September 8, 2009

Francis Galton's "Hereditary Genius"

I'm rereading Francis Galton's 1869 book Hereditary Genius, which argues for the heritability of ability (he wrote in 1892 that he should have named it Hereditary Ability). From a glass-half-full perspective, it's certainly impressive. The novelty of so much of the reasoning in it is extraordinary.

I read it a decade ago from a glass is half empty perspective and found it unconvincing. But, of course, Galton couldn't have been wholly convincing back in 1869: Galton had to dream up most of the conceptual tools (such as twin studies and the correlation coefficient) he needed to prove his insight, which he proceeded to do over the second half of his long and remarkably productive life.

In Hereditary Genius, Galton's basic methodology is to come up with lists of eminent people and determine how many prominent relatives they have. Galton was a great believer in the accuracy of long-term reputation.

Strikingly, he prefers to use other people's lists of eminent men that were created for other purposes so that his biases won't interfere with who makes the list. For example, among statesmen, he is aware of how far men can be propelled by inheritance, luck, and so forth, so he restricts his list to two sources: Prime Ministers (on the ground that you had to have something on the ball to make it all the way to very highest post) and a book written by one of Galton's heroes, Henry Brougham: Sketches of the Statesmen of the time of George III.

Galton cites Brougham, the brilliant Whig politician who largely pushed through the Reform Act of 1832 and the Slavery Abolition Act of 1833, as the exemplar of the man of parts so talented that he would achieve great renown under any circumstances.

Ironically, Brougham is even more overlooked today than Galton. In contrast, Galton's other hero, his own half-cousin Charles Darwin, is now titanically famous. And yet, at least to me, Darwin and Galton, the grandsons of the polymath Erasmus Darwin, appear to be very similar in talents and accomplishments. Darwin, the older of the pair, had the single best idea, but Galton, who was healthier and more energetic, may have had more good ideas (e.g., besides the basic concept of a science of human differences, he invented the concept of regression toward the mean, the basic math of correlation, the weather map, the silent dog whistle, and the system for classifying fingerprints).

Neither Darwin nor Galton radiated an air of being a supreme genius. Both seemed more like enormously curious and resourceful wealthy English amateurs with lots of time on their hands, to the sciences what Lord Peter Wimsey is to fictional crime solving. If Darwin and Galton hadn't been born into a rich family of Whig views and a scientific bent, would they have become so eminent?

The concept of the control group hadn't been dreamed up by 1869 (I don't believe), but Galton cleverly self-analyzes his sample by showing that the likelihood of a relative becoming eminent himself is proportional to the genealogical distance: sons or brothers or fathers of eminent men are more likely to be eminent than nephews, while nephews are more likely to be eminent than cousins or great-nephews.

Galton is aware of the nature-nurture conundrum (he coined the term "nature v. nurture"), so he suggests looking at the careers of favorite nephews of Italian popes. In recent centuries, after the end of the great Renaissance families, the Church became less aristocratic, and popes tended to be the most impressive figure of less distinguished families. How did their favorite nephews do? Not as well as sons do in non-celibate professions, he asserts.

Galton offers other interesting if not wholly convincing arguments for heredity of ability. He wrote in 1869:
Another argument to prove, that the hindrances of English social life, are not effectual in repressing high ability is, that the number of eminent men in England, is as great as in other countries where fewer hindrances exist. Culture is far more widely spread in America, than with us, and the education of their middle and lower classes far more advanced; but, for all that, America most certainly does not beat us in first-class works of literature, philosophy, or art. The higher kind of books, even of the most modern date, read in America, are principally the work of Englishmen. The Americans have an immense amount of the newspaper-article-writer, or of the member-of-congress stamp of ability; but the number of their really eminent authors is more limited even than with us. I argue that, if the hindrances to the rise of genius, were removed from English society as completely as they have been removed from that of America, we should not become materially richer in highly eminent men.

I certainly found that true when forced to study the early classics of American Literature in high school. Before Huckleberry Finn, what from American lit is really worth reading: Bartleby the Scrivener? The Tell-Tale Heart? The best I could say for Thoreau's Walden was that its prose style wasn't quite as soporific as Emerson's Self-Reliance. Most of the early classics appear to be classics mostly out of New Englandish self-regard. New Englanders started most of the colleges, so they got to decide what should be taught in the colleges.

The most prodigious intellectual effort of early American letters, Ben Franklin's 1751 essay Observations Concerning the Increase of Mankind, which, as Malthus admitted in his second edition, foreshadowed him by a half century, is almost unknown today.

Galton's book remains full of great data nerd stuff, such as this digression on an issue that comes up in assessing the talent of military commanders:
There is a singular and curious condition of success in the army and navy, quite independent of ability, that deserves a few words. In order that a young man may fight his way to the top of his profession, he must survive many battles. But it so happens that men of equal ability are not equally likely to escape shot free. Before explaining why, let me remark that the danger of being shot in battle is considerable. No less than seven of the thirty-two commanders mentioned in my appendix, or between one-quarter and one-fifth of them, perished in that way; they are Charles XII., Gustavus Adolphus, Sir Henry Lawrence, Sir John Moore, Nelson, Tromp, and Turenne. (I may add, while talking of these things, though it does not bear on my argument, that four others were murdered, viz. Caesar, Coligny, Philip II. of Macedon, and William the Silent; and that two committed suicide, viz. Lord Clive and Hannibal. In short, 40 per cent. of the whole number died by violent deaths.)

There is a principle of natural selection in an enemy's bullets which
bears more heavily against large than against small men. Large men are more likely to be hit. I calculate that the chance of a man being accidentally shot is as the square root of the product of his height multiplied into his weight;¹ that where a man of 16 stone in weight, and 6 feet 2.5 inches high, will escape from chance shots for two years, a man of 8 stone in weight and 5 feet 6 inches high, would escape for three. But the total proportion of the risk run by the large man, is, I believe, considerably greater. He is conspicuous from his size, and is therefore more likely to be recognised and made the object of a special aim. It is also in human nature, that the shooter should pick out the largest man, just as he would pick out the largest bird in a covey, or antelope in a herd.

...
This is really an important consideration. Had [Admiral] Nelson [killed at Trafalgar in 1805] been a large man, instead of a mere feather-weight, the probability is that he would not have survived so long.

In short, to have survived is an essential condition to becoming a famed commander; yet persons equally endowed with military gifts—such as the requisite form of high intellectual and moral ability and of constitutional vigour—are by no means equally qualified to escape shot free. The enemy's bullets are least dangerous to the smallest men, and therefore small men are more likely to achieve high fame as commanders than their equally gifted contemporaries whose physical frames are larger.

My published articles are archived at iSteve.com -- Steve Sailer

Neponsit

The New York Times has an article, A Beach Shared by a Tight-Knit Clan, and slide show celebrating the serene beachfront Neponsit neighborhood in Queens, which is in Queens kind of like the Green Zone is in Baghdad. The beach is supposedly public, but there's a big chainlink fence on the sand separating it from Jacob Riis Beach, where there's public parking. No parking is allowed on the neighborhood streets during beach season, so to go to the beach you pretty much have to know somebody who lives there who will let you park in his driveway:
According to census data, the population is about 2,000; 95 percent are white, 2 percent Asian, 2 percent Hispanic, and fewer than 1 percent black or multiracial.

