Category Archives: Private Property

Updated: Loosening Lending Standards: The Real Scandal Of The Mortgage Crisis

Affirmative Action, Economy, Government, Hillary Clinton, Law, Multiculturalism, Private Property, Socialism, The State

THE REAL SCANDAL
By STAN LIEBOWITZ, New York Post

February 5, 2008 — PERHAPS the greatest scandal of the mortgage crisis is that it is a direct result of an intentional loosening of underwriting standards – done in the name of ending discrimination, despite warnings that it could lead to wide-scale defaults.

At the crisis’ core are loans that were made with virtually nonexistent underwriting standards -no verification of income or assets; little consideration of the applicant’s ability to make payments; no down payment.

Most people instinctively understand that such loans are likely to be unsound. But how did the heavily-regulated banking industry end up able to engage in such foolishness?

From the current hand-wringing, you’d think that the banks came up with the idea of looser underwriting standards on their own, with regulators just asleep on the job. In fact, it was the regulators who relaxed these standards – at the behest of community groups and “progressive” political forces.

In the 1980s, groups such as the activists at ACORN began pushing charges of “redlining” – claims that banks discriminated against minorities in mortgage lending. In 1989, sympathetic members of Congress got the Home Mortgage Disclosure Act amended to force banks to collect racial data on mortgage applicants; this allowed various studies to be ginned up that seemed to validate the original accusation.

In fact, minority mortgage applications were rejected more frequently than other applications – but the overwhelming reason wasn’t racial discrimination, but simply that minorities tend to have weaker finances.

Yet a “landmark” 1992 study from the Boston Fed concluded that mortgage-lending discrimination was systemic.

That study was tremendously flawed – a colleague and I later showed that the data it had used contained thousands of egregious typos, such as loans with negative interest rates. Our study found no evidence of discrimination.

Yet the political agenda triumphed – with the president of the Boston Fed saying no new studies were needed, and the US comptroller of the currency seconding the motion.

No sooner had the ink dried on its discrimination study than the Boston Fed, clearly speaking for the entire Fed, produced a manual for mortgage lenders stating that: “discrimination may be observed when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants.”

Some of these “outdated” criteria included the size of the mortgage payment relative to income, credit history, savings history and income verification. Instead, the Boston Fed ruled that participation in a credit-counseling program should be taken as evidence of an applicant’s ability to manage debt.

Sound crazy? You bet. Those “outdated” standards existed to limit defaults. But bank regulators required the loosened underwriting standards, with approval by politicians and the chattering class. A 1995 strengthening of the Community Reinvestment Act required banks to find ways to provide mortgages to their poorer communities. It also let community activists intervene at yearly bank reviews, shaking the banks down for large pots of money.

Banks that got poor reviews were punished; some saw their merger plans frustrated; others faced direct legal challenges by the Justice Department.

Flexible lending programs expanded even though they had higher default rates than loans with traditional standards. On the Web, you can still find CRA loans available via ACORN with “100 percent financing . . . no credit scores . . . undocumented income . . . even if you don’t report it on your tax returns.” Credit counseling is required, of course.

Ironically, an enthusiastic Fannie Mae Foundation report singled out one paragon of nondiscriminatory lending, which worked with community activists and followed “the most flexible underwriting criteria permitted.” That lender’s $1 billion commitment to low-income loans in 1992 had grown to $80 billion by 1999 and $600 billion by early 2003.

Who was that virtuous lender? Why – Countrywide, the nation’s largest mortgage lender, recently in the headlines as it hurtled toward bankruptcy.

In an earlier newspaper story extolling the virtues of relaxed underwriting standards, Countrywide’s chief executive bragged that, to approve minority applications that would otherwise be rejected “lenders have had to stretch the rules a bit.” He’s not bragging now.

For years, rising house prices hid the default problems since quick refinances were possible. But now that house prices have stopped rising, we can clearly see the damage caused by relaxed lending standards.

This damage was quite predictable: “After the warm and fuzzy glow of ‘flexible underwriting standards’ has worn off, we may discover that they are nothing more than standards that lead to bad loans . . . these policies will have done a disservice to their putative beneficiaries if . . . they are dispossessed from their homes.” I wrote that, with Ted Day, in a 1998 academic article.

Sadly, we were spitting into the wind.

These days, everyone claims to favor strong lending standards. What about all those self-righteous newspapers, politicians and regulators who were intent on loosening lending standards?

As you might expect, they are now self-righteously blaming those, such as Countrywide, who did what they were told

Stan Liebowitz is the Ashbel Smith professor of Economics in the Business School at the University of Texas at Dallas

Related: Hillary, as I’ve noted, will help “Level The Lending Industry.” Barrack, no doubt, will be behind her all the way.

Updated: Here’s the Liebowitz-Day study, “Mortgage lending to Minorities: Where’s the Bias?” The idea that all groups must own homes, or be represented in the professions proportionate to their numbers in the general population, is a political construct. Science usually has to be manipulated and massaged to support such politically driven constructs.

