How many CRA loans, how much affirmative action payout?

From 2000 to 2007, blacks and hispanics received six hundred and thirteen billion dollars more in home purchase mortgages than they would have received had they received the same proportion of the money that they received in 1999 – a figure that strikingly resembles the total cost of the bailout.

In 1999, people warned that CRA loans, affirmative action loans, racial quota loans, began to endanger the financial system

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 …

…These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, …

… “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.”

1977 was the start of turning the finance industry into a political slush fund, and with each regulatory  intervention, the amount of money at risk increased  exponentially

How many CRA loans, affirmative actions loans, racial quota loans, were there?

Fortunately the data for new house loans by race is available, and from this data we can calculate that CRA loans, affirmative action loans, racial quota loans, for new house purchases, in the period 2000 to 2007 were at least  six hundred and thirteen billion dollars, which is pretty close to the total US bailout cost.

613 billion dollars.

So this was an affirmative action financial crisis, and we are for the most part bailing out financial institutions that were forced to lend to unqualified borrowers by race, and perhaps also bailing out the culture of corruption that results from rating mortgage securities AAA that were generated in the course of signing up people to vote democrat with a bottle of cheap whiskey and a million dollar mortgage – because rating them differently would be racist, much as Princeton was corrupted because when it graduated Obama’s wife, fearing that it would have been racist had it failed to pass her thesis merely because it was a barely literate rant against racism.  We are required to pretend Obama’s wife is educated, and we are required to pretend that these borrowers are credit worthy.  It corrupts the universities, and it corrupts the financiers.

There was a massive increase in the value of loans to black and hispanic borrowers.  To the extent that these loans grew much faster than loans to white people, this most likely represents affirmative action.  This is a conservative estimate, since affirmative action lending has been enforced by the Community Reinvestment Act (CRA) since 1977.  What was new in 1999 was not affirmative action lending, it was affirmative aciton lending on a scale that threatened the financial system.

In 1999, mortgages to black and hispanic new house borrowers were 10.4% of mortgages to white new house borrowers.

In 2006, mortgages to black and hispanic new house borrowers were 36.5% of mortgages to white new house borrowers.

I calculate what new home mortgages would have been had new home mortgages to black and hispanics remained 10.4% of new home mortgages to whites.

The excess, the difference between hypothetical mortgages and actual mortgages, is a conservative estimate of CRA loans, affirmative action loans, racial quota loans.

In this table, the first column is new housing loans to whites, the second column is new housing loans to blacks and hispanics. Estimated CRA loans are the difference between the actual and hypothetical loans, and at the bottom I total numbers.

The numbers for new house mortgages in billions of dollars come the government racial quota monitoring website.  The number for affirmative action loans is my estimate, calculated as new house mortgages to blacks and hispanics minus 10.4% of white new house mortgages

The numbers for new house mortgages in billions of dollars come the government racial quota monitoring website.  The value for affirmative action loans is my estimate, calculated as new house mortgages to
blacks and hispanics minus 10.4% of white new house mortgages

Home Purchase Mortgages in Billions of dollars

Year Black and
White estimated
1999 37.60 359.90 0.00
2000 43.72 364.54 5.63
2001 51.18 381.41 11.33
2002 89.44 469.03 40.44
2003 128.40 537.96 72.20
2004 135.26 547.41 78.07
2005 236.06 757.33 156.94
2006 247.55 678.20 176.70
2007 129.53 547.41 72.34
Total 1098.75 4643.20 613.65

Unfortunately, no racial breakdown on default rate is available, but the Hispanics I saw buying houses in Sunnyvale in 2005 and 2006, looking at them from twenty paces, you could tell in two heartbeats that the chances of them making payments was very poor indeed.

Implicit government guarantees produce a vast river of easy credit to the too-big-to-fail beneficiary of that guarantee, and inevitably politicians are tempted to direct that river to political voting blocks – sometimes political voting blocks that are unlikely to repay the money.