My published articles are archived at iSteve.com -- Steve Sailer

September 7, 2009

My new VDARE.com column on Paul Gottfried

I review intellectual historian Paul Gottfried's memoir Encounters: My Life with Nixon, Marcuse, and Other Friends and Teachers:

The Property and Freedom Society conference, hosted annually in lovely Bodrum, Turkey, by Austrian School economist Hans-Hermann Hoppe, is an eye-opening experience in urbanity for provincial Americans like myself. For the benefit of monoglot Anglophones, the speeches are all in English, but many of the Continental speakers, such as economist Jorg Guido Hülsmann, are more suavely articulate in their second, third, or fourth languages than I am in my one and only.

Fortunately, the presence in Bodrum of Paul E. Gottfried—the distinguished intellectual historian, VDARE.com contributor, and coiner of the term "paleoconservative"—demonstrated that not all Americans are as unsophisticated as I am.

Each time I passed Dr. Gottfried in the gleaming lobby of the Hotel Karia Princess, he seemed to be carrying on a lively conversation in a different language. He was even rumored to have started acquiring some Turkish, a non-Indo-European language from the Asian steppe whose mere placenames (e.g., the nearby resort of Göltürkbükü) baffled me with their unfamiliarity.

Gottfried’s energetic erudition reminded me of the international man of mystery who saves the day in Evelyn Waugh’s Scoop, "Mr. Baldwin", who plays world-class ping-pong while keeping up all the while "a bright, bantering conversation in demotic Greek" and "singing snatches of lugubrious Baltic music" in Swedish.

Gottfried’s new memoir, Encounters: My Life with Nixon, Marcuse, and Other Friends and Teachers, provides an ideal introduction to the works of this scholar, who is perhaps the most acute "political genealogist" of our time.

My published articles are archived at iSteve.com -- Steve Sailer

LAT: "Obama is fast losing white voters' support"

From the LA Times:
Obama is fast losing white voters' support

His approval ratings with the crucial bloc have plunged since April. Strategists say the healthcare debate is largely to blame, but that's not the only reason.

By Peter Wallsten

After a summer of healthcare battles and sliding approval ratings for President Obama, the White House is facing a troubling new trend: The voters losing faith in the president are the ones he had worked hardest to attract.

New surveys show steep declines in Obama's approval ratings among whites -- including Democrats and independents -- who were crucial elements of the diverse coalition that helped elect the country's first black president.

Among white Democrats, Obama’s job approval rating has dropped 11 points since his 100-days mark in April, according to surveys by the Pew Research Center for the People and the Press. It has dropped by 9 points among white independents and whites over 50, and by 12 points among white women -- all groups that will be targeted by both parties in next year's midterm elections.

"While Obama has a lock on African Americans, his support among white voters seems to be almost in a free fall," said veteran Republican pollster Neil Newhouse.

Strategists in both parties blame Obama's decline on growing discontent with his policy agenda, particularly after a month of often-rowdy debate over his proposed healthcare overhaul, in which some conservatives accused him of socialism. Obama's ratings seem likely to rise again if he wins passage of healthcare legislation this fall.

But the drop in support among whites also comes as some conservatives have stoked controversies that have the potential to further erode Obama's standing among centrists -- including some controversies that resulted from White House stumbles.

One such episode came to a head Sunday when Van Jones, Obama’s green jobs czar, resigned after a week of criticism over past inflammatory statements and for signing onto conspiracy theories questioning whether the U.S. government played a role in the Sept. 11 attacks. A White House official acknowledged Sunday that Jones had been vetted less rigorously than other officials. ...

Pew first identified a slippage in white support immediately after a news conference in July, when Obama surprised many by saying that a white police officer had acted "stupidly" in arresting a black Harvard professor.

Still unclear is whether Obama's slide in the polls is due solely to his policies, or questions about his personal background or allegiances.

During the presidential campaign last fall, the nation's economic meltdown swamped any attempts by Republicans to portray Obama as having radical associations with figures such as his former pastor, the Rev. Jeremiah A. Wright Jr.

Which Republicans? Certainly not John McCain, the losing candidate.
... One black congressman, Rep. Charles B. Rangel (D-N.Y.), was quoted last week alleging that opposition to Obama's healthcare policies was "a bias, a prejudice, an emotional feeling."

Democratic pollster David Beattie conducted a survey last month in one competitive congressional district that found that more than a quarter of independents believed Obama had not proven his natural-born status. The same sentiment was expressed by nearly 6 in 10 Republican women -- a group that Beattie said would be important for a Democratic victory.

He declined to name the district because the polling was private, but said that such questions about Obama's background seemed to be a "proxy" for voters' growing unease with Obama's ambitious agenda, which has included a potential push to create a government-sponsored health insurance plan.

"We're having an economic culture war," Beattie said.

The basic question in all politics is: "Whose side are you on?" McCain and the media worked together to keep this profound question about Obama off the table during the election, but it inevitably re-emerges when complicated and expensive legislation like health is on the table. Is Obama pushing this 1,000 page bill for your benefit or somebody else's benefit? Whose side is he on?

The various conspiracy theories about Obama are attempts by thoroughly cowed people to raise questions about Obama without mentioning the fundamental one: Does he see his life's work as A Story of Race and Inheritance?

As I wrote last year in VDARE.com:

Many wild rumors have circulated about Barack Obama, such as

And finally, the most popular and yet most self-evidently implausible rumor of all, assiduously promoted by Obama’s media handler David Axelrod:

  • that Obama refuses to be defined by his race, that he transcends race, that he’s not interested in race, blah blah.

What do all these assertions have in common?

First, they betray a lack of awareness of the facts of Obama’s life.

Second, they tend to reflect the widespread desire among whites of all political stripes to not think about race anymore, and to imagine that Obama doesn’t either.

In truth, the big secret about Obama is that there’s no secret: as Obama explains at vast length in his memoir, what he himself calls his “racial obsessions” have dominated his life.

My published articles are archived at iSteve.com -- Steve Sailer

Rove and Bush

Matt Latimer, a former Bush speechwriter, in the Washington Post:

Yet Bush's advisers, particularly Karl Rove, exerted enormous pressure on him to go out every day to talk about anything -- even if no one was listening. Each year, for example, we were asked to produce three entirely separate statements to commemorate St. Patrick's Day. And we crafted remarks for so many Hispanic-themed ceremonies that the president finally stood up in the Oval Office and told his speechwriters, "No más."

The Hispanic-themed comments were an outgrowth of the administration's all-out push for comprehensive immigration reform. As the president's proposal became more controversial, Rove -- on one of his over-caffeinated days -- persuaded Bush to give speech after speech, each time hoping that somehow they'd find the magic words to turn things around. Bush, who when given a moment to collect his thoughts could be a persuasive speaker, was talking so often that his words on the subject lost their presidential heft. Critics noted that his message seemed muddied and his arguments contradictory or confusing.

Well, when you are trying to put a giant swindle over on American voters, the best you can hope for is that your message comes across as muddied, contradictory, and confusing.

My published articles are archived at iSteve.com -- Steve Sailer

"Is Your Baby Racist?"

Newsweek runs the most unintentionally funny article of the year on its cover:
See Baby Discriminate
Kids as young as 6 months judge others based on skin color. What's a parent to do?

It's by San Francisco novelist Po Bronson and his wife Ashley Merryman, both terminally SWPL. It's a chapter from their self-help book Nurture Shock, and it explains how to more scientifically indoctrinate your children in the conventional wisdom so they don't slip up and inadvertently say something politically incorrect about race, thus exposing them, and you, to who knows what consequences.

