Smoking gun article: liberals, Democrats, poor people and non-Asian minorities caused financial crisis

A reader sent me a link to yet another smoking gun NY Times article from 1999 demonstrating how the current credit crisis came about.

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

We see that the motivation behind loosening credit was to give more loans to minorities. Liberals failed to consider that these minorities were inherently bad credit risks, because we all know that credit standards are how the white racist majority keeps the black man down.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

We see that the Democratic Clinton Administration was pushing for looser credit to help minorities. There's also a mention of stock holder profits. It was wrong that anyone was profiting from the implicit assumption that the government would stand behind bad Fannie Mae debt. It's an example of making money through value transference--transferring value from the taxpayers to Fannie Mae.

[Franklin D. Raines, Fannie Mae's chairman and chief executive officer, and also a black man, said:] ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

"Too many" borrowers have bad credit. So the solution to this perceived social problem is not to change the behavior of the borrowers (if that's even possible given their genetic deficits), but to just lower lending standards.

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

Yes, lending standards be racist.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

A conservative warns of the problem, but he is ignored by Democrats because Democrats and liberals know that the conservative is motivated by racism.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

It's all clear. The big financial mess we're in today was due to failure of liberals and Democrats to acknolwedge the genetic deficits of the poor and of non-Asian minorities. Proper lending standards are called "racial discrimination," and something had to be done about it.

UPDATE

I didn't mean to imply that non-Asian minorities are morally responsible for the crisis. After all, it's not their fault they are born with bad genes. The moral responsibility is with liberal elites who refuse to acknowledge the genetic problem and insist against all evidence that everyone is born with exactly the same cognitive attributes.

Comments

[Peter]

This has become a favorite blogosphere meme over the past few days, yet as far as I can tell no one has yet shown any statistical basis for the claim. Trying to find a racial explanation for a national problem is both pointless and dishonest.

[Hi]

The future of the USA:
http://www.cnn.com/2008/HEALTH/conditions/09/30/adult.down.syndrome/index.html

Lets celebrate.

[Mingo]

Statistically, it is clear that minority loans brought on the crash. But only after amplified by credit default swapping. Democrats in Washington created the problem, and creative graduates of Harvard amplified the problem beyond redemption on Wall Street.

But enough about this. Let's talk about Sarah Palin's Down's Syndrome baby and who might be the real father and mother.

[Been There]

Peter,
Did you bother to read the article? Seriously, expend some effort.

[slwerner]

Peter - ”Trying to find a racial explanation for a national problem is both pointless and dishonest.”

At this point, yes, it is rather pointless. But, if we can somehow manage to learn from history (by learning from our mistakes), I cannot agree that it is dishonest. Not that I intend to echo HS’s allusion to the genetic deficiencies ascribed to NAM’s, but more simply, to get to the point that it WAS a matter of racial considerations that spurred the growth in sub-prime lending.

While it has gotten to the point that the “crisis” is much larger than the 5% (or so) of sub-prime loans to NAM’s which have gone into default, it is still useful to remember how the “ball” got “rolling” in the first place.

The over-simplified version, which I’m sure you’re already quite aware of:
NAM’s have poorer “future orientation” leading to neglect of credit worthiness;
lack of credit worthiness leads to fewer loans being approved for NMA’s;
fewer loans to NMA’s blamed on racism;
Clinton Administration investigations of racial lending practices under the auspice of the Community Reinvestment Act (Jimmy Carter’s);
leading to pressure on lenders to create a way to approve more loans to NAM’s despite the greater risks involved;
leading to the growth of sub-prime loans;
leading to lower standards for all loans;
leading to even more people borrowing too much for homes who’s prices were bid-up by the greater ease of getting higher loans.

Now we are stuck with the situation of large numbers of “bad loans” held by financial institutions and their investors. The lenders clearly acted with reckless abandon in approving so many high risk and over-market value loans. So, it can be argued that the whites and Asians who hold greater stakes in high finance now bear a far greater responsibility for their irresponsibility than to irresponsible NAM’s

Yet, if we hope to avoid repeating the same nonsense in the future, there is value in remembering how it happened.

