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Author Topic: Is subprime fiasco race based
Frustrated Mess
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posted 14 December 2007 07:00 AM      Profile for Frustrated Mess   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Home Mortgage Disclosure Act data from 2005 reveal that more than 50 percent of black and 46 percent of Latino home buyers received subprime loans, compared to 17 percent of white borrowers. Many of the minority borrowers could have qualified for more favorable terms.

http://polizeros.com/2007/03/30/subprime-racism/

quote:
U.S. Senator Barack Obama (D-IL) today sent the following letter to FTC Commissioner Deborah Platt Majoras, calling on her to investigate the marketing practices of subprime lenders and the brokers of subprime loans to determine whether minority borrowers have been victims of discrimination. According to recent studies, and an editorial in the New York Times, there is increasing evidence that black and Hispanic borrowers were more likely to be steered to high-cost subprime loans than other borrowers. Hundreds of thousands of African American families – many of whom probably should have been eligible for lower cost prime loans instead of riskier subprime loans – could potentially lose their homes in the coming years.

http://obama.senate.gov/press/071018-obama_demands_i/


From: doom without the gloom | Registered: Feb 2005  |  IP: Logged
Pride for Red Dolores
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posted 14 December 2007 01:16 PM      Profile for Pride for Red Dolores     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Ironically, cheap money policies that have trapped some many minority people in houses they can’t pay for were enacted as a response to complaints that to great a percentage of minorites were unable to qualify for traditional loans. Here in El Paso, Texas, which is 80 percent Hispanic, a survey revealed that, while more Hispanics than Anglos received mortgage loans, a larger percentage of Hispanics than Anglos failed to qualify for loans. Although the lenders were able to demonstrate the lending process was not racially biased (the loans applications were processed and approved by computers that had no way of identifying the race of applicants, civic leaders coerced the banking community into “leveling the playing field” by granting loans to a set percentage of Hispanics who otherwise would not have qualified.

The executives of mortgage companies that sprang up overnight to take advantage of the easy money policies could care less about race; they were motivated by generating short-term revenue growth and big bonuses. At the low end of the non-traditional mortgage pyramid, minorities represent an outside percentage of the loosers, at the high end or overly optimist buyers who bought mansions assuming they would raidly increase in value. In the middile are people of all races who are going to spend the rest of their lives paying high monthly payments on homes that are decreasing in value and


This is all an effect of racism that has created poverty- these minorities were the victims of racism and slavery, so they have not "caught up" with white people economically due to lack of acess top resources- educational, cash,employ etc.This is why the minorities are the majority of subprime borrowers. It's like Katrina- the majority of the victims were black because of slavery in the past and its lingering effects.


From: Montreal | Registered: Feb 2006  |  IP: Logged
Stockholm
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posted 14 December 2007 01:25 PM      Profile for Stockholm     Send New Private Message      Edit/Delete Post  Reply With Quote 
Why not change the title of the thread to "Is sub-prime fiasco class based". I'll bet that people with sub-prime mortgages tend to have much lower incomes than people with non-subprime mortgages.
From: Toronto | Registered: Sep 2002  |  IP: Logged
Frustrated Mess
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posted 14 December 2007 01:33 PM      Profile for Frustrated Mess   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
As usual, Stockholm, you sink to the bottom. So are you saying all poor people are black and Latino or all black and Latino people are poor?

If you were actually capable of reading and listening with any degree of comprehension, you would find that what is being said (and why am I wasting me energy?) is that blacks and Latinos were disproportionately steered to subprimes and, surprise, surprise, foreclosures are disproportionately higher in black and Latino neighbourhoods.

Duh.


From: doom without the gloom | Registered: Feb 2005  |  IP: Logged
Stockholm
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posted 14 December 2007 01:46 PM      Profile for Stockholm     Send New Private Message      Edit/Delete Post  Reply With Quote 
We all know that the average household incomes of Blacks and Hispanics in the US tend to be lower. This is not news. Therefore, given that typically only poorer people would ever apply for sub-prime mortgages in the first place - of course groups that tend to be poorer will have a better chance of being affected. I'll bet that people with sub-prime mortgages are also disproportionately single mothers and have less education.

Just because vodka and water makes you drunk, and scotch and water makes you drunk and rye and water makes you drunk does NOT mean that water makes you drunk!


From: Toronto | Registered: Sep 2002  |  IP: Logged
Sven
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posted 14 December 2007 01:55 PM      Profile for Sven     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Frustrated Mess:
Duh.

On what basis do you conclude that sub-prime mortgages were targeted at POC and not at poor people generally (a disproportionate percentage of whom are POC)?


From: Eleutherophobics of the World...Unite!!!!! | Registered: Jul 2005  |  IP: Logged
Tommy_Paine
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posted 14 December 2007 02:30 PM      Profile for Tommy_Paine     Send New Private Message      Edit/Delete Post  Reply With Quote 
I think it's racist.

There was a similar report on CNN some time ago, and while it didn't point to racism directly, it did point out that many people who were hooked into this were taken advantage of because they didn't have a good understanding of english, let alone english legal jargon. Which explains why Hispanics might have been targeted by these flim flam artists.

Similarly, when the state ensures ignorance by underfunding education, and does so more often than not along racial lines, and then sends these lambs out into the deregulated market place for slaughter, it's indeed systemic racism.

But there is a classist element to this also. I don't think the two can necessarily be always separated.


