Redlining = Building Modern Plantations

Redlining refers to, well, taking a map, and color-coding it to denote areas of *chronic loan delinquency*.

That's an old map of Philadelphia above; an image that's well-known and oft-invoked among the institutionalized race-hustling community.

You can read more about it on Wikipedia - though I warn you, that entry has obviously been written by the aforementioned hustlers!

The practice of red-lining actually has its historical roots in the Federal Government!

Private organizations created maps designed to meet the requirements of the Federal Housing Administration's underwriting manual. The lenders had to consider FHA standards if they wanted to receive FHA insurance for their loans. FHA appraisal manuals instructed banks to steer clear of areas with "inharmonious racial groups"...

And here's where the Big Government apologists start spinning:

Urban planning historians theorize that the maps were used by private and public entities for years afterwards to deny loans to people in black communities.[8] However, recent research has indicated that the HOLC [read "the Feds"] did not redline in its own lending activities, and that the racist language reflected the bias of the private sector and experts hired to conduct the appraisals.

Hah! All racist redlining was a consequence of the PRIVATE SECTOR (even though the Fed codified it)!

Obviously, that *edit* came from unblinking statists; religious Morons who think Big Government infallible.

Redlining has helped preserve segregated living patterns for blacks and whites in the United States, because discrimination motivated by prejudice is often contingent on the racial composition of neighborhoods where the loan is sought and the race of the applicant.

Discrimination....motivated by prejudice....contingent on racial composition....and race of applicant...

Say what???

That gibberish sounds like something out of a Harvard freshman *sensitivity seminar*, or something.

Many believe policies of credit card companies such as American Express that reduce credit lines of individuals that make purchases at retailers frequented by so-called "high-risk" customers to be akin to redlining.

Deny credit based on research of where and what one shops for?

That was probably VERY CLEVER at its inception - though it sounds like Amex was finally busted, er shaken down by class action attorneys.

Policies related to redlining and urban decay can also act as a form of environmental racism, which in turn have an impact on public health. Urban minority communities may face environmental racism in the form of parks that are smaller, less accessible and of poorer quality than those in more affluent or white areas in some cities. This may have an indirect impact on health, since young people have fewer places to play and adults have fewer opportunities for exercise.

Environmental racism?

A grief-monger's double-delight!

The term "liquorlining" is sometimes used to describe the practice of encouraging very high density of liquor stores and other alcohol outlets in low income and/or minority communities relative to surrounding areas, implicitly by design. This is believed by some to cause a neighborhood to go downhill in terms of crime and quality of life. However, unlike redlining, this is usually not illegal.

Liquor-lining? Are they serious?

What's next - toilet-seat-lining?



Nope. Though something just as humorously predictable:

Although open redlining was made illegal in the 70s through community reinvestment legislation, the practice continued in less overt ways....and many allege that the redlining target group has shifted from African Americans to the LGBT community.

Invert-lining!!!

I definitely got side-tracked writing this post. I just wanted to say one small thing about so-called red-lining but was distracted by the inanity of that Wikipedia link.

I was thinking about these hoods where lenders are forced to burn money and how Big Government's failures are routinely used as arguments for yet more Big Government.

I submit that the very existence of *public housing* just about ensures that the surrounding *red* areas won't ever gentrify. The projects essentially institutionalize neighborhoods as slums - and therefore anyone who doesn't sell their product there becomes a de facto target for the *shakedown industry*.

See also:

The Lack of Good Sushi in the Slums is "Discriminatory"

And visit Zombietime for a mind-blowing look at the role of subprime shakedown artists in today's financial cluster-[bleep]. That post I linked in one of my smackdowns of Barry Ritholtz.

A Fight Where No One Got Hurt

First, visit - Itching For A Fight.

After screaming far and wide that he'd put $100,000 of his money against anyone in a narrowly-defined, subjective debate Barry Ritholtz has gone silent on the issue of Big Government's role in the *housing mess* - via subprime lending mandates and whatnot.