Side question: in the bail-bill being worked out, are those bad loans going to be purchased by from private holders at full face-value (i.e. outstanding balances of loans) or at the current market value of the homes involved? I cannot seem to find answers to such questions anywhere.

Does anyone know of good sources to full explanations of what this proposed bail-out entails?

"So, it can be argued that the whites and Asians who hold greater stakes in high finance now bear a far greater responsibility for their irresponsibility than to irresponsible NAM’s."

Liberal and Leftist whites and asians. Let's get that straight.

[Brick Oven Bill]

Prices go down when supply is injected to the market through foreclosures. Prices went up throughout 90% of the country in 2007:

http://brickoven.blogspot.com/2008_09_01_archive.html

The only places where prices are going down are the American Southwest, Florida, urban areas, and Michigan. The map supports Half Sigma’s conclusions.

[Brick Oven Bill]

Sorry; Better link:

http://brickoven.blogspot.com/2008/09/this-is-local-problem.html

[Jim Beam]

"The future of the USA"

What future is that? The majority of the population will be working at low-wage, service jobs?

Or are you picking on a down syndrome person?

Loser.

[slwerner]

From Brick Oven Bill's site - "The red regions are those same regions with the inundated emergency rooms."

A very good insight, Bill.

Others have made the link between increasing immigrant concentrations and over-inflated housing prices. Thanks for pointing out the graphical evidence which serves to back them up.

[Been There]

Attention liberals and leftists. Your policies that give free money to NAMs is becoming unsustainable. Think about this for a minute. The well is running dry. NAMs cannot finance their own welfare, cheap loans, education, Head Start, etc...There are less productive whites and more unproductive NAMs. Do the math.

[Marlboro Man]

Yes, it is quite obvious that the $1,000 trillion+ of unregulated derivatives is the fault of pinkos, proles, and dark people. They were also the ones who forced the alpha investment bankers upper-middles(the people who we should all aspire to be) to leverage their capital 30-40x.

[Marlboro Man]

Oh, I almost forgot; they are the ones who also cut interest rates to 1% and held them there for nearly three years.

[Bruno Brazil]

According to the site presented by Bick Oven

" A bailout would represent a transfer of wealth from those who work, purchase homes that they can afford, and generally live responsible lives to greedy bankers, irresponsible buyers, and a subgroup of people who did nothing wrong except have bad timing".

I know, the bailout is like giving a new car to a child who just crashed the vehicle while driving drunk. I know, the common sense tell that the irresponsible son (subprime loan takers) should receive a punishment for his deeds.

But I ask: should you create a massive bank failure and a new Greeat Depression just for a punishment of you super-indebted americans? Does the 6 billion inhabitants of earth deserve another economic cataclysm because of some people?

Give the god damn bailout, even if this means giving a new car to a drug addicted who just destroyed his after driving stoned.

[Pore and Starvin]

"But I ask: should you create a massive bank failure and a new Greeat Depression just for a punishment of you super-indebted americans?"

I thought foreigners were all about sticking it to the Americans. Here's the chance for us to suffer like we deserve and maybe learn something and be more like the French, or something. And now I hear we are supposed to get a pass and get bailed out? This is a teaching moment, we may not have another chance for a long time! Like anyone in Zimbabwe is going to be notice anyway...

[slwerner]

Bruno Brazil - ”I know, the bailout is like giving a new car to a child who just crashed the vehicle while driving drunk. I know, the common sense tell that the irresponsible son (subprime loan takers) should receive a punishment for his deeds.”

Bruno,

With all the over-simplification going on here regarding this issue, I’m afraid that you taken it one step further and over-over-simplified.

Your post would seem to imply that you believe that homeowners/borrowers who’ve gotten themselves in too deep are the intended “target” for this bail-out. They are not. The bulk of what the proposed bail-out seeks to do is to buy up the bad loans from troubled investors/financial institutions, and (from what I’ve been able to come up with thus far) do so at the full balance value of those bad loans. In short, the aim is to bail out the lenders who made bad loans, not the would-be home owners who borrowed too much at too high of an interest rate.