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Stockholm
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posted 14 December 2007 02:36 PM      Profile for Stockholm     Send New Private Message      Edit/Delete Post  Reply With Quote 
I wonder how many recent immigrants from Hong Kong in the "investor" category bought a sub-prime mortgage. I'll bet there are way more poor white folk in the Appalachians facing foreclosures than people think.
From: Toronto | Registered: Sep 2002  |  IP: Logged
Agent 204
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posted 14 December 2007 02:44 PM      Profile for Agent 204   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
I'd say it's primarily class-based (not exclusively so, as Tommy_Paine's point about people's understanding of English illustrates), but a big chunk of what class people end up in is race-based.

So, by transitive property, it's significantly race-based as well.


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Sven
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posted 14 December 2007 02:56 PM      Profile for Sven     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Agent 204:
I'd say it's primarily class-based (not exclusively so, as Tommy_Paine's point about people's understanding of English illustrates), but a big chunk of what class people end up in is race-based.

So, by transitive property, it's significantly race-based as well.


That's probably the more accurate picture. Well stated.


From: Eleutherophobics of the World...Unite!!!!! | Registered: Jul 2005  |  IP: Logged
Frustrated Mess
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posted 14 December 2007 03:52 PM      Profile for Frustrated Mess   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
On what basis do you conclude that sub-prime mortgages were targeted at POC and not at poor people generally

Did you read the opening quote, Sven? Here it is again:

quote:
Home Mortgage Disclosure Act data from 2005 reveal that more than 50 percent of black and 46 percent of Latino home buyers received subprime loans, compared to 17 percent of white borrowers. Many of the minority borrowers could have qualified for more favorable terms.

And from Obama:

quote:
According to recent studies, and an editorial in the New York Times, there is increasing evidence that black and Hispanic borrowers were more likely to be steered to high-cost subprime loans than other borrowers.

It is classist only in the sense that in the US blacks and hispanics form a sub-class. But the fact there is a black and hispanic sub-class points to a systemic and inherent racism.

Much of the dialog about the subprime crisis argues that it represents a massive transfer of wealth from poor Americans to wealthy Americans. Seldom does that dialog point out that it represents a massive transfer of wealth from black and hispanic Americans to white Americans.

Stockholm, one day you will make sense. Until then, we wait with


From: doom without the gloom | Registered: Feb 2005  |  IP: Logged
Frustrated Mess
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posted 14 December 2007 03:56 PM      Profile for Frustrated Mess   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 

This map shows black areas in Cleveland and you can also select areas of subprime mortgages and foreclosures. It tells quite the tale.

http://news.bbc.co.uk/1/hi/business/7073131.stm

[ 14 December 2007: Message edited by: Frustrated Mess ]


From: doom without the gloom | Registered: Feb 2005  |  IP: Logged
jester
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posted 14 December 2007 06:23 PM      Profile for jester        Edit/Delete Post  Reply With Quote 
Hmmm. An interesting statistic about ARMs (adjstable rate mortgages) both prime and sub-prime, is that over 50% of these mortgages are tied to the LIBOR (London inter-bank rate).

The spread between the LIBOR and the US Fed rate is 60 basis points, meaning that no matter what sort of finagling the fed does,anyone with an ARM mortgage is hooped.

One of the problems with sub-prime mortgages is that credit was extended to anyone with two feet and a heartbeat regardless of ability to pay.

Since Afro-Americans and Hispanic-Americans are more likely to be financially disadvantaged, they are most likely over represented in statistics.

The sub-prime fiasco is not race based,but opportunity based. Anyone,regardless of race,is equally represented as a opportunity to be screwed over by the sub-prime predators.


From: Against stupidity, the Gods themselves contend in vain | Registered: Jan 2006  |  IP: Logged
jester
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posted 14 December 2007 06:51 PM      Profile for jester        Edit/Delete Post  Reply With Quote 
quote:
Much of the dialog about the subprime crisis argues that it represents a massive transfer of wealth from poor Americans to wealthy Americans. Seldom does that dialog point out that it represents a massive transfer of wealth from black and hispanic Americans to white Americans.


FM, you don't know your ass from your elbow on this subject.

While there will be a massive transfer of wealth,most of the individuals who qualified for sub-prime ARMs had no equity investment and it will be the pension plans and fund investors who will pay the price for investing in the bundled collateralised debt obligations that were spun off as derivatives.

A more accurate analogy would be a massive transfer of unrealised capital gains from the victims of predatory financing to a never-never land of collateralised debt obligations. As evidenced by the decision of an Ohio court,the foreclosers cannot establish clear title to the houses foreclosed upon and the legal wrangling will take many years.

Regardless of race, it will be the individual pension plan contributor or investor who will see his return erode. The plans and funds will,of course,sue but only the lawyers will see any return on investment.

It will be the individual recipient of Social Security or Medicare who will see his SS and/or medicare benefits disappear by 2020.

It will be the individual American who will see their standard of living erode. Source food costs have risen 26% in the US this year as a result of higher oil costs and the effect of government subsidy of ethanol-based fuels among many variables.

An analysis of the US inflation rate and the Consumer spending index provides a very interesting observation.

The Inflation rate is advertised as the "core" rate which basically means that if you don't need food or energy,(heat or transportation), inflation is very managable. .

The Consumer price index,that measures consumer confidence, on the other hand , includes food and energy so that when the talking heads spin about how the US consumer is still confident in the economy as evidenced by their increased spending, they neglect to mention that the consumer is spending more on food and energy,not discretionary spending.

Another spin is housing sales. The talking heads are crowing over increased sales of existing housing but what they fail to mention is that when a house goes into foreclosure or when a builder surrenders an unsold house to their creditor,the statistics consider that surrender a "sale". So, the spinners attempt to spin increased surrenders to foreclosure as a positive sales statistic.

