. Also like magic, people mysteriously disappear from their houses and once-viable loans dissolve into foreclosures.

That's the end, right? A novice may assume that the end game is economic pressure due to a reluctance to lend or invest money -- once bitten, twice shy -- which is essentially the same thing as raising the interest rate. But the discerning reader would know that this scenario is far from over.

The interest rate was cut by .75% the other day, the largest single-day decrease of my entire life. I was waiting for the other shoe to drop after hearing that. The situation was just too juicy for the government to pass up. And then it happened: George Bush and congressional Democratic leaders were going to cook up a plan for the Government to bail us out of this mess that Countrywide caused.

To the unaware, this seems great. To be sure, I'm not going to rip up my $600+ check. But I'm not thankful for it. As you now know, this whole mess is because of government meddling to begin with -- and now they presume to fix it? Isn't this the classic create-a-problem-and-then-solve-that-problem tactic people so often accuse "Neocons" of? This is a perfect chance for big-government elitists to flex their muscles and further entrench the perceived need for government bailouts. The bureaucracy must expand to meet the needs of the bureaucracy.

Here's great quote describing the scenario (from an article linked earlier):
It is time to recognize that fair housing laws have become largely pretexts to allow politicians to stretch their power and to plunder one industry or target after another. Insofar as people are schooled to believe that government power is inherently just, thus far will people be abused and exploited by the State.
And that's how race baiting can push an economy into recession...and how selective delivery of information can keep an entire nation completely in the dark as to the real reason behind the machinations of our government.


Fritz J. said...

While that is a somewhat simplistic explanation, it covers the situation quite well.