[Been There]

Posted by: Marlboro Man | September 30, 2008 at 01:01 PM

You didn't read the article or HS's post either, did you? Don't be like Peter. It isn't pretty.

[as]

More choice quotes:

"In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's."

"By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings."

"But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites."

"In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups."

[slwerner]

me - "In short, the aim is to bail out the lenders who made bad loans"

Mea Culpa!

I just realized that I, too, have been guilty of an over-over-simplification.

Obviously, the intent is to bail out the investors/firms who purchased (directly or indirectly) the bad loans that lenders made.

[Bruno Brazil]

"I thought foreigners were all about sticking it to the Americans. Here's the chance for us to suffer like we deserve and maybe learn something and be more like the French, or something. And now I hear we are supposed to get a pass and get bailed out? This is a teaching moment, we may not have another chance for a long time! Like anyone in Zimbabwe is going to be notice anyway..."

The poster probably is a masochist, loves to suffer....he wants a new 1929 just to teach responsibility.

However, I think that another Depression is too great of a lesson, specially for people outside America, no?

Beyond it believe me, if a mass bank failure spread in the entire planet, the foreigners would protect themselves (including of course China) with massive protectionism and capital controls, because they see no point in suffering a major depression just for the sake of suffering, specially if they did not provoke it.

Beyond it, a Depression is a bad teacher. Any improvement in the world economy and the irresponsible lending will return. Believe me, the memory of the people is too short for that. You americans forgot the S&L crisis, somewhat similar but in a relatively recent timespan.

[Half Sigma]

If there's another Great Depression, this doens't mean anyone will figure out the real reasons for it.

Liberals will just blame Bush and the Republicans for it.

[Lucas]

"if a mass bank failure spread in the entire planet, the foreigners would protect themselves (including of course China) with massive protectionism and capital controls"

No dude. This is the "end of the world" scenario that is being sold by Bernanke/Paulson/Pelosi/Bush to convince people to accept the bail out.

Without it, the shares of the surviving Invetment Banks will fall sharply and they will end up being bought by someone else, live SOvereign Funds, Asian Banks, etc, or simply nationalyzed. Anyway, the bankers lose their bonuses. The world will not end.

[Been There]

"...You americans forgot the S&L crisis, somewhat similar but in a relatively recent timespan."

Yes, jackass, I want another Great Depression. Thanks again for the lecture. Do you think they will notice in Zimbabwe?

"No dude. This is the "end of the world" scenario that is being sold by Bernanke/Paulson/Pelosi/Bush to convince people to accept the bail out."

Lots of truth to that. If this bailout was so vital, so necessary and needed to be done immediately or the world would explode how come everyone went home for the jewish holiday(possible conspiracy angle)?

[JewishAtheist]

This is ridiculous. If those loans were priced correctly by the lenders when they were sold off to other companies, this wouldn't be an issue. High interest rates compensate for higher-risk loans. It was the pretending that they were worth more than they are (which they were able to do due to lack of oversight and regulation) that caused the crisis.

[Lucas]

"how come everyone went home for the jewish holiday"

this is why the banks screwed Japan so badly. Because they don´t have jews there, no one could play the "jewish conspiracy" card so the banks got what they wanted when the stock markets crashed in the early 90s

[Law Student]

I am no Democrat, but I believe over 75% of the sub-prime loans were issued to whites.

[David Alexander]

"The moral responsibility is with liberal elites who refuse to acknowledge the genetic problem and insist against all evidence that everyone is born with exactly the same cognitive attributes."

As I've said on numerous occasions, I've stated that people don't like the idea of genetic inheritance of IQ because it destroys the belief in egalitarian America where hard work and sacrifice can make *anybody* rich, and that people are simply poor due to laziness and other negative qualities. While genetic inheritance of IQ means that my kids may never be able to graduate high school, it also means that a sizable chunk of the white population will never see the walls of an Ivy League institution, and I question if America's ready for the destruction of their long-cherished dream.