We can next analyse the employment numbers but, you get the picture.

Finance has no conscience and doesn't care what race the victim is. The good reverend is busily spinning his own version as usual.


From: Against stupidity, the Gods themselves contend in vain | Registered: Jan 2006  |  IP: Logged
Sven
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posted 14 December 2007 08:24 PM      Profile for Sven     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Frustrated Mess:
It is classist only in the sense that in the US blacks and hispanics form a sub-class. But the fact there is a black and hispanic sub-class points to a systemic and inherent racism.

What about Asian-Americans, FM?


From: Eleutherophobics of the World...Unite!!!!! | Registered: Jul 2005  |  IP: Logged
Pride for Red Dolores
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posted 14 December 2007 08:42 PM      Profile for Pride for Red Dolores     Send New Private Message      Edit/Delete Post  Reply With Quote 
What some of us are saying is not that blacks and Hispanics were targeted, but that because of a long history of social inequality due to systemic racism, they are more likely to be poor, and thus have a need to seek out these types of loans. The article also said that there were people who could have qualified for better deals but were steered by people to sub prime ones- this may be common sense racism on the part of the lenders, thinking that black or Hispanic automatically = poor, so again they would only have access to subprime mortgages. None of it is necessarily conscious. Capitalism/Finance isn't disembodied- it's a system created by people interacting.
From: Montreal | Registered: Feb 2006  |  IP: Logged
Sven
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posted 14 December 2007 08:45 PM      Profile for Sven     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Pride for Red Dolores:
What some of us are saying is not that blacks and Hispanics were targeted, but that because of a long history of social inequality due to systemic racism, they are more likely to be poor, and thus have a need to seek out these types of loans. The article also said that there were people who could have qualified for better deals but were steered by people to sub prime ones- this may be common sense racism on the part of the lenders, thinking that black or Hispanic automatically = poor, so again they would only have access to subprime mortgages. None of it is necessarily conscious. Capitalism/Finance isn't disembodied- it's a system created by people interacting.

If it's a conscious (or unconscious) targeting of POC, does anyone have statistics regarding Asia-Canadians (or Asian-Americans), viz., sub-prime mortgages?


From: Eleutherophobics of the World...Unite!!!!! | Registered: Jul 2005  |  IP: Logged
mary123
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posted 14 December 2007 09:24 PM      Profile for mary123     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
African American and Latino homeowners have been particularly hard hit. A recent study by ACORN found that upper-income African Americans and Latinos were more than three times as likely as upper-income whites to have a high-cost loan.

A more up to date interview of this topic with Amy Goodman of Democracy Now


From: ~~Canada - still God's greatest creation on the face of the earth~~ | Registered: Jun 2004  |  IP: Logged
Frustrated Mess
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posted 17 December 2007 11:59 AM      Profile for Frustrated Mess   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:

FM, you don't know your ass from your elbow on this subject.

And apparently, jester, you don't know your ass from the hole in your mouth.

quote:

While there will be a massive transfer of wealth ...


So there will be a massive transfer in wealth. Excellent.

quote:

most of the individuals who qualified for sub-prime ARMs had no equity investment


Yes, because they have been paying interest for nothing. That may not be equity, but it represents value and the loss of the roof over their heads.

quote:

... it will be the pension plans and fund investors who will pay the price for investing in the bundled collateralised debt obligations that were spun off as derivatives.


And who are those people?

As for the rest, blah, blah, blah ...


From: doom without the gloom | Registered: Feb 2005  |  IP: Logged
Frustrated Mess
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posted 17 December 2007 12:00 PM      Profile for Frustrated Mess   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
More on this ...

quote:
You have to dig to find out that, for instance, more African Americans borrowers making upwards of $100,000 a year were given subprime mortgages than were whites making under $40,000. African Americans communities were targeted for subprime and adjustable rate mortgages as a very lucrative new market for loan sharks.

So far it looks, smells, and walks like a duck.

From: doom without the gloom | Registered: Feb 2005  |  IP: Logged
arborman
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posted 17 December 2007 12:07 PM      Profile for arborman     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Sven:

If it's a conscious (or unconscious) targeting of POC, does anyone have statistics regarding Asia-Canadians (or Asian-Americans), viz., sub-prime mortgages?


I don't think we really have sub-prime mortgages up here.


From: I'm a solipsist - isn't everyone? | Registered: Aug 2003  |  IP: Logged
jester
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posted 17 December 2007 04:47 PM      Profile for jester        Edit/Delete Post  Reply With Quote 
quote:
And apparently, jester, you don't know your ass from the hole in your mouth.

As usual FM you're busy talking when you should be listening. Try taking your time to craft an insult so it doesn't sound so dorky.

quote:
And who are those people?
As for the rest, blah, blah, blah ...

Those people are the individuals who invest in pensions either through their company or personal plans-401Ks in the US,I assume.

Yes,yes. blah,blah,blah. That is what all the lemmings chant as they head on over the cliff.


From: Against stupidity, the Gods themselves contend in vain | Registered: Jan 2006  |  IP: Logged
Frustrated Mess
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posted 17 December 2007 04:49 PM      Profile for Frustrated Mess   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
So really you have nothing at all to add. Gee. I'm shocked. Oh, wait, let me leave you with something you do understand.
From: doom without the gloom | Registered: Feb 2005  |  IP: Logged
Michelle
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posted 17 December 2007 04:53 PM      Profile for Michelle   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Okay everyone, why does it have to go like this? I don't think anyone has offered any offensive opinions in this thread, so I don't get what all the personal attacks are about. Let's continue the discussion without them.
From: I've got a fever, and the only prescription is more cowbell. | Registered: May 2001  |  IP: Logged
Frustrated Mess
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posted 17 December 2007 04:55 PM      Profile for Frustrated Mess   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Michelle said:
quote:
I don't think anyone has offered any offensive opinions in this thread, so I don't get what all the personal attacks are about.

