A new liberal decided to comment on my post on the subprime crisis.
As usual, so much confidence, such a feeling of superiority and such utter ignorance of basic economics and human psychology. It’s really hard to comprehend how someone that stupid could think he’s smart.
First he wrote the usual drivel about minorities getting bad loans that whites aren’t getting. (“There are lots of mortgage brokers giving subprime loans to minorities who qualify for prime loans. This is not happening to white people.”)
So I tried to explain to thim that the lending industry is not one guy, but many people. If a person qualifies for a loan, he will get that loan somewhere because a well-qualified borrower is a money-maker for the banks.
In response, he writes: “banks and especially mortgage brokers make more money by offering subprime loans.”
A little knowledge is truly a dangerous thing! He realizes that 10% is more than 7% and thinks he’s a genius. No, Pablo, you aren’t a genius. You have the intelligence of a 3 year old who knows how to count, but not much more.
10% of is course more than 7%. But if you can make a profit on a prime loan at 7% and offer someone a subprime loan of 10%, your offer will get rejected.
Why do you think businesses don’t charge 50% interest or 400% interest? Because someone else will underbid you.
Offer someone who qualifies for a 7% loan a 10% rate instead, and you’ll just lose his business. It’s that simple.
If everyone is offering blacks 10% loans, and you can offer a 7% loan while at the same time making a profit, you’ll corner the whole market. There are 40 million blacks and another 45 million Hispanics in the US. If you can dominate the market by underbidding everyone else while still making a profit, you’ll literally make billions.
And if you are just a loan officer, going to qualified minorities and offering them prime loans would also make you millions.
The self-congratulating liberal thinks he’s so brilliant because he knows that 10% is more than 7%. But he just can’t comprehend basic business operations in a competitive economy.
“Unfortunately there are communities, both black and white, that are not regularly served by banks and mortgage brokers so there is room to come in without competition and provide subprime loans to people of all races who qualify for better loans.”
I’ve previously mentioned that there are plenty of minorities who are wealthy enough to benefit from providing prime loans to qualified minorities, so now he’s backing out of his earlier statement that subprime loans were given to blacks but not whites.
But these communities are not “underserved”. Open the yellow pages which every gets and call up a few loan offers. Or use the internet (if you don’t have a computer, go to the library). Or just spend half a day walking around from bank to bank on a busy commercial street.
In fact, loan officers will actually come to your house with all the paperwork filled out just to make sure they get your business. If you qualify for a prime loan, someone will offer it to you and all the racists who refused to give you a prime loan will just fail to get your business.
Racists will learn not to be racist in the future. But this didn’t happen. Why? Because the large majority of those who didn’t get prime loans were people who didn’t qualify for them. The rest are just shiftless idiots who don’t bother to shop around when purchasing something as expensive as a mortgage. No racism here.
“My saying that there are lots of brokers who gave these bad loans is not the same as saying that all of them do, as you claimed I said. Stretching my comment about a portion of the lending industry into a broad blanket racist statement about all lenders is misleading at best.”
When someone gives you a bad offer, you can pick up the yellow pages and call someone else for a better offer. Or go on any commercial street and you’ll find a dozen banks within 5 blocks. If you can’t do that, you are a moron. If you are implying that all those banks will refuse to give you a prime loan only because you are black, then everyone must be a racist. If that’s the case, why don’t some minorities step in and take advantage of the opportunity to corner the market?
“I did not say that all subprime borrowers qualify for better loans or that even a majority did. I am just saying that there are more and more studies coming out showing that some of these borrowers qualified for significantly better loans than they were given.”
That’s nice. I also saw studies that show that some people bought clothes during a Christmas sales, while others went shopping to stores without any sale and paid more for the same exact clothes.
First of, even if these people were qualified, it doesn’t mean the banking industry was to blame. Businesses have different rates for many reasons.
Second, these studies were conducted by black racists affiliated with guys like Jesse Jackson and Al Sharpton. They will look at one or two aspects necessary for qualification and conclude that these people are qualified. But there’s much more to it: income, savings, marital status, credit history, etc.
“To say that all minority subprime borrowers were unqualified is a bit of hyperbole.”
No, it’s a fact. If they were qualified for something better, someone would offer it to them. If they didn’t bother to shop around when getting a 6-digit loan, then they should kill themselves because they are too stupid to live.
“Unfortunately, any person who does not qualify and whose house you can foreclose on and sell is a better money-maker. Going through the foreclosure process after a few years is a quicker and easier way to make money than going through a 30-year loan.”
I guess you know more than every bank officer in the history of banking institutions. If it were that easy, then why don’t the banks just give out money on the street?
There are plenty of private cooperative organizations that lend money. Why don’t you try giving your money to someone with a terrible credit score and income, and then try to get your money back via foreclosure.
First off, if there’s a 30 year mortgage, you make a profit for 30 years. If there’s a 1 year mortgage, you make a profit off interest only 1 year.
Second, if the person is paying off his debt, you are guaranteed to make money without any effort. If he stops paying, you have to pay lawyers just to recover your own money.
Why do banks try to work with people before going into foreclosure? It’s not out of the goodness of the heart. It’s because banks always lose if they go into foreclosure. They may not sell the house for as much as it was originally worth (especially in this market) and even if they do, up to half the money recovered will go to their lawyers.
“To fight “redlining”, banks were forced to not ignore entire neighborhoods but they were never forced to give loans to people who don’t qualify.”
No, they were forced to follow “disparate impact” legislation. So if blacks are worse borrowers than whites, we can’t acknowledge, we must give loans to both races and ignore people’s incomes, credit histories, percentage of the salary they’ve saved, etc.