I'm sure parents in Stalin's Soviet Union had similar worries. Bronson and Merryman would no doubt have done land office business peddling advice to kulak parents about how to talk about class so their little ones don't slip up.

My published articles are archived at iSteve.com -- Steve Sailer

September 6, 2009

How Krugman got it wrong

Paul Krugman has a long article in the NYT Magazine entitled "How Did the Economists Get It So Wrong?" which demonstrates quite nicely, by all the topics it avoids mentioning, how the economists got it so wrong.

Krugman's article is basically a nostalgia fest, with Krugman arguing for Keynes over Friedman, East Coast economics departments over Great Lakes economics departments. Big whoop ... It's like baseball fans arguing over Mickey Mantle vs. Ty Cobb as a centerfielder on your all-time all-star team.

I'm sorry, but this is the 21st Century, and the critical problems we face are the ones that economists have tried hard to ignore.

Krugman, for example, totally ignores inconvenient realities, such as the bipartisan push by politicians for more mortgage lending to minorities, which played such a huge role in the mortgage meltdown that launched the recession.

Similarly, immigration is never mentioned. As I blogged on August 26, 2005:
Amusingly, the extremely low interest rates that are propping up the economy today are causing a boom in home construction in the exurbs (i.e., creating more of the exurban sprawl that Krugman derides). While the home construction boom is doing nothing to help us compete better economically with the Chinese, it is sucking in more illegal immigrants to work in construction. In turn, the rapidly rising populations of unassimilated Hispanic immigrants is triggering more white flight out to the exurbs and raising demand for new McMansions. [What I wasn't aware of in 2005 was how much of the lending was going to minorities.]

You might think that this process would interest economist Krugman, but you'd be wrong. Since 2001, Krugman has barely mentioned immigration at all, despite writing 100 columns per year for the New York Times. The problem he faces is that he and his bete noire George W. Bush hold almost identical, visceral, non-rational views on the goodness of immigration, so Krugman is just not going to mention the entire subject.

You might think this merely reflects Krugman's personal idiosyncrasies, yet it's also representative of how almost the entire economics profession in the U.S. has been AWOL on this enormous issue, one with obvious and profound economic implications. Economists have largely ignored immigration in recent years, and when they do discuss it, often spew self-evident nonsense that they would flunk an Econ 101 student for writing on a test on any other subject.

Meanwhile, even when it comes to conventional economics, Krugman still doesn't get the Austrian theory of how malinvestment causes recessions. He's outraged that an opposing economist says:
“We should have a recession. People who spend their lives pounding nails in Nevada need something else to do.”

Personally, I think this is crazy. Why should it take mass unemployment across the whole nation to get carpenters to move out of Nevada?

I explained at length last October why all the giant unfinished casinos in Las Vegas inevitably cause unemployment. Krugman wrote in 1998:
For if the problem is that collectively people want to hold more money than there is in circulation, why not simply increase the supply of money? You may tell me that it's not that simple, that during the previous boom businessmen made bad investments and banks made bad loans. Well, fine. Junk the bad investments and write off the bad loans. Why should this require that perfectly good productive capacity be left idle?
I responded:
Look, the hulk of the Echelon [casino] on the Strip isn't perfectly good productive capacity. It is, at present, perfectly no good productive capacity. It's worse than nothing because the owner has to keep paying the interest on the loans he took out for the money he's already spent on it. He has calculated, however, that it's somewhat less ruinous to let it sit idle than to finish the monstrosity for the Californians who won't be coming again for years. So, the owner of the Echelon isn't going to be spending as much on either consumption or investment as he had been planning to....

But the newly unemployed of Las Vegas aren't good workers in the post-Bubble economy. They are construction workers, croupiers, waiters, touts, whores, and other professions that we won't have much use for for a number of years. Hopefully, some of them will develop new, more valuable skills, but that will take years. And when you actually check the numbers on the newcomers to Las Vegas, you don't get a warm feeling that many of these folks are going to turn into solar energy technology inventors or whatever anytime soon. If we're lucky, a lot of them will go home to Mexico, where it's much cheaper to be poor than in America. If we're not lucky ...

Unfortunately, due to advice like Krugman's, we didn't have much of a recession in 2001-2002 due to inflating the money supply, both by the Fed and by easing up on mortgage lending rules, so now we are paying the price in spades.

The Tech Bubble was stupid, but at least pouring huge amounts of money into Cisco Systems had a certain surface plausibility. Cisco actually made something ... In contrast, building oversized homes outside of Las Vegas for the mortgage brokers who sold their old homes to the new blackjack dealers who got hired by the new casinos to fleece the Californians with home equity loans on their houses that were going to rise in price to infinity never ever made any sense.

Now, anti-Krugmaniac realist economics has a very valuable policy implication, which is: "frictional problems" are incredibly painful. So, don't waste money in the first place. More specifically, the spending of a population is based on its wealth. In the long run, its wealth is mostly a function of its human capital (i.e., the population's ability to earn money). So, don't debauch the average human capital of your population.

My published articles are archived at iSteve.com -- Steve Sailer

Do statheads tend to be betting men?

When I was a freshman in college, a high school friend whose dad was one of the top bookies in LA gave me a free subscription to his dad's football betting newsletter, the Gold Sheet, which I see has now been in business for 50 years, so it's time-tested. It's modus operandi is to barter inside information on injuries and the like, so these guys aren't just selling their opinions.

Each week, I'd look through the Gold Sheet's predictions for college football games looking for ones I disagreed with. I'd pick one to five games per week where I thought the Gold Sheet was wrong on its point spread prediction. I believe my cumulative record for the year was 19-7 against the Gold Sheet's point spread predictions (not against the Las Vegas line, by the way).

I recount that because that's the last time I took an active interest in gambling. And, keep in mind, that I didn't actually bet any money. I just kept track to see how I would do if I had bet against the Gold Sheet's line.

Since then, despite being a classic stathead, I can recall buying two one dollar lottery tickets (when the jackpot was over $100,000,000, because it's fun to think about what you'd do with, what, $2.5 million per year pretax for 20 years -- in contrast, when the jackpot's only $1,000,000 it's depressing to think about what you'd with an extra $30k per year, because you quickly realize that you really need an extra $30k per year just to stay afloat, so why spend a buck to be remind of that?).

In other words, I'm not at all interested in gambling. Learning probability just taught the lesson that the odds are rigged against you, so why play?

On the other hand, the late stathead journalist Dan Seligman, who probably was about as similar to me in general turn of mind as anybody, was a devoted gambler. (Here's his 1997 article about his weekly poker game, straight out of a Billy Wilder movie, that had been a fixture in Manhattan business and journalism circles since 1954.)

So, here's the question: does being a stathead tend to make you more or less likely to be a gambler?

My published articles are archived at iSteve.com -- Steve Sailer

What's the Matter with Rhode Island?

It's not a very important state, but I notice that Rhode Island, in the heart of southern New England, seems to be slowly drifting toward the bottom of state-by-state statistics, turning into the West Virginia of Blue State America. And yet, unlike the Mountain State, the Ocean State has seemingly favorable topography: flat land, a remarkable number of miles of coastline per square mile (that's why Robber Barons built their "cottages" in Rhode Island), and weather, that while bad, is less bad than Massachusetts'. Culturally, Rhode Island has an Ivy League university and four centuries of architecture.