Besides, I suspect that for some people, the fact that a traditionally discriminated group will never achieve the same success as the rest of America regardless of the intervention is disheartening and depressing, and for the discriminated group in question, it will only lead to depression, antagonism towards the successful majority and hyper-successful and easily identifiable minority. Mind you, I have no real solutions to the problem that are feasible and easily implemented in the real world.

[Wade Nichols]

"...how come everyone went home for the jewish holiday(possible conspiracy angle)?"

And I suppose these are the same folks who stayed home on September 11, 2001 also, right?

[Been There]

Wade,
I was only playing up the conspiracy angle for laughs. Half Sigma had a post last week about the (only one?) pathetically ineffective Jewish Conspiracy that exists (too many high IQ jews are writing screenplays and not enough are doing shit to help out Israel, with predictable results: Bad movies and Israel gets screwed). It wasn't meant to be taken seriously, bubbe.

[The Griffyn]

Middle-class borrowers also took on too much debt too.

And the rants about genetic inferiority just make you seem like a kook or a Nazi.

[Capt. Beefheart]

I wonder if the current economic crises is going to bring an end to such lending practices?

[Dick]

I no longer take responsibility for black shortcomings!!!!!!!!!!!!!!!!!!!!!.

[Turambar]

I agree that HS has identified a plausible mechanism.

But at this point we (ok, maybe just me) just dont know to what extent the various factors contributed.

Yes, lowering of loan standards probably is a causal factor, but what percentage of the bad debt is 0-down interest-only loans on beach property? If you ever watched shows like "Property Ladder" or "Flip that House" there were a lot bridge loans taken out on California real estate based on the quick re-appraisals.

I did see on a board somewhere that a white guy talking about walking away from his mortgage because "he'd have to be dumb to pay $200K more for something than it is worth".

My point is that it a little too soon to say who/what is responsible and to what extent. Other than CEO salaries have nothing to do with the failures.

[Brutus]

What has happened to our financial markets is happening all over the US.

NAMs are causing the lowering of standards in all aspects of American society. Think about it;

1. WE HAVE TO LEARN TO "TOLERATE" crime--because a diverse society demands it.

2. We have to tolerate incompetent racist professors at places like Duke who will try to railroad your children on trumped-up charges.

3. We have to learn to tolerate bilingual education--after all, Jose is your brother.

Bottom line is that the US has a parasite problem, and this subprime mess is but the tip of the iceberg.

Goody goody.

THANK YOU, NAMs, can I have another?

[zzz]

If the banks weren't demanding excessive returns, the loans wouldn't be so bulky. It is the worst argument to say "the poor people couldn't pay the price that the bank put on their house, so it's the poor person's fault!"

And how dare of someone to decide not to live in a cardboard box. So don't give me that "don't buy what you cannot afford."

Nobody can have a typical American standard of living without relying on credit while relying totally on wages alone; even the middle-class drones that all of you hold in such high regard.

Posted by: zzz | September 30, 2008 at 06:55 PM

A common complaint, but we've heard it all before I'm afraid. Have you ever seen how the poor in this country spend? If not, take a walk through the 'hood. Not exactly lots of scrimping and saving going on. But there are plenty of expensive sneakers, Blue Toofs, bling and rims. And why can't blacks and hispanics start their own banks and loan to each other? Why must they rely on YT for loans or the taxpayer? Of course if illegals weren't depressing wages blacks could earn at those jobs which provided a decent living. But they have to show up for work which is a problem for them.

[Ray Midge]

"I didn't mean to imply that non-Asian minorities are morally responsible for the crisis. After all, it's not their fault they are born with bad genes. The moral responsibility is with liberal elites who refuse to acknowledge the genetic problem and insist against all evidence that everyone is born with exactly the same cognitive attributes."