First, I jabbed him in the comments of his own blog.

And then afterwards I swung again on Steve Sailor's blog. Steve whacked him good as well and enjoyed the bonus of a direct response from Barry. Click here for the entire post with comments. Below I'm just going to copy Barry's feckless response to Steve, along with my *helpful* rejoinder:

Ritholtz said...

I think we are approaching this from two entirely different universes.

I am looking for cause and effect; I want to see data that supports or detracts from the proposition at hand. PROVE TO ME that X caused Y (including actual statistics).

Your proposal of Diversity causing the housing crash reads to me as a soft philosophical argument that is by definition unprovable -- and undisprovable.

At the very least, I see no proof in your writings. They are cogent arguments that leap from A to B to C -- but they lack the rigorous statistical evidence to demonstrate something convincingly to people who insist on hard data.

In my belief system, I use as few assumptions as possible. I try to avoid things that are unquantifiable. Statistical back testing is just on[sic] way to do that.

But even softer analyses such as war-gaming and alternative scenarios have to have some reasonable basis for proceeding. It cant be all assumptions, beliefs guesses
and hunches.

7/02/2009

My trenchant, and still unanswered, reply:

CaptiousNut said...

Barry Ritholtz deprecates counterarguments as *soft* and *philosophical*. He wants comers to statistically:

PROVE that X caused Y.

But what precisely are X and Y? And how exactly could one PROVE causation?

Here’s his own wording:

"Is the CRA significantly to blame for the credit crisis?

Let’s go term by term:

CRA = narrow, but treatable in debate.

significantly = vague and hardly mathematically defined.

blame = loaded, subjective term.

credit crisis = also amorphous and thoroughly subjective.

So Barry has the gall(or gap?) to stand before us and demand *actual statistics* to address his own fuzzier-than-a-Sicilian-backside question!!!

Mr. Ritholtz,

Economics is a SOCIAL SCIENCE. Macroeconomics is a JUNK SCIENCE. And political science is a misnomer!

(BTW, what exactly is the statistical, scientific basis of the term *wingnuttery* in your analyses? Mentally trapped in *binary*, huh? It must be a real intellectually superior universe that you hail from.)

It’s bad enough that you frame a subjective question and then rule out *cogent*, subjective responses...

But what kills me is you stickling for *causation* when you are a freakin’ quantitative trader. You so-called quants traffic in CORRELATIONS all day long and bet gobs of, well, other people’s money thereupon. So not only is your universe an unfit perspective for this debate – it’s unclear whether or not you understand your own livelihood.

Now, if Barry Ritholtz insists that the massive subsidization of our nation’s least creditworthy homebuyers had an insignificant effect on the overall housing market...

Then I guess Barry believes the subsidization of underperformers (via quotas and race-based financial aid) hasn’t significantly affected national academic standards or costs.

And I guess he believes that the subsidization of our most unhealthy (i.e. the aged via Medicare) hasn’t significantly affected healthcare in this country in terms of cost, efficiency, research direction, etc,...either.

Alright I was just kidding. I know he probably doesn’t have well-developed positions on those subjects - nor should he.

He really ought to limit himself to his wheelhouse – stockpicking; which he seems quite good at. Listening to him on wider socio-economic issues is like bearing a 22 year old Hollywood starlet on geopolitics.

The empirical fact is that the CORRELATION between Big Government and severe economic distortion remains the same as it's been throughout history - 100%.

7/07/2009

Now this is an important debate, an important battle to be fought.

It's just too bad that the prospects for real dialogue on this were, like most things Ritholtz,....all bluster.

I would have really liked to see someone like the sharp-tongued Don Luskin, neither a friend of mine nor Barry's, step up for a slugfest.

Alas, Luskin has been a housing bull the whole way down. This subject has proven beyond his ken.