Jester said:

quote:
FM, you don't know your ass from your elbow on this subject.

I said:

quote:
jester, you don't know your ass from the hole in your mouth.

And then I proved it. Oh, for Jester:


From: doom without the gloom | Registered: Feb 2005  |  IP: Logged
Michelle
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posted 17 December 2007 04:59 PM      Profile for Michelle   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Yes, and before that you were personally attacking other people who disagreed with you. And jester personally attacked you. Then you personally attacked him.

Which is why I didn't say, "Hey, Frustrated Mess ONLY, please stop that!" I asked everyone to stop. Once a thread starts with that kind of tone, it's difficult to stop, I realize, but maybe we could try? I don't think any of you would talk to each other like that to each other's faces.


From: I've got a fever, and the only prescription is more cowbell. | Registered: May 2001  |  IP: Logged
jester
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posted 17 December 2007 05:20 PM      Profile for jester        Edit/Delete Post  Reply With Quote 
I communicate more effectively in the idiom of my peer group. I was disagreeing with FM and qualified my remark with "on this subject".

I dont think there were personal attacks on either side. FM likes to get a little passionate in his posting and I am ever eager to offer encouragement.

If we were face to face,we wouldn't be limited to observing the proprieties but could also indulge in body language, arm waving and wild gestures.


From: Against stupidity, the Gods themselves contend in vain | Registered: Jan 2006  |  IP: Logged
Frustrated Mess
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posted 17 December 2007 05:23 PM      Profile for Frustrated Mess   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
and jumping up and down.
From: doom without the gloom | Registered: Feb 2005  |  IP: Logged
Michelle
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posted 17 December 2007 05:30 PM      Profile for Michelle   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Well, sorry for interrupting then. If you're happy, I'm happy. But it might make it kind of intimidating to more mild-mannered types who might want to join the discussion.
From: I've got a fever, and the only prescription is more cowbell. | Registered: May 2001  |  IP: Logged
1234567
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posted 17 December 2007 06:59 PM      Profile for 1234567     Send New Private Message      Edit/Delete Post  Reply With Quote 
Continue, please...it's somewhat amusing to watch a perfectly interesting and important thread digress to a pissing match between two regular posters. Forget the topic, who cares if the colour of your skin depends on how much interest you pay on your loan.
From: speak up, even if your voice shakes | Registered: Aug 2007  |  IP: Logged
Sven
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posted 17 December 2007 08:31 PM      Profile for Sven     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Michelle:
I don't think any of you would talk to each other like that to each other's faces.

Isn't that the truth? [Not specifically about FM and jester--I'm just talking generally about board etiquette]. We (including me) should try to keep that it mind more often!


From: Eleutherophobics of the World...Unite!!!!! | Registered: Jul 2005  |  IP: Logged
Sven
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posted 17 December 2007 08:37 PM      Profile for Sven     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Frustrated Mess:
You have to dig to find out that, for instance, more African Americans borrowers making upwards of $100,000 a year were given subprime mortgages than were whites making under $40,000. African Americans communities were targeted for subprime and adjustable rate mortgages as a very lucrative new market for loan sharks.[/URL]

I'd like to see the author's source for that claim. It may be completely accurate but I'd like to see her source data.


From: Eleutherophobics of the World...Unite!!!!! | Registered: Jul 2005  |  IP: Logged
AfroHealer
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posted 19 December 2007 06:19 AM      Profile for AfroHealer   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Sven:

I'd like to see the author's source for that claim. It may be completely accurate but I'd like to see her source data.


There is so much data to prove the systemic racism in the financial industry its overwhelming. If you want to find out more, go talk to or go read some data prepared by and for Hisponaic and African communities.

This is more or less common knowledge amongst the middle to upper middle class Hispanic and African communities.

What next, you will be asking for proof that the criminal injustice system is racist?

I;m assuming that you mean well, so i will suggest you go do your homework. And you will be unpleasantly surprised to find these things to be true.


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Frustrated Mess
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posted 19 December 2007 07:55 AM      Profile for Frustrated Mess   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
How about CNN? From 2002:

quote:
The study, entitled "Risk or Race?," revealed that lower-income African-Americans receive 2.4 times as many subprime loans as lower-income whites, while upper-income African-Americans receive 3 times as many subprime loans as do whites with comparable incomes.

At the same time, lower-income Hispanics receive 1.4 times as many subprime loans as do lower-income whites, while upper-income Hispanics receive 2.2 times as many.



Subprime lenders target minorities

Note that is the CNN headline, not mine.

