Rather Predictable

It's not even ironic that in the wake of a massive financial crisis driven by the Federal government's relentless pressure on lenders to relax lending standards and make more home loans to minorities, one of the few actions Eric Holder's Justice Department has taken in this sphere is to charge a bank with unfair lending practices to minorities. And not just any bank, of course, but the Typhoid Mary of minority-outreach lending, Countrywide. I'm not surprised - are you? No, I didn't think so - saw it coming a mile away.

The specific allegation - that Countrywide "steered" black and Hispanic customers to higher-fee, higher-rate loans compared to whites (with allegedly equivalent qualifications), is not entirely implausible. Given Countrywide's "$Trillion Pledge," some serious recruitment of minority candidates was needed. To really ramp up minority lending, you can't just sit behind a desk and wait for the customers to line up. You've got to go out and find them, convince them that they could indeed get a loan, and assure them that that dishwasher's salary won't be a problem, trust me. These recruits need a little heftier commissions to get the job done, so it's hardly shocking they might just convince the prospective borrower to pay a bit more in interest and a bit higher fees than a customer who comes knocking on your door with LendingTree data in hand.

Yet, despite a plausible scenario to explain it, I seriously doubt the allegations are backed up by the data. Typically these "equivalent qualifications" fail to take into account borrower's net worth. And more important, is there any data showing that minority borrowers performed better with subprime loans than white borrowers? I doubt it - if there were such data, it would have been revealed long ago. In fact, the Federal Reserve has carefully guarded any such data, leading me to believe the exact opposite is true - that minority performance was actually worse. Bank of America - which owns Countrywide - settled the complaint without a fight, of course.

Illegal? There was Nothing Illegal!

Obama has received characteristically little grief for his claim that the fraud that drove the Wall St. debacle wasn't illegal. For Obama and the left, such quaint, common-law legal concepts like "fraud" are irrelevant in a modern state. Regulations are the way to go - the government establishes detailed regulations and legions of regulators micro-manage firms actions. Fraud - a charge that requires detective work, witnesses, forensic accounting, etc. - is just too messy, too unpredictable to bother work.

Regulations, on the other hand, could prevent these bad actions before they occur, plus direct commercial activity towards achieving policy goals, such as financing for favored projects. Of course that was all tried before - the S&L crisis, the Enron scandal (which begat Sarbanes Oxley, arguably the most burdensome regulatory regime ever) - and it happened anyway.

Fraud prosecutions in this scandal might not have been all that difficult. You start with the borrowers who lied on their applications, and then go right up the chain to the brokers, their managers, the financiers who put together the CDO's and on up to the top. Sarbanes-Oxley itself, which effectively criminalizes incorrect earnings statements, should have been able to bag a few CEO's all by itself. But apparently no one in the Justice Department has found this massive web of fraud anything but an impenetrable morass.

I must confess, though, to having some sympathy for the banksters. Though I have no doubt they engaged in out-and-out fraud, I'm also convinced they're behavior was essentially foisted upon them by the government's minority-lending mandates. Starting early in the Clinton administration and then amped up by W. himself, banks faced the choice of stagnating or aggressively pursuing minority lending. But of course at the same time they are being pressured by the government to take on less profitable business (less profitable because the loans are riskier), the banks are under tremendous pressure by shareholders to be more-and-more profitable.

Well the only way to avoid losses on riskier assets is to increase leverage. So they appealed to the authorities for relaxed leverage rules, requests which the authorities all too willingly accommodated since it was towards a noble cause. But as we all know now, pumping up leverage is like being a mule-skinner transporting nitroglycerine - the pay's good but one bump and it's all over. The CDO's were an effort to share the risk - like paying the other wagons to each take a bottle or two of nitro - but then what happens of course is that when one blows, all the other wagons go up with it.

On the other hand, the banks could have showed some courage and fought back, insisting that no business model could withstand this kind of debasement of best practices. They could have insisted that bank lending is too fundamentally critical to the nation's economic health to be subject to politically correct mandates. But such courage is nowhere to be found in the business world. Indeed, the Diversity Doctrine is so deeply entrenched in corporate culture that almost certainly those in charge actually believe it.

Asymmetric Political Warfare

The Supreme Court has agreed to hear Texas' appeal of a judicially imposed apportionment plan and issued a stay against the plan's implementation. The Justice Department claims that Texas's reapportionment discriminates against Hispanic voters by reducing their representation. But what this case really comes down to - and how I think the 5 conservative justices will decide - is the Justice Department attempting to dictate to states the partisan makeup of their delegations, which is clearly a violation of state sovereignty.

Back in the early days of the voting rights act, which imposes onerous restrictions on jurisdictions with a history of discriminatory voting rules, the question was whether you'd have a white Democrat or a black Democrat in the legislature or in Congress. Now that whites in the South have pretty much made a complete party switch, enforcing the Voting Rights act means mandating more Democrats than the legislature would prefer. But it is the right of state legislatures, going back to the early days of the Republic, to maximize their party's representation via apportionment.