"What about Mr. Mortgage?", I thought. And I even emailed him to ask but was *underwhelmed* to say the least. He replied:

Ritholtz is right -- the investment banks made this...then the commercials followed the IBs because their earnings were suffering. The cra was a small part.

Say what?

I respectfully pointed out to Mr. M. that:

PS - by the way, barry doesn't heap blame upon the investment banks as you say. he has them ranked 13-17 as culprits. you might want to revisit what he wrote because it's clear to me that he doesn't see the connections between the low end, middle end, and high end of the housing markets.

and i forgot that you at one time were contributing to his blog....

Anyway, enough on this subject for the moment.

But I do want y'all to check out a very well-written and informative piece on *political lending* by Zombietime - that photo-journalist from California.

Seriously, take the minute to click on it. What's chilling beyond the blog post's substance is how easily a non-financial layman can grasp the reality on housing better than pros in the business and on Wall Street.

Big Government As "Victim"

With a reeling economy, it's hunting season for statists. They'll be ramping up the agitprop against sundry timely bogeymen: "volatile financial markets", Wall Street, predatory lending, the "credit crisis"...

So Boston's Turnpike Authority is facing rising debt payments. Was it Wall Street that forced it to borrow short for its long term infinite obligations?



Note this article from the Boston Globe used the subtitle - "Authority a victim of recent turmoil in finance markets"

That's right, while glibly mentioning a recent toll hike (January) and adding more tolls to "create a fairer toll system", Noah Bierman's article paints Big Government - not taxpayers and commuting wage slaves - as the victim.

"At the same meeting, the authority's board discussed a preliminary report on how to create a fairer toll system, which could mean adding tolls in some areas that are currently free, including the Interstate 90 extension. Cohen said the board remains in a "research phase" on the toll issue, which will take four to six months as the Patrick administration looks for cost savings elsewhere.

Cohen has been cautious on the issue, trying to steer clear of controversy since an aide public discussed adding tolls to Interstate 93.

But the report from Cohen's staff suggested Turnpike Authority officials might look at reinstating some Western Turnpike tolls for cars, as well as a Newton toll that ended in 1996. The report also said that the state could add an optional toll lane on I-93 that would let solo drivers use the carpool lane if they pay a fee. That idea, often called a HOT lane, has been raised in the past and has gained support nationally as US Secretary of Transportation Mary Peters has encouraged states to try it.

What would this discussion be without a mention of "carpooling" - as if that has anything to do with the incompetence of politicians whose solution to every problem of their own creation is a tax hike, a scapegoat, and these days, a rhetorical bone thrown to eco-pagans?



Y'all need to believe me when I tell you that Big Government is the biggest subprime borrower of them all.

Think about it. What exactly is the difference between your irresponsible neighbor with the adjustable or interest-only mortgage and the pols who build schools, roads, and tunnels with short term financing?

They both presume growing income and they both presume indefinite benign borrowing environments.

And "resets" and "recessions" are going to kill them both.

If only Big Government were going to die - instead us taxpayers will bear the agony - and it will morph into Bigger Government.

For example, my landlord is aboard the express train to bankruptcy. On the $600,000 (at best) house I rent from him, I just found out that his current $5,200 mortgage payment is scheduled to reset at over $7,500 per month. It's been tragic to hear him cheer every Federal Funds rate cut since September as they've been powerless to stave off his inevitable foreclosure. To his credit, he's refrained from blaming bogeymen for his plight - though he hasn't admitted to any personal culpability either.

Furthermore, just as homeowners are facing the double pain of a weaker job market and commodity inflation, municipalities are, and will continue to be, ravaged not only by sky-rocketing financing costs, but also withering tax revenues. Receipts of every stripe are spiraling down: property taxes, sales taxes, income taxes, corporate taxes, etc.

In fact, outside of commodity prices, it seems everything these days is dropping.

Note the very last thing to expect is an uptick in political competence.

Poor Big Government...just an innocent bystander caught in the crossfire of Wall Street greed.