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Above is an interesting chart. So is this one:

There clearly were many factors in the housing bubble, all of which aligned to create a perfect storm of sorts: higher levels of leverage among investment banks, a trade imbalance, reliance by institutional investors on misleading ratings by ratings agencies, inflationary monetary policy, conversion of housing assets into opaque financial instruments, reduced lending standards, the pressures of the Community Reinvestment Act, the mystique of home ownership, business models that invited fraud, and a pervasive mania of speculation. But one factor that seems increasingly undeniable is the Bush administration’s belief that Hispanics were “natural Republicans” and that the best way to get them into the fold was to give them a stake in the “ownership society” through various housing subsidies. Hispanics’ increasing numbers in the so-called “sand states” had a lot to do with the bubble’s disproportionate influence in those regions, and these subprime borrowers’ low levels of human capital and earnings eventually led to the music stopping as payments were unmade and new borrowers could not materialize to prop up the inflated housing prices. I mean, throughout the boom, no one said, “Does it make sense a sheetrocker from Chiapas making $11/hour can afford a $400K McMansion in Anaheim?”

This is what may be called an “overdetermined” event. In other words, without large levels of Hispanic immigration and Bush’s obsession with cultivating Hispanic political support, the bubble may still have happened. But it seems unlikely that it scale would have been quite so huge and the wave of defaults quite so numerous in the absence of the low-skill Hispanic immigration wave the U.S. has undergone since the 1986 amnesty. A million people per year is a lot of people. As the chart above shows, subprime lending tripled in the boom and the bulk of that expansion was increasing lending to blacks and Hispanics. Even more important, as shown in the second chart, blacks and Hispanics–according to the Boston Fed–have default rates nearly two times higher than white subprime borrowers. Of course, the media, the Democrats, and the Republicans don’t want to discuss such things; it’s not considered polite, and, thus, the greatest demographic and social change of the United States since the Civil Rights movement is thoroughly and deliberately under-analyzed and misunderstood by well-meaning (and not-so-well-meaning) political elites.

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