Is it just that everybody ambitious in Rhode Island heads to New York or Boston? Or is something else going on?

My published articles are archived at iSteve.com -- Steve Sailer

Obama as Ralph Ellison's "Rinehart"

A reader points out an amusing literary precedent for our protean President: When experiencing doubts about his identity while at Punahou Prep, Obama read Ralph Ellison's Invisible Man. Toward the climax of that African-American classic, the nameless narrator, who has been beset with identity problems of his own, puts on dark sunglasses and ventures onto the streets of Harlem. In this disguise, he is repeatedly accosted by passers-by who think he is, apparently, some local character named Rinehart. This Rinehart, a man for all seasons, is evidently a pimp, a preacher, a numbers-runner, whatever works best for whomever he's dealing with at the moment. In his opaque lenses, people see whomever they hope to see. He is the one they've been waiting for.

The narrator experiences a revelation that might remind you a little of a recent political campaign's basic strategy:
Still, could he be all of them: Rine the runner and Rine the gambler and Rine the briber and Rine the lover and Rinehart the Reverend? Could he himself be both rind and heart? What is real anyway? But how could I doubt it? He was a broad man, a man of parts who got around. Rinehart the rounder. It was true as I was true. His world was possibility and he knew it. He was years ahead of me and I was a fool. I must have been crazy and blind. The world in which we lived was without boundaries. A vast seething, hot world of fluidity, and Rine the rascal was at home. Perhaps only Rine the rascal was at home in it. It was unbelievable, but perhaps only the unbelievable could be believed. Perhaps the truth was always a lie. ...

In the South everyone knew you, but coming North was a jump into the unknown. How many days could you walk the streets of the big city without encountering anyone who knew you, and how many nights? You could actually make yourself anew. The notion was frightening, for now the world seemed to flow before my eyes. All boundaries down, freedom was not only the recognition of necessity, it was the recognition of possibility. And sitting there trembling I caught a brief glimpse of the possibilities posed by Rinehart's multiple personalities and turned away. It was too vast and confusing to contemplate. Then I looked at the polished lenses of the glasses and laughed. I had been trying simply to turn them into a disguise but they had become a political instrument instead; for if Rinehart could use them in his work, no doubt I could use them in mine.

For another Ellisoncentric view of Obama, see David Samuels' brilliant article "Invisible Man" in the October 22, 2008 issue of The New Republic. It doesn't seem to be online anymore, but, fortunately, it's still cached by Google.

My published articles are archived at iSteve.com -- Steve Sailer

Does Liar Loan = Tax Evader?

The Liar’s Loan? study by economists Wei Jiang, Ashlyn Aiko Nelson, and Edward Vytlacil of over 700,000 mortgages issued during the Housing Bubble by an unnamed financial institution focusing on the "low documentation" mortgages brought in by independent brokers (now that's a trustworthy-sounding combination) raises questions about exactly what kind of borrower wants to pay higher interest rates in return for hiding facts about themselves.

Although this mortgage bank handed out fewer subprime loans than the national average, it still rode the Housing Bubble hard:
First, the bank experienced a rapid increase in loan production during the mortgage boom, followed by a sharp decline during the housing bust; new loan originations increased from about 20,000 in the first half of 2004 to a peak of over 154,000 in the second half of 2006, followed by precipitous decline starting in the second half of 2007.

It's specialty was low-doc loans:
Finally, the low-documentation loans represent just 20% of loans in the McDash database, but represent 70% of our sample. The difference is due to the lender’s specialization in low-documentation loans.

Like the lab rat that keeps hitting the button that dispenses more cocaine, the financial institution kept hitting the Low Doc / Broker channel harder and harder:
Figure 2 also shows that the rapid expansion in loan production was driven almost exclusively by increased loan originations through the broker channel, and expansion of low-documentation loans through the broker channel in particular. Broker-originated loans represented 73% of all loan originations in the first half of 2004, increasing to 94% by the second half of 2006; while broker low-doc loans accounted for 39% of originations in early 2004, they comprised 75% of loan originations by late 2006.

The creditworthiness of the four different channels is exactly what you'd expect:
The median duration times (in months) reported at the bottom of Table 3 reveal that a loan originated with full documentation by the bank has a median life of 25 years (300 months) before delinquency; the same median lifetime drops steeply to 8.4 years for Bank/Low-Doc loans, and to 7.9 years for Broker/Full-Doc loans. Finally, the median life is a mere 4.6 years for Broker/Low-Doc loans.

Not surprisingly, by 2009 the cumulative delinquency rates for 2007 loans were about 2.5X higher than for early 2004 loans.

So, what exactly was the business strategy behind pursuing the low documenation Don't-Ask-Don't-Tell borrower?

A 2006 MSN tried to put a good spin low-doc mortgages, it but it still comes out sounding sleazy:
No-doc mortgages let you pay for privacy

If your income doesn't come from a paycheck or you don't want to reveal all to some lender, you can still get a home loan, but you'll pay more. Here's how.

By Bankrate.com

Most homebuyers work for a steady paycheck and are willing to divulge details of their finances in exchange for the best available mortgage loan.

But a lot of buyers don't draw a steady paycheck from a boss. They own businesses, make commissions, live off investments, get their income in cash or live a life of crime. Others don't want to give up their financial privacy. Limited-documentation mortgages are available for these people. ...

Ethical mortgage brokers and lenders generally try to talk customers out of getting low-doc and no-doc loans because they cost more.

Hmmhmmm ...
There are three main types of low-doc/no-doc mortgages.
  • Stated-income mortgages tend to be for people who work but don't draw regular wages or salary from an employer. That includes self-employed people or those who make a living off commissions or tips.

  • No-ratio loans are often the right call for wealthy people with complex financial lives, retirees who live off investments and people whose lives are in flux because of divorce, recent death of a spouse, or career change.

  • No-doc or NINA (no income/no asset verification) mortgages are for creditworthy people who want maximum privacy and can afford to pay for it.
Stated-income mortgages

Someone who gets a stated-income mortgage must disclose annual earnings, usually for the last two years and sometimes more. Instead of backing up the income statement with pay stubs and W2 forms, the borrower might have to show tax returns, bank statements and even profit-and-loss statements.

The borrower must list assets and debts. That's why the term "low documentation" isn't always accurate.

Stated-income mortgages are for people who make the money they say they make, but that amount doesn't show up on the bottom line of their income taxes, says Hugh McLaughlin, president and CEO of KMC Mortgage Services Inc., a lender and broker in Naples, Fla.

"They work for cash. They might be cleaning people or people who work in restaurants," McLaughlin says. "It is also good for self-employed borrowers who actually make gross sufficient amounts of income, but write off a lot on their taxes. They have the capacity to pay the loan back, but what they file with the IRS doesn't reflect their real income." ...
No-ratio mortgages

With these mortgages, the borrower doesn't declare income. No pay stubs, no W2s, no tax returns. Think of it as the "don't ask, don't tell" mortgage: The lender doesn't ask how much the borrower earns, and the borrower doesn't tell. ...

But the borrower does list assets -- money in the bank, stocks and bonds, real estate, ownership stakes in businesses.

"The purpose of the no-ratio program is to provide expedited processing for creditworthy borrowers," Pawsat says. "It's not intended as a means to qualify marginal borrowers."

Someone who owns 10 car dealerships might apply for a no-ratio mortgage because a conventional loan could require submitting personal and corporate tax returns and a year-to-date profit-and-loss statement for all the dealerships. ...