Unless, of course, there is a genetic basis for the cognitive pain liberal elites' experience confronted with evidence of a genetic basis for the non-random dispersal of cognitive attributes.

Or you can recognize and accept your moral emotions even when you feel disgust with others for actions that their genetics left them with limtied "choice" over. After all, genetics created those moral emotions in you as well. Don't lead a life distrusting your own moral emotions. They're there in you for a reason.

[CN]

Asian men be careful, the only reason they are willing to tolerate you is because they covet your women.
--------------------------------
But there are plenty of expensive sneakers, Blue Toofs, bling and rims.

Yes this keeps the consumer based economy going. If blacks weren't spending money you would be crying about that.

And why can't blacks and hispanics start their own banks and loan to each other?

Look up Harbour bank for one

Why must they rely on YT for loans or the taxpayer?
Don't blacks pay taxes?

[Beefheart]

"THANK YOU, NAMs, can I have another?"
(Brutus)

Brutus, I think its incorrect to blame the NAMs for the financial meltdown. NAMs don't control the congresses, not do they occupy the executive branch, media, academia, or Hollywood.

This crisis is the fault of the EJE (Euro/Jewish elite) who run this country. The liberal EJEs screeched about NAMs not owning houses. They attacked the American masses with accusations of racism for not wanting to raise their children in majority NAM areas. After prepping the "battlefield," they started their attack on financial institutions for expecting NAMs to have the same credit ratings as the non-NAM masses. The liberal EJE's intimidated the banks to lend to NAMS.

But it doesn't stop with liberal EJE's. Conservative EJE's made no attempts at stopping this activity. Steve Sailor recently wrote an article for Vdare showing Karl Rove's involvement in this process.(1) President Bush has bragged many times about increasing NAM home ownership to "record levels."

So the blame sits squarely on the EJEs. The NAMS in many cases signed contracts they couldn't even read, meanwhile the EJE's were pretending that they were "spreading equality."

You wouldn't blame a child for shooting himself if his parents gave him a loaded pistol to play with; would you?

(1) http://www.vdare.com/sailer/080928_rove.htm

[Chase Perry]

This whole fiasco is hilarious.

Obviously lenders should never have lowered standards, however to say that so-called "NAM's" are the SOLE reason for the fallout is intellectually dishonest. This country's financial stability has been based on hallucinated wealth since the 70's and has given numerous examples through the decades since that it is only one calamity away from failure.

Yes, the negro and mestizo played a part in many of the subprime losses (apparently no other race partook in that market and defaulted) but do not discount the fact that the caucasoid's greed (over valued mortgages, convoluted Wall St. pyramid schemes, etc.) essentially just made the last two years the proverbial straw that broke the camel's back.

[Chase Perry]

"After all, it's not their fault they are born with bad genes"

-Half Sigma

IQ trumps everything it appears...never mind the whole genetically dominant vs. genetically recessive rubbish.

[Peter]

Mass delusion ("house prices are going to rise forever and ever!") knows no ethnic bounds.

[Jun]

"After all, it's not their fault they are born with bad genes."

*Bad* genes. Although I know what you mean (in this financial context that you're talking about), it's not really correct to refer to whatever genes that are contributing to these peoples' low IQs as bad, is it?

I mean, exactly how many billions of people around the world have IQs below 100? And how many populations of people have average IQs of below 100?

These are obviously not *bad* genes evolutionarily speaking. They seem to be doing pretty damn good.

[tommy]

Lots of point-and-sputter from the left here, not many topical replies to the principal accusation: successful efforts were made by the left (along with the Latino-loving Bush administration) to loosen standards of creditworthiness to get more minority buyers into homes while scumbags like Barney Frank ran defense for a mismanaged Freddie and Fannie.

Frank ought to have his fat, lisping head hanging on a spike by now. Instead, the average leftist's response to the housing disaster sounds like something Tim Robbin's character in Team America might say:

Let me explain to you how this works. You see, the corporations finance Team America. And then Team America goes out and the corporations sit there in their, uh in their corporation buildings and, and and see that's, they're all corporationy, and they make money.