It is a fundamental moral hazard problem in government regulation and intervention, which cannot be regulated away.  Instead of regulating, the beneficiaries of these guarantees must be shrunk – regulated to become small enough to fail, instead of regulated to benevolently hand out money to the politically favored.  Instead of sending that mighty river of money in the direction of desirable voting blocks, politicians must shrink it – which, like dieting, is hard for them to do.

The financial crisis in America was one of affirmative action and the community reinvestment act, of Black and Hispanic deadbeats robbing honest hardworking whites, but thinking of it in those terms of the particular voting blocks is not useful, will not get us to a financial system that moves savings from honest thrifty savers to honest hard working investors who can put the money to profitable use.  Such thinking, thinking in terms of voting blocks, will at best merely change the skin color of the deadbeats robbing the honest folk.  The financial crisis in the rest of the world had different beneficiaries with diverse skin colors, but the common factor was political favor sending funds to political voting blocks, rather than to people able to put the money to profitable use.  It is more useful to think in terms of moral hazard – that politicians cannot regulate, for they have perverse and dangerous incentives, and therefore corrupt financiers.

That politicians dispatched our money to cat eating wetbacks should enrage us, but we should be enraged at the politicians, rather than at migrants looking for work who have difficulty affording meat from a butcher, migrants who are prohibited from honest work by those politicians, and then offered welfare and a million dollar mortgage no money down by the same politicians.  The politicians corrupted Hispanics and financiers alike.

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5 Responses to “How many CRA loans, how much affirmative action payout?”

  1. How many cra loans how much affirmative action payout.. Keen 🙂

  2. How many cra loans how much affirmative action payout.. Ho-o-o-o-t 🙂

  3. Corey says:

    It is the case that according to traditional, orthodox economics government should not guarantee mortgages, people should not use their homes as investments and, large property owners should not dictate political decisions.(Economics in one lesson by Henry Hazlitt. see Chp. 6 sec. 2 in particular. Also Adam Smith.) All three of these principles/beliefs were violated by our government wholly or near wholly. The government then bought the mortgages from banks to encourage them to make them, set no cap for national liability of any kind and affirmative actionized a very great part of the home loan mortgage market. The affirmative actionizing was in response (Clinton’s 1999 executive order to Fannie Mae was the supposed resolution I take it)to the kind of litigation President Obama , who sat on ACORN’s board, directed at Citibank when he sued them. His administration is now breathing down the back of the nation’s banking community to get them to make even more loans during this financial/debt crisis. The only real disagreement between the two political parties in Washington about all this was the part about the affirmative actionizing of the loans in which case the Democrats were on the side of affirmative action. President Bush and Mc Cain spoke out against this and were basically told to shut up by the Dimmycrats. We then go and elect President the fella who sued the banks on behalf of ACORN. Do I have this right? Also about what portion of the 50 percent of GDP that went up in smoke and was added to the national debt was made up of these affirmative action loans? Could you recommend a country to immigrate to when all this comes to bear its evil fruit as well?

    • jim says:

      It is apparent that the vast majority of the loans that went poof are affirmative action loans: We cannot get a breakdown of defaults by race, but we can get a breakdown by suburb, and looking at suburbs where I know the racial ratios, the number of defaults is proportional to the number of non asian minorities in that suburb.

      The whole world is pretty screwed. The country that is most soundly run economically is Singapore, but it is no libertarian paradise. The US will probably be one of the last of the social democracies to fall. Just as the US keeps the race breakdown of the defaults secret, France keeps the number of young males that are Muslim secret.

      Singapore, Estonia, and Switzerland are fairly well run.

      • Corey says:

        Thanks for the reply Jim! The Dimmycrats will no doubt try to emphasize what some banks told our government about the security of the housing market(whose responsibility is it to secure the public’s interest?) but the losses lie where they do. No government involvement in the loan market no crisis. No affirmative action lending no crisis. I would love someone to publish a laundry list of all the members of congress who voted with Clinton in 1999 to affirmative actionize the loan market. By the way I am a Euro american convert to Islam and you are quite right about France I believe. If you have an open ended welfare state with guaranteed no matter what unemplyment compensation then why wash dishes for only 20 euros more than you would get doing nothing at all?

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