He says these loans also are for people "who say, 'I don't want to tell my whole life story to someone, so I want to pay a premium rate not to do that.'" ...

No-income/no-asset verification mortgages

These loans, sometimes known as NINAs, need the least documentation. In some cases the borrower provides his or her name, Social Security number, the amount of the down payment and the address of the property being bought. That's it. The lender gets a credit report and a property appraisal.

The line gets fuzzy between no-ratio and NINA mortgages, McLaughlin says. A lot depends upon the borrower's credit score. The better the score, the less documentation the lender will demand. In many cases, the lender will want to know what the buyer does for a living, and for how long. Lenders feel more comfortable with a borrower who has been doing the same job for at least two years.

In any case, an excellent credit score is required. These mortgages are for people who never, ever fail to pay bills on time. Actually, they're for people who employ assistants to pay the bills on time.

They're meant for people who zealously guard their privacy -- the movie star who doesn't want someone in the loan office selling copies of her tax return to The National Enquirer, the mobster who doesn't want to leave a paper trail.

In summary, these loans were invented for well-to-do tax evaders.

Yet, classy criminals, the kind who will lie to the IRS but not to the bank, the honor-among-thieves crowd, are fairly thin on the ground. If you go looking for liars to lend money to, you're likely to find ones who will lie to you, too.

One thing that would be worth exploring is how the interaction of illegal immigration and the Housing Bubble helped make liar loans so plausible sounding. Lots of who employed illegal immigrants, such as building contractors, were making lots of money during the Bubble, but doing much of it on a cash basis. Their employees wanted to be paid in cash, so that gave them an excuse to demand cash, too. Moreover, they tended to be speculators in housing, so if, like most of the financial community, you assume that we need ever more housing for our ever growing population which leads to ever increasing land prices, then they were good bets.

Of course, lots of people who implied they were making a lot in the untaxed market weren't.

You know, it's just hard to tell.

My published articles are archived at iSteve.com -- Steve Sailer

Is Obama being mau-maued in Afghanistan?

Tom Wolfe's classic study of War on Poverty handouts to "community organizers" in inner city San Francisco pointed out that most of the demonstrations and confrontations were largely staged to get money out of the government:

Going downtown to mau-mau the bureaucrats got to be the routine practice in San Francisco. The poverty program encouraged you to go in for mau-mauing. They wouldn't have known what to do without it. ... That was one reason why Summer Jobs was such a big deal. ... Nevertheless, there was some fierce ma-mauing that went on over summer jobs, especially in 1969, when the O.E.O. started cutting back funds and the squeeze was on. Half of it was sheer status. There were supposed to be strict impartial guidelines determining who got the summer jobs--but the plain fact was that half the jobs were handed out organization by organization, according to how heavy your organization was. If you could get twenty summer jobs for your organization and somebody else got five, then you were four times the aces they were ...

Reading the Afghanistan War website of Michael Yon, an ex-Green Beret who has been an embedded reporter in Iraq and Afghanistan, for some reason got me thinking about Mau-Mau the Flak Catchers. Especially the parts where people who are likely Taliban-affiliated show up at the British Army base where Yon is embedded and demand medical care for a wound no doubt suffered fighting the Brits or show up demanding compensation for their house that got blown up because guys were shooting at the Brits from it.

For a lot of the Pashtuns, no matter what side they nominally are on, the war seems to be not just about killing people and breaking things (which, being Pashtuns, they consider good clean fun), but, also, it's a living. If the war ever ends, will the rest of the world continue to funnel money and weapons into Afghanistan? Will they then have to get, like, jobs?

Moreover, consider the lessons the Afghans likely drew from the Iraq "Surge." Here in the U.S., the received lesson is that adding 15% more soldiers made all the difference, but what actually made the difference was what I'd been advocating all along: bribe the Sunni rebels to stop fighting us and start fighting the foreign fundamentalists.

If you are an Afghan, you probably figure that the same logic will play out in Afghanistan as in Iraq: the more problems you cause the Americans now, the more they will bribe you to switch sides, the same as the more you intimidated federal poverty bureaucrats in 1969, the biggerthe bribe they paid you.

Does Obama grasp that? This is one case where his pre-Presidential career experience ought to equip him to understand what's going on.

Yon's perspective is different. He implies that American soldiers didn't like the Iraqis, but at least they were civilized, in the sense that they mostly lived in houses that were designed with the expectation of some degree of law and order in Iraq. In contrast, while American and British troops tend to like the Afghans more on a personal level, they're basically uncivilized. Everybody in Afghanistan who can afford it builds his family a mud fort to call home, a mini-Alamo, because the expectationis that normal life in Afghanistan is Hobbesian.

For some reason, though, this doesn't discourage Yon:

We must face reality: Our reasons for continuing are not the reasons we came for. We are fighting a different war now than the one that began in 2001. Today's war is about social re-engineering. Given the horrible history of Afghanistan, and the fact that we already are here, the cause is worthy and worthwhile. ... Today, the war is still worth fighting, yet the goal to reengineer one of the most backward, violent places on Earth, will require a century before a reasonable person can call Afghanistan "a developing nation." The war will not take that long - but the effort will.

Well, as Sam Goldwyn would say, include me out.

My published articles are archived at iSteve.com -- Steve Sailer

Why did Van Jones get into "green jobs?"

My published articles are archived at iSteve.com -- Steve Sailer

"A Mugging on Lake Street"

Continuing my recent Chicago nostalgia-fest, here's an article from Chicago Magazine by liberal investigative reporter John Conroy, whose career has been dedicated to exposing the use of torture by Chicago area cops on black suspects. In "A Mugging on Lake Street," however, the muggee was Conroy. While riding his bike westbound on Lake Street under the El tracks through the West Side of Chicago (which my in-laws were driven out of by violence in 1970) to his home in Oak Park, he was knocked unconscious by a 16 year old black kid. No robbery, no apparent motive other than racial hatred.

Not long after, I was talking about the incident with my neighbor and fellow journalist Alex Kotlowitz, interpreter of racial maladies in There Are No Children Here and The Other Side of the River. I mentioned the coincidence of hearing the same thing from two such different sources. “I don’t think there is any question that it had to do with race,” Kotlowitz said. (Our initial conversation was over the fence, and I recently asked him to reconstruct his perception.) “There is some surmising here, but what other explanation is there for it? It is not like they had some animosity toward bikers.”

But he found the notion of a hate crime problematic. It presumes, he said, that the assailant acted out of racism, which by Kotlowitz’s definition requires a belief that one’s race is superior to another’s. “In this instance, I don’t think he felt superior. I think probably he felt diminished in some way and that was part of the lashing out.”

Modern liberal thought consists largely of dressing "Who? Whom?" up in sophisticated-sounding verbiage.

Speaking of the Lake Street El, my paternal grandfather used to ride the Lake Street Elevated Line everyday from his home in Oak Park, which native son Ernest Hemingway famously called a town of "broad lawns and narrow minds." Despite Hemingway's put-down, Oak Park produced perhaps the two most celebrated American artistic geniuses of the first half of the 20th Century in Hemingway, and Frank Lloyd Wright, who developed his Prairie Style while living there from age 22. Wright designed about a dozen houses within a block of my grandfather's (non-Wright) place.

My published articles are archived at iSteve.com -- Steve Sailer

September 3, 2009

Crucial new mortgage study: "Liar's Loan?"