“I know of not a single statute or law that forces banks to give loans to unqualified borrowers.”
It’s called “disparate impact”. If some qualification affects blacks more than whites, we must disregard it no matter how much sense it makes. If you fail to do the same (or more) for blacks as for whites, you’ll get sued by civil rights lawyers for hundreds of millions of dollars.
“They are merely required to not take race into account when operating their business.”
No, they actually are required to take race into account because otherwise blacks would qualify for loans at much lower rates than whites. Sort of like affirmative action under threat of law suit.
“Your last question is based on a completely unsupported statement so I’m really not sure how to respond to it. If I say that I know minorities who loan money to each other, does that refute your question or will you just say I’m wrong?”
This has been widely documented in surveys. This is so well-known that even black comedians joke about blacks being unwilling to lend to each other.
Wow, sorry, didn’t mean to get you so riled up. I again find it amusing that you don’t allow posts that “mock or attack any writers or participants personally” and then go ahead and call me stupid and say “You have the intelligence of a 3 year old who knows how to count, but not much more.”
As for your one-sided points, there is no real point to continuing the argument because neither of us are going to be convinced by the other. The only thing I do want to comment on is the part about disparate impact because I have done quite a bit of research on this. Disparate impact is a legal theory that can be used under certain statutes or laws, but definitely not all. It has been used in employment contexts most often and I believe it began with a sexism case. Traditionally it is used in Title VII cases and recently the Supreme Court adopted it for an ADEA case. It has not however been accepted for use under the FHA or ECOA which would be the two most on-point statutes used for a lending discrimination lawsuit.
I can’t wait to hear your thoughts on this.
This is guywhite’s blogsite, and if you haven’t noticed he’s very passionate about these topics. It only makes sense that if you were to come here and argue with him that he’s going to personally target you, as it is his place to vent and to find common ground with others of like mind on these injustices.
Under pressure from sentimental liberalism, American banks made so-called sub-prime loans to a huge number of people who couldn’t afford to repay them. The banks abandoned their prudent lending criteria and knowingly let people without collateral or even income borrow lots of money.
The crisis isn’t confined to the US because these junk loans were repackaged and then sold to other financial institutions around the world. So now the sub-prime loan folly is an international problem.
Why were these junk loans bought and sold so avidly? The liberals can’t be blamed for the global mess, but the greed of the banks and mortgage brokers can.
thank you
Obviously, minorities (or non-minorities for that matter) are not being forced to take out these loans. As usual, when things go bad, something has to be blamed, in this case the bankers or whatever.
As usual, liberals (I use that term imprecisely) are not happy unless they have the government come in and force people to do something. Behind the smiling facade of liberalism lies the jackboot state.
Pablo, if you feel so passionately about this sort of thing, perhaps you can go into banking and create what you consider to be more equitable loans.
To be honest, this is not something I’m very passionate about. I’ve been doing research for a legal project, stumbled across this website, and just left a 4-5 sentence post that started all this. In the instances where people got into bad loans in a fair manner, I definitely agree it’s their own fault and not the governments responsibility to get involved. At the same time, there have been many brokers who deliberately falsified information on the borrower’s loan application in order to get them a larger loan which they could not afford (and thus “earn” the broker a higher YSP). There are also many examples of brokers acquiring loans for more money than the borrowers asked for. In general there are just lots of examples of brokers acting almost illegally in how they secured loans for borrowers.
So it’s not that the government needs to come in and fix all these subprime loans; some were entered into legally and the borrower should have known better. However, there seems to be more and more evidence of brokers acting illegally to secure loans that had no reasonable chance of working out. It looks like using YSP’s and subjective, discretionary loan pricing have really hurt many people including non-borrowers who simply purchased securities including these crappy loans.
Since this is a blog about race…these shady brokers (I definitely do not want to accuse all or even a majority of brokers) have hurt people of all races. In general more minorities have been affected, but that really doesn’t change the issue.
“there have been many brokers who deliberately falsified information on the borrower’s loan application in order to get them a larger loan which they could not afford (and thus “earn” the broker a higher YSP).”
That’s probably true. There are always people trying to scam others, not just in banking but doctors who perform unnecessary tests, lawyers who bill for 3 hours for every hour they actually worked, car mechanics who bill for replacing parts they merely fixed.
But this is a different story. Let’s not bring race into this.
My issue isn’t that some bank brokers are dishonest. My issue is the claim by the Al Sharptons of the world that there’s an organized effort by “the whitey” to give 10% interest rates to blacks who deserved 7% loans and the only reason for the mark-up is the white man’s racism.
Those who commit scams should be prosecuted. But turning every issue into an example of the evil of “The White Devil” is the true racism.
I’m sick and tired of innocent whites being accused of the worst thought crime (“racism”) for which they lose jobs and reputations just because of their skin color.
Sharpton and Jesse Jackson are out to destroy the white race in order to excuse everything blacks do. And whites go to their own personal destruction quietly while begging for forgiveness for crimes they never committed.
At the same time, there have been many brokers who deliberately falsified information on the borrower’s loan application in order to get them a larger loan which they could not afford (and thus “earn” the broker a higher YSP).
This is fraud, obviously, and there is no excuse for it, regardless of race, creed or color of skin.
Guywhite, don’t get flustered. Pablo, no doubt a “minority” himself (though I doubt the Pablos ever feel like one, not the way they take over whole swathes of territory), like so much of the world today, simply assumes racial egalitarianism is correct and thus has to fit every event into the egalitarian paradigm. Debates with such people are an exercise in futility because your arguments are not actually considered arguments; they are considered “tricks.” It’s only once the paradigm of racial egalitarianism dropped that life and world around you begin to make sense.