Steve Sailer authors a provocative piece at TakiMag arguing that affirmative-action lending fueled the mortgage crisis. "About half of all mortgages for blacks and Hispanics are subprime, versus roughly one-sixth for whites," Sailer points out. "Not surprisingly, the biggest home price collapses have occurred in heavily Hispanic cities such as Las Vegas, Miami, Phoenix, and Los Angeles." Sailer accuses George W. Bush of fostering the mentality that paved the way for the crisis by attempting to realize his "ownership society" rhetoric via a policy of zero-down, federally-backed mortgages to first-time home buyers. Antedating the Bush administration, federal lawsuits that targeted lenders who didn't reach diversity goals imposed from without encouraged the reckless lending. Unfortunately, the government contributed to the problem that they will now attempt to "solve," creating ever new problems, which, one supposes, will be followed by ever new "solutions."

Just one more thing Obamessiah will have to "change" when he gets "elected."

Sailer is wrong. The cause is more simple: greed. Lenders like Countrywide originated loans, but they didn't keep them for very long. They sold them on the secondary market. So Countrywide was not on the hook at all if the borrower defaulted. Because they weren't on the hook, it was easy to approve loans that shouldn't have been approved. What's more, the fees that Countrywide collected off sub-prime loans were higher than loans to good borrowers (similar to higher rates for auto insurance to bad drivers), so there was a finaincial incentive to make more bad loans.

I think the point is that government, in the name of equitable lending for all no matter what their financial health, forced the hand of mortg@ge companies to drop the standards and conditions for their loans and to accept customers who were greater risks. And this was done as some form of politically correct agenda using some existing concepts as a guide.

asdf,

From what I've been told by several people who work in the primary and secondary lending business, that's not the point at all. The thing that 'forced' lenders to make bad loans was money, plain and simple. They were able to make more money in fees off bad lenders, and there were no consequences since they didn't keep the loans. A politically correct agenda had nothing to do with it.

"They were able to make more money in fees off bad lenders..." That should be "loans

Well of course lenders will go along with the agenda for the money. I think that’s what they’re in it for and certainly saw profit, especially as they knew those instruments would be sold and re-sold and the buck would stop somewhere other than with them. But there was some arm twisting to go along with a plan to allow for risky lending targeting certain groups who shouldn’t have gotten loans. Did you read the article brought up via the link? This is not current news.

Ralph,

Sailer's article doesn't preclude your explanation, it argues that a "not negligible" part of the blame is on government affirmative action schemes. He doesn't attribute the crash to government interference entirely. However, they easily go together as real estate developers (for one) have an obvious interest in promoting such government interference and racial regulations which directly lead to their own increased profits. Also, some of the biggest lenders involved in the crash are govt run lenders like Fannie Mae and Mac which are completely controlled and directed by pc and racial spoils ideology.

It isn't a comprehensive explanation but is pretty clearly a factor.

The Washington Post had a piece a week or two ago that is relevant. As I read it, the authors asserted that the regulators deliberately approved of the new system where these risky loans were packaged with the good loans to sell to others (who were not given sufficient information to know about the new practice). And that the regulators (or quasi-public corporations involved)did this to keep the loan rate to minorities (which was one of their "performance measures") high.

So Ralph and asdf and Sailer are all right. The affirmative action pressure worked directly on the lenders but, more importantly, govenment policies put financial pressure on them to make, package and resell these loans, thus getting the benefits and passing off the risks to the unsuspecting.

All I gots to say is that we been disenfranchisemented.

Lenders like Countrywide are on the hook. They sometimes have to buy back loans that they sell when they go bad. Even when they don't have to, that doesn't change the fact that this crisis was a result of the creation of speculative loan-backed instruments that were foisted on investors with the promise of high yield returns. They needed high yields as an alternative to the stock market after the market crashed in 2001. Lenders bundled bad loans and pretended that the risk was adequately spread out to cushion any losses. The truth is, probably 75% of all 100% financed home borrowers were unable to repay from day one. In short, virtually all of those loans were bad. Let the investors take the hit for their greed. They were bamboozled, but that's no reason for the American taxpayer to take them off the hook by refinancing out these homebuyers and repaying these investors, thus putting John Q Public's butt on the block.