Here are excerpts from an important new paper on the causes of the Mortgage Meltdown, "Liar's Loan?" by three academic economists from Columbia, Indiana, and Yale. They obtained records on 721,767 mortgages handed out from January 2004 to February 2008 (including deliquencies up through January 2009) by a big, very aggressive national mortgage bank. The economists managed to match most of them up with ethnicity info from the Home Mortgage Disclosure Act database.

They don't say who the bank is (or, more likely, was) but it septupled the number of mortgages it gave out from the first half of 2004 to the second half of 2006. It gave out a lower percentage of subprime loans than the national average, but it did specialize in low-documentation (liar loans) mortgages.

The results aren't terribly surprising. Low-document (i.e., liar loans) have higher delinquency rates than full document loans, and loans originated by local mortgage brokers who sold them to the bank did worse than the loans originated by the bank itself. The model, therefore, is one of predatory securitizing from the ground up.

The usual ethnic differences in delinquency are observed:
"In the full sample, the ranking of delinquency rates by race/ethnicity is as follows: white (24.7%), Asian (27.1%), black (37.4%), and Hispanic (40.2%)."

That's not as great as the huge ethnic differences (3.3x for blacks vs. whites, 2.5x for Hispanics, and 1.6x for Asians) seen even in credit score and income-adjusted foreclosure rates from the state of California in the San Francisco Fed study by Laderman and Reid. (I've filed a Freedom of Information Act request to get the crucial raw data for California from the SF Fed).

The narrower delinquency rates seen in this one bank study are not surprising, since the bank was more or less pursuing a certain class of borrowers (i.e., iffy ones).
Liar’s Loan?

Effects of Origination Channel and Information Falsification on Mortgage Delinquency

Wei Jiang, Ashlyn Aiko Nelson, Edward Vytlacil

This Draft: August 2009

ABSTRACT This paper presents a comprehensive predictive model of mortgage delinquency using a unique dataset from a major national mortgage bank containing all of its loan origination information from 2004 to 2008. Our analysis highlights two major agency problems underlying the mortgage crisis: an agency problem between the bank and mortgage brokers that results in lower quality broker-originated loans, and an agency problem between banks and borrowers that results in information falsification by borrowers of low-documentation loans--known in the industry as Alt-A or “liars’ loans”--especially when originated through a broker. We also document significant differences in loan performance by race/ethnicity that cannot be explained by observable risk factors or loan pricing.

...The crisis that started from the mortgage market quickly spread to other financial markets and throughout the economy...

We use the experience of a major national mortgage bank to uncover the determinants of the mortgage crisis and the evolution of the crisis at a micro level.... Loans issued by the bank since the beginning of 2004 reached a cumulative delinquency rate of 28% by early 2009; approximately half of these delinquent loans were in the state of short sale or foreclosure. Finally, the borrowers and properties underlying the bank’s loans during our sample period have fair representations in all 50 states. Therefore, lessons from this particular bank have general implications for the national mortgage market. The proprietary data set represents the most comprehensive, detailed, and disaggregated data set in the mortgage loan literature. Our data set consists of all 721,767 loans that the bank originated between January 2004 and February 2008. ...

We provide evidence of borrower information falsification at both individual variable and aggregate levels. ...

Finally, we document significantly higher delinquency rates among Hispanic and black borrowers. The differences in delinquency rates--4 to 11 percentage points higher for Hispanics and 3 to 4 percentage points higher for blacks, relative to white borrowers--are not explained by the full set of individual risk factors collected at loan origination, or by differences in loan pricing. Our analysis--which includes far more detailed data than that used in prior research on the relationship between race/ethnicity and credit-- does not support a finding of discrimination, whereby minorities are subjected to higher lending standards or higher pricing for given financial products. Rather, the findings suggest that systematic differences between white and minority borrowers--such as information and experience disparities resulting from a lack of prior home buying experience or exposure to mainstream financial institutions--may explain these delinquency differences. ....

The housing boom welcomed many first-time homebuyers to the mortgage market. In early 2004, only 7.6% of borrowers in the sample were first-time homebuyers, a figure that climbed to 18.1% by late 2006. As the housing market collapsed and lenders tightened standards, the percent of first-timers fell to 12.7% by the end of 2007. During the sample period, black and Hispanic borrowers gained a significantly higher share of new loan originations. In early 2004, they represented 4.5% and 7.5% of the borrower population, respectively; by early 2007, the percentages were 8.9% and 23.3%. More strikingly, the proportion of blacks and Hispanics who were first-time borrowers increased from 10.3% in early 2004 to more than 25% in late 2006. The national mortgage market experienced a similar increase during the same period in the percentage of first-time homebuyers and the expansion of credit to minority households, who were disproportionately first-time homebuyers. According to national HMDA data on home purchase loans,8 6.6% (10.8%) of borrowers were black (Hispanic) in 2004; the numbers increased to 8.7% (14.4%) in 2006.

The graph in Figure 3 in the report shows that early 2007 vintage loans had radically higher delinquency rates than early 2004 loans: 31% of the early 2007 loans were delinquent by early 2009 compared to 12% of early 2004 loans. One reason was the lower prices in 2004 than in 2005-2007; another was that the bank was scraping deeper and deeper into the bottom of the barrel, dragging up ever more dubious borrowers.
... Column 1 of Table 4 Panel A indicates that the following variables predict a higher likelihood that a borrower will obtain a loan from a broker rather than from the bank: high debt level, original purchase (as opposed to refinance), first lien, first-time owner, owner-occupied, low income, low credit score, female borrower, minority borrower, young borrower, short employment tenure, and self-employed. All non-white racial groups favor the Broker channel in comparison to whites. Most of these characteristics (except perhaps the first-lien and self-employed variables) are associated, on average, with lower financial sophistication, less experience with mortgages, and lower credit quality. This relation calls attention to the issue of irresponsible lending--lending without due regard to ability to pay, to poorly informed borrowers--as analyzed by Bond, Musto, and Yilmaz (2008) and Inderst (2006).

The government spent years telling the mortgage industry to diversify its broker forces. When it finally did, that just greased the skids for Spanish-speaking and black mortgage brokers to dredge up bad borrowers who didn't have a clue what they were getting themselves talked into by their co-ethnics.

The variables that predict choosing a low-doc loan have the following contrasts with those that predict choosing a broker. First, borrowers with low loan-to-value (LTV) ratios but high loan size are more likely to choose low documentation. Second, first-time owners and those purchasing owner occupied properties are less likely to choose low documentation. Third, borrowers with high income and credit scores tend to choose low documentation. Fourth, black borrowers do not appear disproportionately in low documentation loans, while Hispanic and Asian borrowers do.

An examination of credit scores by race reveals that average credit scores are highest among Asian and white borrowers, and lowest among Hispanic and black borrowers. Hispanic borrowers who obtain loans directly from the bank have credit scores that are comparable to those of white borrowers, but those who obtain loans through a broker have credit scores that are on average 2-5 points lower. Black borrowers have average credit scores that are 14-27 points lower than white borrower credit scores, across all subsamples.

Remember, this is just for borrowers from this dubious bank, not for the overall population.
Section V offers a more detailed analysis of these race/ethnicity effects. Last, the time trend of credit scores, as shown by the year dummy variable coefficients, is informative; while Bank loans saw steady improvement in credit scores over time from 2004-2008, credit scores for Broker loans deteriorated from 2004-2007, and only recovered in 2008. The findings provide evidence that the bank pursued a growth strategy which relied on penetrating marginal borrowers through the broker channel.