Notice too that the study is not new. It is, rather, kept under wraps by the familiar culprits who prefer to speak of—and act upon—corrupt concepts such as “endemic racism” and the need to step in and correct so-called systemic wrongs.

Updated: In Defense Of The Fence

Constitution, Crime, IMMIGRATION, libertarianism, Private Property

Here’s an excerpt from my new WorldNetDaily column for Friday, April 4:

“[T]he Department of Homeland Security [has] proceeded to waive certain environmental laws for various project areas in California, Arizona, New Mexico, and Texas, so as to begin completing, this time apparently in earnest, the 700 miles of fencing mandated by the ‘Secure Fence Act.’”

“The Act was forced on the ruling class in 2006 by a passionately non-partisan American public, sick and tired of the farce on the southwest front. Naturally, after the primping and preening that accompanies the signing of a bill into law just prior to midterm elections, the politicians promptly side-stepped the popular will…”

“That the government has used its discretionary waiver authority to temporarily suspend a few of its countless ‘land management’ laws, never vetted by voters, is no tragedy. In fact, government should waive more superfluous regulations if this means fulfilling its one constitutionally mandated function: defending the nation’s borders…”

Read “In Defense of The Fence” here (or on WND, where we lead the Commentary Page).

Update: In reply to some of the hysterical yelps of “tear down this wall”:

“If you really want to see an immigration liberationist rise on his hind legs, mention a fence along the U.S.-Mexico border. … Irrational minds have transformed a defensive wall à la the Emperor Hadrian’s, intended to keep the ‘barbarians’ out, into the Iron Curtain or the Berlin Wall, constructed to keep people in.”

A fence is the quintessential non-aggressive method of defense. You don’t attack, arrest, or otherwise molest undesirables, you keep them at bay, away. This is why it’s so dishonest of libertarians to protest the fence. Other than utopian solutions that’ll never come to pass, there is no other option. Libertarians are not that stupid. They know this, which makes their position all the more callous. Even sicker do such people make me when they protest Israel’s security fence. It has cut by over 80 percent the number of Israelis maimed and murdered by suicide bombers.

“Other barriers that fail to move the ‘tear-down-this-wall’ humanitarians to do their St. Vitus Dance are those separating India and Pakistan, Botswana and Zimbabwe, Uzbekistan and Kyrgyztan, Thailand and Malaysia, and Turkey and Syria (this one is mined).” And, as Joseph Farah points out in his latest column, Egypt is erecting a fence to keep the bad-tempered Gazans from hurting Egyptians.

I suspect that the kind of person screaming bloody murder about a barrier would change his tune if his property was being traipsed by trespassers day-in-and-out. Here’s the left-liberal Time magazine on the ordeal:

“When the crowds cross the ranches along and near the border, they discard backpacks, empty Gatorade and water bottles and soiled clothes. They turn the land into a vast latrine, leaving behind revolting mounds of personal refuse and enough discarded plastic bags to stock a Wal-Mart. Night after night, they cut fences intended to hold in cattle and horses. Cows that eat the bags must often be killed because the plastic becomes lodged between the first and second stomachs. The immigrants steal vehicles and saddles. They poison dogs to quiet them. The illegal traffic is so heavy that some ranchers, because of the disruptions and noise, get very little sleep at night.”

Or if his beloved fell pray to a member of a group so well-represented among the criminal class:

“Some of the most violent criminals at large today are illegal aliens.” In 2000 nearly 30 percent of federal prisoners were foreign-born. In Los Angeles, 95 percent of all outstanding warrants for homicide target illegal aliens. Up to two-thirds of all fugitive felony warrants are for illegal aliens. In 1995, already 60 percent of the 20,000-strong 18th Street Gang in southern California was illegal. In the Mecklenburg County, where the sheriff recently broke with the country and began to enforce immigration law, “1,200 foreign-born people have been arrested since April, on charges ranging from traffic violations and trespassing to sex crimes, and nearly 600 have been found to be here illegally.”

Minimizing the Crime of Home Invasion

Aesthetics, Crime, Criminal Injustice, Individual Rights, Natural Law, Private Property, Race

Don Lemon, one of CNN’s not-very-bright, cherubic, soft-spoken “girlie-men,” called the murder of Washington Redskins star Sean Taylor a “robbery gone wrong.”

In other words, the four career criminals who invaded Taylor’s home and shot and killed him were modern-day Jean Valjeans. Like Victor Hugo’s protagonist in Les Misérables, these thugs intended only to take a loaf of bread, sate their hunger, and then leave. (Please don’t tell me I have to post a “cynicism alert” every time I’m being, well, cynical.)

Let’s unpack this.

Confronted with a criminal breaking and entering, there’s precious little a homeowner can do to divine the intentions of the invader. If you violate someone’s inner sanctum, then he or she ought to proceed from the premise that you’re willing to violate the occupant.

The law ought to proceed from the same premise. A home owner ought to be permitted to deploy deadly force in defense of his home and family. In general, albeit with a growing number of exceptions, I believe this is the rule in the US. (Although, not in Cool Britannia.)