And there is this:

quote:
Targeted groups are Seniors, Disabled, and Minorities
A. In Los Angeles, 253 of the 1,641 census tracts had high levels of subprime lending
activity. Of the 253 tracts, 241 had a high concentration of African Americans or
Hispanics. (Curbing Predatory Home Mortgage Lending, p.48.)
B. Among borrowers living in upper-income white neighborhoods, only 6% turned to
subprime lenders for refinancing in 1998. In contrast, 39% of borrowers living in upperincome
black neighborhoods refinanced in the subprime market. The growth of mortgage
foreclosures paralleled the growth in subprime lending. (Curbing Predatory Home
Mortgage Lending, p. 48 and p.49.)
C. Subprime lending in Los Angeles is more likely in low-income minority
neighborhoods with a high proportion of elderly residents. (Subprime Lending and
Neighborhood Conditions in the City of Los Angeles, p.10.)
D. The rise of subprime lending is not a response from low-income homeowners; the
percentage of minority and elderly populations are more significant factors. (Subprime
Lending and Neighborhood Conditions in the City of Los Angeles, p. 13.)
E. A growing body of research shows that elderly, minority residents of low income
neighborhoods are most at-risk of predatory lending practices. (Subprime Lending and
Neighborhood Conditions in the City of Los Angeles p. 22.)
F. Subprime mortgage lenders target the poor, the elderly and people of color for higher
loan costs. (CRC Letter, 2/20/02 p. 2.)
G. The growth in subprime refinance loans from 1993-2000 was greater among African
American and Latino homeowners than it was among whites. (Separate and Unequal:
Predatory Lending in America.)
H. Predatory lenders have been able to get away with abusive practices, in part, because
they exploit the history of racial discrimination and redlining by traditional financial
institutions. (Separate and Unequal: Predatory Lending in America, p. 30.)

It goes on ...

quote:
Across the nation, black and Hispanic borrowers helped fuel a multiyear housing boom, accounting for 49% of the increase in homeowners from 1995 to 2005, says Harvard's Joint Center for Housing Studies. But Hispanics and African-Americans were far more likely to leverage the American dream with subprime loans — higher-cost products for buyers with impaired credit — that are now going bad at an alarming rate.

About 46% of Hispanics and 55% of blacks who took out purchase mortgages in 2005 got higher-cost loans, compared with about 17% of whites and Asians, according to Federal Reserve data. The South Side of Chicago, with a large concentration of minority borrowers, has a high concentration of subprime loans and the state's highest foreclosure rate. In Boston, where defaults are rising — especially in minority areas — 73% of high-income black buyers (those making $92,000 to $152,000) and 70% of high-income Hispanics had subprime loans in 2005, compared with 17% of whites.

Concentrated foreclosures in minority neighborhoods could reduce property values. The NAACP, National Council of La Raza and other civil rights groups recently called for a six-month moratorium on subprime home foreclosures. Problems are centered on subprime borrowers who took out adjustable-rate mortgages, which are now resetting at higher rates, increasing the monthly payments.

One of those swept up in the subprime frenzy was Paris Alston, 35, of Boston, who moved from a homeless shelter to a steady job and hard-to-get federally subsidized housing. Last year, after seeing an ad targeted at first-time buyers, she jumped into a subprime adjustable-rate loan that started with a 9.95% interest rate that could jump to as much as 15.25%.



Minorities hit hard by rising costs of subprime loans

Apparently also targeted were women and the elderly. The usual target of fraud artists. And when all is said and done, the subprime fiasco is a massive fraud perpetuated on primarily African Americans and Latinos with the complicit support of the entire US financial and political elite.


From: doom without the gloom | Registered: Feb 2005  |  IP: Logged
Frustrated Mess
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posted 09 January 2008 06:44 AM      Profile for Frustrated Mess   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Baltimore’s mayor and City Council are suing Wells Fargo Bank, contending that its lending practices discriminated against black borrowers and led to a wave of foreclosures that has reduced city tax revenues and increased its costs ...

... In the suit, Mayor Sheila Dixon joined with the City Council to ask that the court bar Wells Fargo from charging higher fees to black borrowers. Many of these borrowers paid more under the bank’s subprime lending program, designed for less creditworthy consumers, and are more likely to default on their loans.

In 2006, Wells Fargo made high-cost loans, with an interest rate at least three percentage points above a federal benchmark, to 65 percent of its black customers in Baltimore and to only 15 percent of its white customers in the area, according to the lawsuit. Similarly, refinancings to black borrowers were more likely to be higher cost than to white ones and to carry prepayment penalties.




New York Times

From: doom without the gloom | Registered: Feb 2005  |  IP: Logged
jester
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posted 09 January 2008 07:00 AM      Profile for jester        Edit/Delete Post  Reply With Quote 
I read that yesterday. It appears your assumptions are correct,FM.

I don't believe that financial predatory practices are more targeted toward African-Americans,just more effective because they are more vulnerable. The financial industry will prey on anyone they can and the more vulnerable,the better.


From: Against stupidity, the Gods themselves contend in vain | Registered: Jan 2006  |  IP: Logged
brookmere
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posted 09 January 2008 09:57 AM      Profile for brookmere     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Stockholm:
Why not change the title of the thread to "Is sub-prime fiasco class based". I'll bet that people with sub-prime mortgages tend to have much lower incomes than people with non-subprime mortgages.

People with sub-prime mortgages are supposed to have lower incomes, or more precisely lower credit ratings, than other borrowers. That's what makes the loans riskier and the rates higher.

The problem, as other posters have pointed out, is that it appears that borrowers were given sub-prime loans not by reason of economic qualifications, but race. That's racial discrimination. There is nothing wrong with any lender matching loan terms to the ability to repay of the borrower, no matter what their race or social class.

Jester is correct. Many subprime borrowers put not even a dollar of their own money down before moving in - not even what would be required of a renter. Of course they were making mortgage payments for some time at least, but they did have a place to live for that time. Really they were just renting the houses from the lenders.

And I'll also point out that the reason all those foreclosures are taking place is that the house prices were inflated by easy lending, that is they were far higher than justified by what the property could be rented for, and those prices are now collapsing back to economically justified values.

That's what economists call a bubble, and that's the real problem clear across the US, from the inner city to the upscale suburbs. It's not a "subprime" crisis, it's a national housing bubble.