A "Don't Tell Us, We Don't Want to Know" relationship between the bank and the mortgage brokers.

V. “The Color of Credit:” Race/Ethnicity and Loan Performance There is a large body of research dedicated to exploring disparate impact on minorities in credit markets and in the mortgage market in particular. A common challenge in this line of research is distinguishing between the effects of disparate impact and discrimination, because most researchers pursuing this question do not have access to the full set of variables to predict loan pricing and performance (see Ross and Yinger (2002) for a full analysis of challenges in identifying racial discrimination in the mortgage market). As an example, the landmark Boston Fed Study (Munnell, Tootell, Browne, and McEneaney (1996)) found that race strongly predicted loan approval among applicants even after controlling for a long list of personal characteristics and individual risk factors, though their estimated race effects were smaller than those found in earlier studies employing a smaller set of control variables. Yet their study did not include other important covariates--such as credit score--which strongly predict loan performance, and did not have information on ex post loan performance. Thus, the study was unable to conclude whether the disparate loan approval rates across race resulted from legitimate economic considerations or from discrimination.

Our findings complement this line of prior research by including additional covariates and by relating loan performance to race/ethnicity. In the full sample, the ranking of delinquency rates by race/ethnicity is as follows: white (24.7%), Asian (27.1%), black (37.4%), and Hispanic (40.2%). Controlling for observable characteristics, the black-white (2.8 to 5.2 percentage points) and Hispanic-white (5.9 to 8.3 percentage points) differences are statistically significant at the 1% level in all four subsamples, while the Asian-White differences (-1.1 to 1.1 percentage points) are not significant even at the 10% level. Notably, the difference in the delinquency rates between white and black/Hispanic borrowers is more than 50% higher in the Broker subsamples than in the Bank subsamples.

It would be very interesting to track delinquency rates by the race of the broker.
We must also control for loan pricing in order to attribute these delinquency differences to race/ethnicity. If certain racial/ethnic groups pay higher interest rates conditional on other characteristics, then the heavier payment burden could cause higher delinquency. Such a concern is warranted by prior research on consumer financing. Charles, Hurst, and Stephens (2008) show that blacks pay significantly higher rates when financing a new car, in large part because blacks are more likely to use more expensive financing companies. Similarly, Ravina (2008) finds that black borrowers in an online lending market pay rates that are over 100 basis points higher than comparably risky white borrowers. Much of the difference can be attributed to favorable interest rates obtained in same-race lender-borrower pairings and the underrepresentation of black lenders. In the context of mortgage lending, price differences could occur by pricing a given product differently for borrowers from different demographic groups, but more likely occurs through steering uninformed borrowers into more costly products, such as subprime loans, when more attractive products are available; or through aggressive negotiation strategies used by brokers to enhance their fees and commissions (known in the industry as yield spread premiums).

We find no evidence that black or Hispanic borrowers pay higher initial or current interest rates on bank-originated loans, conditional on observable individual risk factors. However, among broker originated loans, black borrowers appear to pay higher rates, on the order of 10-16 basis points, while there is no clear evidence that Hispanic borrowers are subject to higher loan pricing. While the coefficients on Black are significant and positive in the Broker subsamples, the magnitudes are much lower than those documented in other credit markets (e.g., Charles, Hurst, and Stephens (2008) and Ravina (2009)). The estimated gender effect is insignificant throughout, both in terms of loan pricing and loan performance. Our results are closer to findings in Haughwout, Mayer, and Tracy (2009) that there is no adverse pricing by race, ethnicity, or gender in either the initial rate or the reset margin based on a sample of subprime loans originated between 2004 and 2006.

Our data suggest that loan pricing is an unlikely explanation for the higher delinquency rates observed among black and Hispanic borrowers. Black borrowers exhibit higher delinquency rates relative to white borrowers, even for bank-originated loans for which we find no evidence of unfavorable pricing. The average (median) unpaid balance on loans among black borrowers is $185,000 ($150,000). Thus, the estimated black-white difference in interest rate among broker-originated loans--10-16 basis points-- amounts to an additional monthly payment of $15-$25 (or $13-$20) using the mean (or median) balance. It is unlikely that such a difference could be pivotal in loan delinquency.

Moreover, Hispanic borrowers exhibit the highest delinquency rates in our sample among all demographic groups, although there is no evidence that they face unfavorable interest rates in comparison to other groups.

Previous work sheds light on the unobserved risk factors that are correlated with race/ethnicity variables. First, blacks and Hispanics have lower savings rates on average than whites of similar age, education and income (Blau and Graham (1990), Charles, Hurst, and Roussanov (2007)). As a result, they accumulate less wealth (often difficult to measure), making them more vulnerable to adverse economic shocks. Second, minorities are less likely to have family or relatives who can help when they have trouble meeting their mortgage payments (Yinger, 1995).

Third, Guiso, Sapienza, and Zingales (2009) offer an interesting explanation for the highest delinquency rates observed among Hispanic borrowers. Based on survey data, the authors find that Hispanics are much less likely (between 18 and 27 percentage points) than blacks or whites to feel morally or socially obligated to continue paying their mortgages when the equity value is significantly below zero.

Wow. Don't tell the SPLC or they'll come after Wei Jiang, Ashlyn Aiko Nelson, Edward Vytlacil with pitchforks.
Historically, policymakers and researchers concerned with mortgage lending discrimination have focused on two key issues: unequal access to credit (i.e., disparities in loan approvals and denials) and pricing disparities. While we do not examine differences in mortgage approvals by race, our analysis suggests that the housing boom fueled a rapid expansion of credit among Hispanic and black borrowers. Moreover, the share of first-time borrowers among black and Hispanic households grew from 10% in early 2004 to 25% in late 2006. In addition, we find little evidence of pricing discrimination as a cause for loan delinquency.

Taken together, the findings suggest that market dynamics and credit expansionary practices during the sample period may have alleviated some of the inequalities in credit access and pricing. Yet the ex post loan performance data suggests that such credit expansion was achieved largely through lowered lending standards, particularly among brokers originating low-documentation loans. The persistence of Hispanic and black race effects in the delinquency models raises further questions, including whether such borrowers were well-informed about the mortgage process and possessed the requisite experience and knowledge to continue making their mortgage payments in full and on time.

In other words, the government finally got what it had been asking for, and got it good and hard.
Our analysis raises the question of why this major mortgage bank—as well as other market players—allowed such deterioration in borrower and loan quality to persist before tightening its lending standards. A plausible explanation is that the expansion of the secondary mortgage market and the ease of loan securitization weakened the bank’s incentive to screen borrowers by allowing the bank to offload risk.

Predatory securitizing.

The New, Life-Sized Obama

Your Lying Eyes asks:
What happened to Obama's awesome charisma?

Maybe he never really had any. Maybe his legions of disciples were simply awed that a black man could be so ... well, like them, that it was their own reflections -- reflections of their own awesomeness, their self-righteous, universalistic, 21st-centuriness -- that mesmerized them. That and some well crafted speeches and an appealing delivery before a teleprompter. But the man himself is a zero when it comes to personality, and his limited level of achievement in his pre-Axelrod life should have been a signal that maybe he's not all that.

