A few political thoughts

Addendum: This is plenty to show that there's nothing to Sailer's theory about the cause of the financial crisis.

*****

It seems to me that if the pressure to have politicians with extremely clean records continues, we're more likely to get younger politicians-- they haven't had as much time to do anything wrong. Good thing, bad thing, a thing, or wrong theory?

******

I've never seen orderly, prudent people-- those who "played by the rules"-- so angry, and justifiably so. Could they form a separate political force, and if so, what would it look like?

Is it a bad thing to teach people that playing by the rules is all they need? It seems to me that this can lead to ignoring context because just paying attention to the rules is supposed to be enough.

******

A more standard question: if the American system applies strong pressure to have two parties, and one of the parties is in as deep trouble as the Republicans, what do you think will happen?

******

A while ago, I heard about a theory that the housing mortgage crisis was the result of a requirement to make too many loans to poor and/or minority borrowers. This seemed so obviously wrong-headed-- a great many of the loans were made to people who were neither poor nor minority-- that I didn't need to bother to read any of the details.

A friend sent me this recently, and it doesn't seem impossible that a requirement was put through that any bank which wanted to acquire another bank had to meet standards for making loans to poor and/or minority borrowers, with side effects including that the growing banks were eventually making bad loans, and since the big banks were making bad loans, they made bad lending practices look respectable.

Unfortunately, my google fu doesn't seem to be up to finding the refutations to Sailer's theory that I glanced at when they first came out.

I don't know whether loans that met those requirements were so common as to actually make a big difference, nor does it explain why poor and/or minority borrowers were steered into unrepayable mortgages when in some cases, they qualified for better terms that they could have repaid. Perhaps the false ratings which simply made larger loans look better when they were resold are enough to explain that.

In any case, it looks to me as though there was prejudice involved in that no one-- not government or the press or the charities or the banks-- was keeping track of whether those loans made any sense. Or at least, there doesn't seem to have been even an effort to make it public, and I do keep an eye out for predictions that got ignored. It's possible that such predictions have been ignored so deeply that even now, they aren't getting publicity.

Here's a larger view from This American Life.

It argues that the money looking for places to be invested doubled in less than the past decade, and when Greenspan lowered the rates on Treasury bonds so much that they were no longer attractive, it occurred to someone that mortgages could be combined into investments. At first good mortgages were used, but there was so much demand that when all the potentially good mortgages were sold, worse and worse mortgages were created.

The adjustable rates for the loans seem like a way to con poor people into taking loans they couldn't afford, but that's consistent with the banks using loans to poor people as a way to make the banks look good. And, of course, no one was expecting housing prices to go down.

It's conceivable that both theories are true-- the loans to poor people led to bad banking practices, and that's why there was a home mortgage crisis rather than some other sort of bubble (though eventually there were CDOs) or general inflation.

A few political thoughts

Addendum: This is plenty to show that there's nothing to Sailer's theory about the cause of the financial crisis.

*****

It seems to me that if the pressure to have politicians with extremely clean records continues, we're more likely to get younger politicians-- they haven't had as much time to do anything wrong. Good thing, bad thing, a thing, or wrong theory?

******

I've never seen orderly, prudent people-- those who "played by the rules"-- so angry, and justifiably so. Could they form a separate political force, and if so, what would it look like?

Is it a bad thing to teach people that playing by the rules is all they need? It seems to me that this can lead to ignoring context because just paying attention to the rules is supposed to be enough.

******

A more standard question: if the American system applies strong pressure to have two parties, and one of the parties is in as deep trouble as the Republicans, what do you think will happen?

******

A while ago, I heard about a theory that the housing mortgage crisis was the result of a requirement to make too many loans to poor and/or minority borrowers. This seemed so obviously wrong-headed-- a great many of the loans were made to people who were neither poor nor minority-- that I didn't need to bother to read any of the details.

A friend sent me this recently, and it doesn't seem impossible that a requirement was put through that any bank which wanted to acquire another bank had to meet standards for making loans to poor and/or minority borrowers, with side effects including that the growing banks were eventually making bad loans, and since the big banks were making bad loans, they made bad lending practices look respectable.

Unfortunately, my google fu doesn't seem to be up to finding the refutations to Sailer's theory that I glanced at when they first came out.

I don't know whether loans that met those requirements were so common as to actually make a big difference, nor does it explain why poor and/or minority borrowers were steered into unrepayable mortgages when in some cases, they qualified for better terms that they could have repaid. Perhaps the false ratings which simply made larger loans look better when they were resold are enough to explain that.

In any case, it looks to me as though there was prejudice involved in that no one-- not government or the press or the charities or the banks-- was keeping track of whether those loans made any sense. Or at least, there doesn't seem to have been even an effort to make it public, and I do keep an eye out for predictions that got ignored. It's possible that such predictions have been ignored so deeply that even now, they aren't getting publicity.

Here's a larger view from This American Life.

It argues that the money looking for places to be invested doubled in less than the past decade, and when Greenspan lowered the rates on Treasury bonds so much that they were no longer attractive, it occurred to someone that mortgages could be combined into investments. At first good mortgages were used, but there was so much demand that when all the potentially good mortgages were sold, worse and worse mortgages were created.

The adjustable rates for the loans seem like a way to con poor people into taking loans they couldn't afford, but that's consistent with the banks using loans to poor people as a way to make the banks look good. And, of course, no one was expecting housing prices to go down.

It's conceivable that both theories are true-- the loans to poor people led to bad banking practices, and that's why there was a home mortgage crisis rather than some other sort of bubble (though eventually there were CDOs) or general inflation.