Housing Bubble Blog (US)

[ 09 January 2008: Message edited by: brookmere ]


From: BC (sort of) | Registered: Jun 2005  |  IP: Logged
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posted 09 January 2008 10:03 AM      Profile for Frustrated Mess   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
It appears your assumptions are correct,FM.

I see that so rarely I just wanted to highlight it.

From: doom without the gloom | Registered: Feb 2005  |  IP: Logged
Fidel
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posted 10 January 2008 10:27 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
I think this is bigger than discrimination, which no doubt is still a problem. I think it's an issue with the world money system that's been developing for a long time.

quote:
In year-end interviews for example, Prime Minister Stephen Harper warns of a "challenging year" ahead, partly on the basis of the compliance cost to industry of federal climate-change regulations, but especially his low expectations of the U.S. economy.

The latter are shared by former U.S. Federal Reserve boss Alan Greenspan who predicted last week "that something will happen which is unexpected, which will knock us down." He went on to say the world's central banks have lost control of upward-trending interest rates -- hardly good news for the U.S. economy, as America waits for the second act in its sub-prime crisis to open.


They are at the point where people aren't buying, and sellers still refuse to realize that they have to drop prices in order to sell. Shares of the largest strip mall company in the U.S. have plummeted something like 90%. Bernanke recently mentioned lowering interest rates in order to encourage borrowing and stimulate the US economy.

Subprime Debacle Traps Even Very Credit-Worthy December

quote:
Many borrowers whose credit scores might have qualified them for conventional loans say they were pushed into risky subprime loans. They say lenders or brokers aggressively marketed the loans, offering easier and faster approvals — and downplaying or hiding the onerous price paid over the long haul in higher interest rates or stricter repayment terms

[ 11 January 2008: Message edited by: Fidel ]


From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged
Doug
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posted 19 January 2008 11:43 PM      Profile for Doug   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
What's happening in Cleveland is just crazy. Not only are foreclosed homes being abandoned, but they're being stripped of anything the least bit valuable like doors, windows, wiring and metal pipe.

There was also a lot of just plain fraud involved in getting people to sign up for those loans.

quote:
Mortgage brokers and lenders became aggressive salesmen, even going door to door in some neighbourhoods. In Cleveland, brokers would show up at houses with lists of purported building-code violations and coax the owners into taking out loans to fix the problems. One woman in a poor Cleveland neighbourhood ended up with a $70,000 loan after being convinced that her garage needed repair. Some brokers worked with corrupt building inspectors . . . when the inspector told a homeowner to fix a structural problem, the broker would follow, offering a loan. Later, the two would split the fee.

http://www.theglobeandmail.com/servlet/story/RTGAM.20080118.wcover19/BNStory/Front/?pageRequested=all


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brookmere
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posted 20 January 2008 03:15 AM      Profile for brookmere     Send New Private Message      Edit/Delete Post  Reply With Quote 
Which illustrates the sheer idiocy of it all. The very reason lenders foreclose houses is that they can sell the house and try to recover the money owing on the mortgage. The lenders would be better off if they just let the former owners stay in these houses free and take care of them while they were for sale.

What is the reason for this crazy state of affairs? As Jester pointed out, the loans have been securitized and parceled out to investors all over the world. There's nobody with feet on the ground to monitor the situation as it would be if a local bank held the mortgage. The job of handling payment collection and foreclosing lies with someone called a "mortgage servicer", and these are currently overwhelmed with problems and unable to cope with the situation.

And obviously, the lenders are taking a big bath. The problem is that the lenders include you and me, from the Government of the Yukon to UBC to ICBC. This garbage has been sold all over the place. It's the financial equivalent of mad cow disease.

[ 20 January 2008: Message edited by: brookmere ]


From: BC (sort of) | Registered: Jun 2005  |  IP: Logged
martin dufresne
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posted 20 January 2008 01:13 PM      Profile for martin dufresne   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
I am puzzled as to why it seems so important for some here to NOT acknowledge the race component of these unfair lending practices? Some of you have gone pretty far out of your way to silence those who pointed out this pattern, despite very convincing evidence from very credible sources. Why? What's in it for you? I am really asking. Do you feel that Whites (even if they're loan sharks) are getting a bum rap? Or that Blacks and Latinos are getting unjustifiable sympathy? If the NYTimes can acknowledge this pattern, why is it apparently this important for you not to?

[ 20 January 2008: Message edited by: martin dufresne ]


From: "Words Matter" (Mackinnon) | Registered: Dec 2005  |  IP: Logged
Fidel
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posted 20 January 2008 02:11 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
Racism in the U.S. is still systematic. As MLK Jr. once referred to them, smiling white Liberals were in favour of civil rights for all Americans on paper only. Tolerating blacks on buses and in public places and promising not to lynch them are not the same things as economic and social democracy.

As far as profiteering goes, usury and greed respect no economic boundaries or skin colour. I don't doubt that a larger percentage of these sub-prime ripoffs were pushed on po' black Americans dreaming about decent places to live.


From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged
martin dufresne
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posted 20 January 2008 02:36 PM      Profile for martin dufresne   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
usury and greed respect no skin color
Uhhh? Are you telling us you're (gasp!) color-blind, Fidel? Say it isn't so, please! Better yet, catch a refresher course from The Angry Black Woman...

From: "Words Matter" (Mackinnon) | Registered: Dec 2005  |  IP: Logged
abnormal
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posted 20 January 2008 02:42 PM      Profile for abnormal   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
There seems to be a common misconception that there is a product called a "sub-prime mortgage" that banks decided to sell to people.

Fact is a mortgage is sub-prime because it was sold to someone that didn't qualify for it under normal circumstances, not because it was a special product. That generally meant they were poor or they were trying to buy too much house or they had no down payment or some such.