At any rate, he was supposed to hit the hustings and take the Health Care cause directly to the American people and bypass all that news reporting slanted against him and rouse the troops. Yawn. Seems like a ragtag collection of malcontents with trucker hats make more compelling viewing than Barry's lame pontificating.

Then there's this video:
White House Reveals Obama Is Bipolar, Has Entered Depressive Phase

Seriously, I suspect Obama is rather like George W. Bush: a psychologically fragile personality who needs a lot of downtime. Bush managed to baby himself through eight years without publicly falling off the wagon, and Obama seems to be trying to pace himself as well. Both put plenty of time into working out, with Obama seemingly even more devoted to golf, a very time-consuming game.

Obama understands himself reasonably well, so he has rules -- e.g., no drama queens among his staffers -- to avoid using up too much of his energy and upsetting his emotional balance. So, expect Obama to up his game somewhat after Labor Day.

Still, Democrats need to worry that Obama could go into a down cycle like the year-long one he apparently suffered after his rejection by black voters as not black enough in a 2000 primary.

Even if he avoids that, Obama is not a gonzo hypomanic like Bill Clinton, who was just on the go all the time. He's sensitive and self-absorbed. Plus, unlike Bush, he's a night person, who is at his sharpest late in the evening. Clinton was a night person, but he didn't need much sleep.

When you are President, you can make your staff follow your schedule (until you burn them out), but you can't do public events in the wee hours of the morning. If you are going to give a big speech at the National Convention of Whatevers, they'll want you to give it some time between 9am and 9pm.

Another problem with being a night person is insomnia (which is common among people who get more energetic as the day goes on), which doesn't fit well with living a Big Life with a Big Schedule. That's basically what killed Michael Jackson: insomnia combined with a demanding schedule of large-scale rehearsals (plus having your own private Dr. Feelgood to shoot you up with an ever-escalating series of sleeping drugs).

My published articles are archived at iSteve.com -- Steve Sailer

September 2, 2009

The 1960s: Elite Lib

In traditional Western cultures, below the rank of aristocrats, romantic and sexual impulsiveness was a major threat to social standing. The punishment in terms of class standing for out-of-wedlock births was so harsh that the illegitimacy rate among women in England in 1200-1800 was stable at around 3-4%, even though women didn't marry on average until age 24 to 26.

The sexual revolution of the 1960s, which hit home in the 1970s, disrupted this traditional system of social sanctions. You can see its power in the spread of the term "single mother," which is now used as a self-description not only by mothers who have never been married, but also by divorced mothers, and even by widows with orphans! My wife knew a Korean lady with two young daughters whose husband had been killed in a car crash. Being old-fashioned, I assumed she would describe herself with that honorable term "widow." But, being a newcomer to America, she had realized what I hadn't noticed yet: "widow" was out of fashion, "single mother" was in.

And yet ... the old logic that children need two parents to have the best chance to succeed in life still plays out even though we aren't supposed to mention it. What I've noticed in socializing with financially successful families whose children are on the academic fast-track is that they follow the old rules implicitly. Divorce is relatively rare, illegitimacy even rarer, mothers who aren't highly-paid executives are typically housewives, and so forth.

So, by removing social indoctrination of the masses, the post-Sexual Revolution system selects even more than the earlier system for social success by individuals who are intelligent and cold-blooded. In contrast, people of impulsive temperaments and less ability to foresee the consequences of giving into their impulses are now much more on their own with far less guidance from the culture.

Thus, the people in the upper reaches of society are increasingly of what you might call a Swedish or Swiss personality (or are Asian immigrants whose families never took seriously the 1960s).

But nobody is supposed to notice that publicly. So, the top level of our society continues to argue for the breaking down of old restrictions, whether on the idea that marriage is between a man and a woman or that their should be limits on debt and interest rates. After all, individualistic self-determination works fine for the upper middle class.

From this perspective, the 1960s cultural revolution look like an Elites Liberation movement, in which Unitarians, Congregationalists, Jews, Episcopalians, Christian Scientists, and similar products of centuries of bourgeois culture decided that they, personally, could get by without the old rules, which, indeed, many of them could. Moreover, they were tired of being expected to be role models of starchy behavior for the proles.

But the tenor of the times demanded that this Elites Lib movement be cloaked in egalitarian and civil rights rhetoric and policies (such as refocusing AFDC from Roosevelt's aim of supporting widows to supporting single mothers, because we wouldn't want to discriminate against blacks), with disastrous effects on people toward the bottom of society, especially blacks.

By the way, that reminds me that perhaps nothing I've ever written has outraged people more than my defense of America's average African-Americans that I wrote during the Hurricane Katrina anarchy. I pointed out that the New Orleans blacks who were misbehaving so conspicuously on TV aren't representative of the national black average:
Judging from their economic and educational statistics, New Orleans' blacks are not even an above-average group of African-Americans, such as you find in Atlanta or Seattle, but more like Miami's or Milwaukee's. About half are below the poverty line. With the national black average IQ around 85, New Orleans' mean black IQ would probably be in the lower 80s or upper 70s.

I argued that New Orleans' African-Americans had long been notorious for worse behavior than the national black average, and that New Orleans' libertine Latin / tourist trap morals are one cause:

The unofficial state motto is "Laissez les bons temps rouler" or "Let the good times roll." Compare that to New Hampshire's official motto of "Live free or die," which display a rather different understanding of freedom. Louisiana's reigning philosophy is freedom from responsibility.

It's a general rule that the tastier the indigenous cuisine, the lousier the government. Its culture has provided America with jazz, A Street Car Named Desire, and the great American comic novel of the 20th Century, A Confederacy of Dunces. New Orleans is a nice place to visit. But you wouldn't want to raise your kids there.

All this is now common parlance, more or less. What you won’t hear, except from me, is that "Let the good times roll" is an especially risky message for African-Americans. The plain fact is that they tend to possess poorer native judgment than members of better-educated groups. Thus they need stricter moral guidance from society.

The berserk denunciations this observation of mine elicited were partly the usual Pavlovian Emperor's New Clothes response to examples of Blacks Behaving Badly. When the most prominent black professor in the country throws a two-year-old's tantrum, the President of the United States insists upon a national conversation about white racism. When six black high school football stars batter a single unconscious white youth in Jena, then the future President of the United States denounces white racism.

As Lionel Tiger and Robin Fox said about Hans Christian Andersen’s The Emperor’s New Clothes, the psychology of the story suddenly goes all wrong at the end. As you’ll recall, the two “weavers” contend that only intelligent people worthy of holding their jobs can see the new clothes. So, just because one little brat is saying “The emperor has no clothes,” the mob isn’t going to suddenly agree with the kid. They are instead going to get very angry at this obviously stupid child who, clearly, isn’t even worthy of holding his job of street urchin, unlike all of the respectable people who deserve their positions of authority, who are all smart enough to see that the Emperor is wearing a ... uh ... new, higher form of clothing.

I suspect, however, that I had also sinned by tangentially calling into question one of the sacred myths of our age, repeated endlessly by PBS: that the 1960s cultural revolution was for the benefit of blacks, when, in truth, it was for the benefit of upper middle class whites, and was very much at the expense of people farther down the social scale.

My published articles are archived at iSteve.com -- Steve Sailer

Are women to blame for the Mortgage Meltdown?

My Wednesday Taki column is now up. It takes a close look at the 2006 Century 21 commercial Suzanne Researched This. Read it there and comment upon it below.

My published articles are archived at iSteve.com -- Steve Sailer