This is why neighbors are out in force to demonstrate their support for Pasadena hero, Joe Horn (good luck finding this story on the major news networks’ sites; I couldn’t):

Horn “shot and killed two suspected burglars at his neighbor’s home last month… The neighborhood has been awash in controversy ever since the two men, Miguel Dejesus, 38, and Diego Ortiz, 30, were shot.
The whole thing started when Horn called 911 to say that two men were breaking into his neighbor’s home.

In a tape of the 911 call released to the media, the emergency operator can be heard urging Horn to remain in his home and wait for police to arrive.
‘You’re gonna get yourself shot if you go outside that house with a gun. I don’t care what you think,’ the operator said.
Horn disagreed.
‘You wanna make a bet?’ he said. ‘I’m gonna kill ‘em.’
After the shooting, a shaken Horn called 911 again.
‘I had no choice,’ he said. ‘They came in the front yard with me, man. I had no choice. Get somebody over here quick.’”

[Snip]
“Values” is a buzzword not only in the presidential campaign. There is a veritable revival of the civil rights movement around certain criminal core values. African-Americans are coalescing around thugs to make the case that, wait a sec; what case are they trying to make? You tell me. If the issue is indeed race, then the Juvenile criminal from Jena came close to killing a white boy; these two black men robbed the home of whites.

Incidentally, why do you suppose this story is so hard to trace?

On Idiot Ideologues Who Pan Paul

Elections 2008, Ilana Mercer, Individual Rights, Liberty, Private Property

A word about the tinny ideologues who pan Paul because he isn’t perfect: They hate freedom, plain and simple. They don’t know what it is to live without it. They are mollycoddled milksops. Here’s why:

I don’t agree with Paul about everything—I voiced my reservations about his understanding of Islam and the Muslim world in “Some Advice for Ron Paul.”

Without going into it, I don’t much care for his position on abortion. However, unlike Paul’s detractors, I happen to know what living without freedom is like. Paul is as close to The Good Life we could hope to come. Only idiots encased in an armor of worthless ideology—worthless because it exists in the arid arena of their minds, not on earth—would turn their noses up at the prospect of Paul.

Let me share with you a little something: I left South Africa with the proceeds from the sale of my apartment stashed in the soles of my shoes. Had I been apprehended smuggling my property out of that country, I’d have gone to jail with my husband. We both stood taller on that trip. As I am in the habit of sending funds to family, I’ve seen firsthand the same creeping oppression sneak-up on Americans. We’ve already seen the South-African model of detention-without-trial slowly become part of the American legal landscape.

I love life and liberty. Almost more than anything I want to keep what is mine—not to pay the mafia shakedown fee levied on my home (property tax), which means I can never really own my abode, and that ownership is merely nominal. When such prospects loom, I seize them. Being an individualist who loves life and liberty means seizing the day; it means that when one encounters a man whose understanding of freedom and individual rights approximates—if not parallels—your own, you seize the moment.

This is not to say one ought to become a mindless “Paulbearer.” Some have; I have not. (More criticism of Paul’s position on immigration is in “Ron Paul’s Electability.”) Nor does it mean that one turns into an asinine detractor, while deluding oneself that rejecting imperfection is tantamount to a show of principle. What the love of liberty means is seizing the best opportunity at a revolution one has. Those who stand on the sidelines are pussies, and worse, slaves to abstractions.

Update: Barely a Blog friend Steven Browne has continued the thread here. Lest I be identified with the treason faction of the liberty movement—the rank pinkos who promote open borders to the detriment of liberty and property in the US—let me add that Dr. Paul is not sufficiently restrictionist on immigration. As I’ve written, “When government orchestrates an unfettered movement of people into an interventionist state, in which the rights to property, free association, and self defense are already heavily circumscribed by the state—it is guilty of unadulterated social engineering, central planning, and worse.” Aiding and abetting this is philosophical treason.
Our Immigration Archive, in which I’ve demolished most of the feeble arguments advanced by those who are laissez faire on immigration. Admittedly, if one is an anarchist, a meaningless position, then the open-borders stance is the only principled one. But since I’m not a kook (anarchist), but belong to the respectable classical liberal tradition, my position is perfectly congruent philosophically.

Paul was wrong to imply, reductively, that Islamic terrorism in general and September 11 in particular are the sole consequences of American foreign policy. Libertarians cannot persist in such unidirectional formulations. As I’ve said previously, our adventurous foreign policy is a necessary precondition for Muslim aggression but it is far from a sufficient one, given that Muslims today are at the center of practically every conflict across the world. The received leftist wisdom that the Arabs were (and remain) hapless and helpless victims of the West is false and patronizing. As scholars such as Efraim and Inari Karsh have shown, “Middle Eastern history is essentially the culmination of long-standing indigenous trends, passions and patterns of behavior rather than an externally imposed dictate.”

Ultimately, a rational suspicion of power, upon which libertarians pride themselves, must be predicated on distrusting all power, not only American power.