Of course the justification always went along the same lines. Interest rates will go down so payments will drop in the future. The consumer will get raises so they'll be able to afford the mortgage down the road. Housing prices will go up so the consumer will be able to flip the house when it comes time to refinance. And so forth.

The question of what sort of mortgages the lenders were offering is another question. When mortgage brokers were being told they'd get a larger fee if they could convince someone to take out a mortgage at an unreasonably high interest rate it was a given that they'd push high interest rate mortgages. And if they've got access to a group of consumers that are both unsophisticated and poor the results are predictable.

The fact that the defaults are heavily skewed along racial lines is more likely to do with income distributions than race per se. If you've got a group of people that thought it was impossible to ever own a home who are suddenly being told that (i) they can have a 100% mortgage and (ii) a few years down the road they can sell the house in question at a very significant profit, there's no doubt that people will be lining up to sign on the dotted line. [Remember it's not that long ago that banks were being dumped on because they weren't advancing enough mortgages to blacks.]

As an aside, ARM's are a different question entirely. While the concept sounds simple they are very sophisticated financial instruments that should not be sold to the general public.


From: far, far away | Registered: Aug 2001  |  IP: Logged
Doug
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posted 20 January 2008 02:53 PM      Profile for Doug   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by martin dufresne:
I am puzzled as to why it seems so important for some here to NOT acknowledge the race component of these unfair lending practices?

I think people are trying not to ascribe to racism what can be ascribed to poverty - but that's just about an impossible task. People are poor for lots of reasons, but a big one, statistically right up there along with lack of education IS their race. Whether you think the subprime mortgage sellers were marketing to (and defrauding) the black community because they were poor or because they were black - you're right...it essentially amounts to the same thing.


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martin dufresne
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posted 20 January 2008 03:12 PM      Profile for martin dufresne   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
But the point was made and documented repeatedly that relatively *rich* POCs were stuck with subprime conditions.
From: "Words Matter" (Mackinnon) | Registered: Dec 2005  |  IP: Logged
jester
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posted 20 January 2008 03:21 PM      Profile for jester        Edit/Delete Post  Reply With Quote 
Individuals of poverty stricken or African American backgrounds may be more succeptible to the spiels of the lenders because they do not have the financial negotiating sophistication to drive the best deal.

Predatory lenders will certainly not discriminate against anyone because of race. They will con anyone regardless of economic circumstance or racial background. It appears to me that the disproportionate number of African Americans ARMs is due not to racial targeting but due to dishonest lending practices that gave false hope to disadvantaged individuals.

There were no consequences for the brokers,lenders,collateralisers and investment banks who were basically offering free money.

A house should not cost more than 3X an individual's gross yearly income. The payments (PIT) should not be more than 32% of gross income and the gross debt servicing of the individual,including the mortgage should not be more than 40% of yearly income.

When a broker works really hard to qualify a purchaser's mortgage to their housing dream rather than qualifying the housing dream to the mortgage, they do the purchaser no favours.


From: Against stupidity, the Gods themselves contend in vain | Registered: Jan 2006  |  IP: Logged
Fidel
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posted 20 January 2008 03:28 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by martin dufresne:
Uhhh? Are you telling us you're (gasp!) color-blind, Fidel? Say it isn't so, please! Better yet, catch a refresher course from The Angry Black Woman...

That's not what I said.

If you're trying to tell us that you've discovered racism in the U.S., then I think you're about a couple of centuries late. Racism was there. Racism is everywhere in America still, we don't have to single out the financial and banking system and suggest that racism is prevalent there only. What drives racism? What drove slavery, a scientific belief that blacks were inferior to whites? No, it was appalling greed and stupidity and ignorance.

[ 20 January 2008: Message edited by: Fidel ]


From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged
abnormal
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posted 20 January 2008 03:33 PM      Profile for abnormal   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
There were no consequences for the brokers,lenders,collateralisers and investment banks who were basically offering free money.

Only partly true. There were definitely no consequences for the brokers and, to the extent that the mortgages could be securitized and sold on there were no consequences to the original lenders. The I Banks are a different story. It depends if they ended up holding the mortgage backed paper or not.

Of course this completely ignores the question of the lawsuits that are in the making against virtually every link of the chain. How successful they'll be is anyone's guess at this stage.

quote:
A house should not cost more than 3X an individual's gross yearly income. The payments (PIT) should not be more than 32% of gross income and the gross debt servicing of the individual,including the mortgage should not be more than 40% of yearly income.

And people were getting qualified under that formula [which is quite aggressive to say the least] without considering their other debts. The results were absolutely predictable.

quote:
Predatory lenders will certainly not discriminate against anyone because of race. They will con anyone regardless of economic circumstance or racial background.

Absolutely true - the only colour that matters here is green.

quote:
It appears to me that the disproportionate number of African Americans ARMs is due not to racial targeting but due to dishonest lending practices that gave false hope to disadvantaged individuals.

Fact is that a few years ago these same individuals couldn't get any loans. Is it any wonder that they jumped at the first offer they got and didn't shop around or try to negotiate better terms.


From: far, far away | Registered: Aug 2001  |  IP: Logged
Fidel
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posted 20 January 2008 04:49 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
Edward N Jones, creator of automated subprime lending software

Apparently some lenders weren't checking to verify whether borrowers were even employed or if their incomes would cover mortgage payments once higher rates kicked in.