[tommy]

"Mass delusion ("house prices are going to rise forever and ever!") knows no ethnic bounds."

Unfortunately, mass foreclosures do know ethnic guidelines, if not bounds.

[tommy]

"IQ trumps everything it appears...never mind the whole genetically dominant vs. genetically recessive rubbish."

Never mind the comments of a commentator who apparently thinks the dominance and recessiveness of heritable traits has something to do with the adaptivity of such traits.

[moto]

To put the blame only on liberals for this is somewhat unfair. The wall street crowd, which is presumably at least fiscally conservative, didn't complain much about the low interest rates and lack of transparency that allowed the housing bubble to swell. Everybody was making money hand over fist. The problem is the government in the markets. Unfortunately, that is not just a liberal obsession anymore.

[tommy]

"Yes, it is quite obvious that the $1,000 trillion+ of unregulated derivatives is the fault of pinkos, proles, and dark people. They were also the ones who forced the alpha investment bankers upper-middles(the people who we should all aspire to be) to leverage their capital 30-40x."

Unfortunately, to a degree, it really is the fault of the pinkos. I bet most of these investment bankers are as delusional about the realities of race as are most other Americans. We can thank you pinkos for making honest thinking and open discussion about that topic a taboo in good society.

[tommy]

"This is ridiculous. If those loans were priced correctly by the lenders when they were sold off to other companies, this wouldn't be an issue. High interest rates compensate for higher-risk loans. It was the pretending that they were worth more than they are (which they were able to do due to lack of oversight and regulation) that caused the crisis."

Higher initial interest rates would have helped. I think a more important factor than low interest rates was waiving down payments. Being able to make a down payment demonstrates an ability to responsibly manage money. Many of the people who got subprimes do not assess their risk realistically. I'm not certain that higher interest rates that were anything short of astronomical would have deterred many of these borrowers from exercising poor judgment. After all, it was higher interest rates, after low initial teaser rates, that killed many of these buyers. That's why banks used to simply deny loans to these folks entirely: at some point, balancing interest rates against risk just becomes impractical and pointless because the interest demanded becomes a substantial cause of failure to pay in itself.

[tommy]

"Yes, the negro and mestizo played a part in many of the subprime losses (apparently no other race partook in that market and defaulted) but do not discount the fact that the caucasoid's greed"

Caucasoid greed is nothing new, but to give one economist's example: when gas prices fall at the pump today, it isn't because executives at Exxon are any less greedy today than they were yesterday. Greed is a constant, but liberals treat it like it's an occasional herpes flare-up.

What is new are misguided efforts of racial flat-earthers to increase home ownership among the "negro and mestizo" that reduced standards of creditworthiness for home buyers of all races.

[zzz]

"Have you ever seen how the poor in this country spend?"

Have you seen how the middle-class in this country spend?

"If not, take a walk through the 'hood. Not exactly lots of scrimping and saving going on."

If not, take a walk through the suburbs. Lots of rampant consumerism going on.

"But there are plenty of expensive sneakers, Blue Toofs, bling and rims."

Brand new cars for their 16 yr olds, college educations, travel baseball leagues, and abercrombie and fitch.

The middle-class standard of living is literally built on a house of [credit] cards. What stands between us and the living standards of the 1920s is mountain of credit card debt and mortgage loans.

"Of course if illegals weren't depressing wages blacks could earn at those jobs which provided a decent living."

What planet are you living on? Who's letting the illegals? It's both parties and their allies in the industries that heavily rely on low wage immigrant labor.

You think it's the NAMs who are allowing illegals to enter.

I completely agree with you by the way in that immigrants (legal and illegal) are depressing wages.

"But they have to show up for work which is a problem for them."

All of that boasted "middle class standard of living" is based on having and keeping a good job. If you lose it, for any reason, you are screwed.

If somebody can't hold down a job or refuses to work. Well, you'll get no sympathy from me.

