The cause of the crisis

Capitalism and free markets are prone to bubbles, and a great deal more prone to bubbles when speculators can expect that the government will print as much money as needed to keep the bubble going, but bubbles do not in themselves lead to massive financial defaults, because normally lenders only lend to people who are in a position to repay, even if the bubble pops.

If one reads what purport to be analyzes of the crisis, they usually use windy evasive language such as “financial conditions deteriorated” – which tells us nothing about what was happening except that it is something that cannot be spoken, for fear of getting in trouble.

“Financial conditions deteriorated” in that people were not making payments on their loans, but if one was to say such a thing, this would immediately imply the question:  Which people are not making payments on their loans? And that is a question that no one dares ask, for fear of the answer.

The answer, of course, as everyone knows, but no one dares say, is that members of protected minorities, the beneficiaries of government mandated affirmative action lending, are not making payments on their loans.

Foreclosures in Palo Alto west of the freeway (white and some chinese, chinese being an unprotected minority):
One foreclosure at the time I post.

Foreclosures in Palo Alto east of the freeway (black and hispanic, all protected minority):
ninety eight foreclosures at the time I post.

Foreclosures in Gilroy (wholly hispanic, all protected minority)
two hundred and sixty three foreclosures at the time I post.

If no money down loans had been available to white people with no income, no job or assets, there would have been a lot more defaults in Palo Alto west of the freeway.

The distribution of foreclosures by suburb implies that ninety nine percent of the defaulters are blacks and Hispanics, the beneficiaries of affirmative action lending.

All house purchase loans are governed by affirmative action, for since 1999 CRA requires that race must be reported on all house purchase loans, and regulators are required to take the racial distribution all loans into account when making all regulatory decisions – which implies that if a banker does not make enough loans to members of protected minorities he will be punished, but to preserve deniability, nominally punished for something completely unrelated to race.

The financial crisis is wholly caused by affirmative action lending enforced by HUD and CRA.

Therefore, if the same standards had been applied to people in Palo Alto West of the freeway, as in Palo Alto east of the freeway, if CRA and HUD had not imposed racist lending policies in favor of protected minorities, there would be no financial crisis, therefore no need for financial bailouts.

The defaulters are not normal middle class people like you and me. Most of the people that I saw buying houses in Sunnyvale in 2006 were no hablos English, and I could tell in two heartbeats at twenty paces that there was no way in hell they were going to make the payments – I conjectured that they were functioning as straw men for a purchaser more literate than themselves, and perhaps of a race less eligible for a loan with no money down, no credit record, and no evidence of income or assets.  In Malaysia they call these “Ali Baba loans” when a member of the favored religion (Islam) fronts for a member of a disfavored religion.