From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged
martin dufresne
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posted 20 January 2008 05:10 PM      Profile for martin dufresne   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Bad, bad, irresponsible Blacks/Latinos that shouldn't have even bought houses in the first place...
A quote from Tim Wise:
quote:
...white folks are incapable of blaming other whites for white racism and racist behavior. Despite all the demands by whites that blacks take “personal responsibility” for their lives, their behaviors, and the problems that often beset their communities–and especially that they stop blaming whites for their station in life–the fact is, we can’t wait to blame someone else when we, or one of ours, screws up...
(from Passing the Buck and Missing the Point)

[ 20 January 2008: Message edited by: martin dufresne ]


From: "Words Matter" (Mackinnon) | Registered: Dec 2005  |  IP: Logged
Fidel
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posted 20 January 2008 05:34 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
I'm getting ready to tell you where you can shove your insinuation and innuendo, Martin.
From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged
martin dufresne
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posted 20 January 2008 05:43 PM      Profile for martin dufresne   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
What innuendo? I am being crystal-clear. We are discussing Blacks and Latinos being grossly overcharged by lenders - and thus pushed into foreclosure - and you are saying - under the guise of blaming irresponsible lenders - that the borrowers' financial situation was the real problem. Colour me perplexed.
From: "Words Matter" (Mackinnon) | Registered: Dec 2005  |  IP: Logged
brookmere
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posted 20 January 2008 08:13 PM      Profile for brookmere     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by Fidel:

Apparently some lenders weren't checking to verify whether borrowers were even employed or if their incomes would cover mortgage payments once higher rates kicked in.


Correct, and the official name for such a loan was "stated income loan".

The unofficial name was "liar loan".

Let's get one thing straight. Many buyers knew perfectly well they could not afford the house payments. They thought that houses would keep going up 10% a year and they could sell for a big profit before the payments jumped.

Every scam requires a mark who thinks they can get something for nothing.

quote:
you are saying - under the guise of blaming irresponsible lenders - that the borrowers' financial situation was the real problem

The real problem was that the borrowers were buying houses at prices they could not afford. Period. This was true for all racial groups and all incomes. The lenders were facilitating this. But nobody was forcing these people to buy the houses.

[ 20 January 2008: Message edited by: brookmere ]


From: BC (sort of) | Registered: Jun 2005  |  IP: Logged
Fidel
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posted 20 January 2008 08:19 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
And I'm saying that racism was already present in the system. Social statistics reveal this.

And I'm also saying the deregulated financial system based on debt is broken. This latest credit bubble isn't turning to bust just because poor blacks and Latinos couldn't pay outrageous interest rates on mortgages. It's breaking down because that's what credit bubbles are designed to do. Interest rates on borrowing are always higher than growth rates of our productive economies. It doesn't take a genie to figure out this design flaw.


From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged
Fidel
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posted 20 January 2008 08:29 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by brookmere:

But nobody was forcing these people to buy the houses.

[ 20 January 2008: Message edited by: brookmere ]


What is real here? Is it a deregulated financial system that's real? Or is it an illusory housing bubble which does not fulfill real housing needs for real families?


From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged
brookmere
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posted 21 January 2008 05:53 AM      Profile for brookmere     Send New Private Message      Edit/Delete Post  Reply With Quote 
The latter is a direct result of the former, so it makes no sense to identify one or the other as the real problem.

Actually the housing bubble will, oddly enough, help a lot of people get affordable housing. So much excess housing in the US has been built in the last 5 years that not only prices but rents are going to drop almost everywhere.

The beneficiaries, of course, will be limited to those who had the wisdom not to buy during this debacle.

This is the Sound of a Bubble Bursting


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jester
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posted 21 January 2008 06:06 AM      Profile for jester        Edit/Delete Post  Reply With Quote 
quote:
Originally posted by abnormal:

Fact is that a few years ago these same individuals couldn't get any loans. Is it any wonder that they jumped at the first offer they got and didn't shop around or try to negotiate better terms.


quote:
Only partly true. There were definitely no consequences for the brokers and, to the extent that the mortgages could be securitized and sold on there were no consequences to the original lenders. The I Banks are a different story. It depends if they ended up holding the mortgage backed paper or not.


Agreed. I did not open up the consequences can of worms because it is not germaine to the topic but the fact is that foreign governments and security holders who have the clout are forcing US banks to buy back their derivatives if such a buyback clause was inserted in the original agreement.

The lawsuits are also flying. The end effect of all this is an evaporation of wealth on an unprecidented scale. it is the natural consequence of Greenspan's and now Bernanke's monetary policy that flooded the markets with liquidity rather than biting the bullet- short term pain for long term gain.

Instead,we now will have long-term pain for all to provide short-term gain for the financial elite. Everyone who has a reirement fund, pension,savings or the hope for a better standard of living will pay their share while the instigators of this fiasco and their government enablers walk.


From: Against stupidity, the Gods themselves contend in vain | Registered: Jan 2006  |  IP: Logged
Fidel
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posted 21 January 2008 01:02 PM      Profile for Fidel     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
Originally posted by brookmere:
Actually the housing bubble will, oddly enough, help a lot of people get affordable housing. So much excess housing in the US has been built in the last 5 years that not only prices but rents are going to drop almost everywhere.

With the recent downturn in the U.S. , I can't see how that will help the housing bubble driven economy.

It's true that I think some Canadians do not realize that the U.S. has had a history with New Deal socialism and social programs. The U.S. spends a great deal of money on things that have nothing to do with free markets. As Duncan Cameron pointed out recently, the city of New York has over 600, 000 affordable housing units for seven or eight million people. That's more than we have altogether in Canada for 32 million people.


From: Viva La Revolución | Registered: Apr 2004  |  IP: Logged

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