Sure, you can always get a marginal shit-job (McDonald's is always hiring...and so is Wal-Mart). But you'll lose that nice apartment and probably your car as well...in fact, it's hard to predict just what you'll end up with. You can file for personal bankruptcy or, like many people, just "walk away" from all the bills.

Most damaging of all, you lose your self-respect...in the conservative's world, we are incessantly bombarded with the message that "you are responsible for what happens to you".

So if you experience "downward mobility", that means land in the bottom rung of society; for any reason at all, you have the powerful impulse to blame yourself.

[Turambar]

""Have you ever seen how the poor in this country spend?"

Have you seen how the middle-class in this country spend?"

As the expression goes, there are no bad foods, just bad diets. There is nothing wrong with a lottery ticket, but there is something wrong with 100 lottery tickets. There is nothing wrong with an SUV, but there may be something wrong with leasing new SUV's every 2 years and having granite counter tops.

[Bruno Brazil]

I think americans would be shocked if they only had what they could afford.

If the US was a developing country, there would be mass bank failures, because nobody can live forever beyond your means and a day of reckoning would come to borrowers and banks.

Start imagining how would life be without credit, you might start living it.

1- Live with your parents until marriage. But it does not mean mooching, because you are turning a percentage of your salary to mom and she needs it. It´s not worth leaving home, because it is too expensive to pay yours and help in your mom´s rent.

2- Lots of old cars. You live with mamma, you can drive her 10-yr old car.

3-Lots of motorcycles and scooters or going in an overcrowded bus.
Ditch that Buick.

4-Fewer than 40%¨going to college. Most colleges in the developing world have no research and are taught by adjuncts, but they are pretty cheap. No debt for college, because interest rates are too high for it.

5-Living in big cities and not suburbia.

6-pre-paid phones.

7-Movies only once a month.

8-Furniture forever.

9- 20 inch TVs

10- interstate travel in buses

Reminds a lot of the life at Spain or the middle classes in top developiong countries, like Russia or Brazil

[mikeca]

Ok. Let's blame the stupidity of all those Wall Street big shots on poor minorities. You know capitalism must be a very week system if a few poor people are able to cause it to collapse.

If you know anything about the sub-prime crisis, you would know that Fannie and Freddie were not allowed to make sub-prime loans. The sub-prime lenders were unregulated private companies. Fannie and Freddie lost market share to the unregulated sub-prime lenders. In response Fannie and Freddie did start pushing alt-a loans, which have a higher default rate than their regular loans, but the housing bubble and collapse was caused by private, unregulated companies, many of which have already gone out of business.

The root cause of the sub-prime crisis is the structural changes in the home loan market. Loans are now approved by companies/banks that immediately turn around and sell them. They no longer have to worry if the borrower can pay the loan back, they only need to worry if they can make the paper work look good enough that someone will buy the loan and they can collect their fee. The natural forces of the market lead them to lower their standards to capture more of the home loan market. Fannie and Freddie as private companies were forced to compete in this market and got dragged down too, but regulation on Fannie and Freddie prevented them from going as low as the private companies did.

How come all those high-g people on Wall Street that set up this system did not see this coming? You have to be really stupid to blame this on poor people.

[Underachiever]

-Chase Perry
Check out http://en.wikipedia.org/wiki/Fatal_familial_insomnia if you think that the dominant form of a gene is always good.
Also, high IQ genes are not necessarily good from an evolutionary standpoint because high IQ does not increase the amount of children people have.
Despite this fact, the usefulness of high IQ is obvious here: http://www.iq-tests.eu/iq-test-Practical-validity-800.html
and high iq societies are more free and have higher standards of living.

[tommy]

"Have you seen how the middle-class in this country spend?"

Have you seen how the middle-class can better afford to spend? Have you seen how middle-class families endure tough times rather than relying on government assistance by not spending like the lower-class spends?

[david stone]

Thanks for censoring my last comment:

Here's an academic rebuttal to your argument:
http://bigpicture.typepad.com/comments/2008/10/misunderstandin.html#more