States dominated by Democrats, however, have no such concerns - they can apportion their voters as they see fit (granted, California voters decided to implement a non-partisan apportionment scheme, but that's their choice). So how is it a level political playing field if one party is forced by the courts to give up seats while the other can operate without restrictions? It isn't, of course, which is why I think the 5 'good guys' on the court will overturn it. The question is how weasily will they do so?

This imbalanced political landscape is not just restricted to the Voting Rights Act. The Republican Party is basically the party of white America, but of course such an entity as "white America" cannot be acknowledged in mainstream outlets (except of course as a source of some evil). A Republican legislator cannot complain that his constituents are being forced to move because their schools are becoming disabled by excessive numbers of non-English speakers or poorly behaved minorities. So instead he must complain about "illegal" immigration in the vaguest of terms and express displeasure with the failure of schools by blaming teacher-unions (bastions of anti-Republican rhetoric). A Democrat, on the other hand, can freely rile up his constituents by denouncing "discrimination" and favoritism, regardless of the facts.

Similarly, any Democrat politician, black or white, can make unlimited hay over alleged racial profiling among the police or "institutional racism" in the law enforcement. But no Republican politician would dare court white voters by defending the police, pointing out, for example, the disproportionately high levels of criminal behavior in the black community. When it was recently revealed that some NYPD officers had the nerve to complain on a facebook page about having to work during the West-Indian Day parade which annually features gun-fire and police injuries, who came to their defense, pointing out that people who engage in gunfights during a parade deserve to be called 'animals'?

The essence of this asymmetry in political combat is that Democrats are free to rabble-rouse and demagogue their positions without penalty - indeed, often with great showers of media attention for doing so - while Republicans must rouse their constituents only obliquely through proxies - religious faith, gun rights, opposition to gay marriage, and of course "No New Taxes". Even then, we often hear pundits denounce the "Three G's" - Gays, Guns and Gods - so even their proxies are derided.

But this leads to dumb policies - or at least failure to enact sensible policies. We can't have sensible gun laws, because Republicans have to prove that they sympathize with white-Americans' anxiety over the baneful impacts of minorities on their neighborhoods not by addressing that issue directly but by supporting unrestricted gun rights. Gay marriage is stupid - but the real problem is the insidious "Diversity" mentality that so offends the white middle class, but instead of fighting that, Republicans must single out Gay marriage (and even that fight is being rapidly lost). And Religion leads to unnecessary constitutional battles, while it is just a proxy of course for the desire of white Americans to keep America the way it is - not a banana republic, not a dysfunctional, balkanized economic zone, as it is on its way to becoming.

Virtuosi Ain't All That

Friday night I attended the NY Philharmonic concert where they played Tchaikovsky's Violin Concerto with superstar Joshua Bell as soloist (NY Times review here). During the cadenza (an extended solo performance usually towards the end of the first movement of a concerto, for any Philistines out there), I got out my small pair of binoculars to get a good close-up look at his playing. But then I noticed that also in my field of view were first violinists (to the left) and the violists (to the right), up-close and personal.

As Mr. Bell's playing mesmerized the audience, one might expect these musicians to be looking on - if not in awe - in rapt attention, savoring the performance of one of their brethren, a professional like them but one who had reached the rarefied heights of superstardom. Well one would be wrong.

What I saw were eyes darting about unfocused - or more clearly not focused on him. Typically the eyes were looking down and away from Mr. Bell, or up towards the ceiling. Lips were pursed as if blowing out air, bows were lightly tapped in palms, bodies shifting around in their chairs. As the solo neared its conclusion and the players began to prepare for their return, I even saw one of the violists smirking as if thinking "Finally!". What I saw, in short, was impatience - that sitting through this solo was a chore and an annoyance, hardly a treat.

I've often wondered how these musicians - who are, as members of the NY Philharmonic, clearly among the most gifted in their profession - view the soloists who perform with them: are they thinking "S/He's not that awesome - I could play that just as well, if I ever got the chance or had the time" or are the soloists indeed viewed as having truly special talent. Well I still don't know what they think exactly, but one thing they clearly do not feel is awe.

So What Did Your Gay Uncle Give You for Christmas?

In the wake of the Andrew Sullivan racial-intelligence flap, Half Sigma's post on the topic devolved into a debate over the heritability of homosexuality. Regrettably, despite it being an "HBD" blog, the commenters generally proved themselves rather dense, with the host not helping much either. A common theme was the absurd "Gay Uncle" theory. This theory posits that homosexuality would be a favored trait because gay uncles help out raising their nieces and nephews. Mathematically this seems ridiculous as an uncle, sharing only 1/4 of his niece's genes, would have to be twice as beneficial to a niece/nephew than a parent (who shares 1/2 her genes with her children) to make up for the shortfall. But since I'm only mediocre in math, that doesn't bother me so much as the common-sense angle. Do these people know any gays? Have they ever seen them pay more than the most superficial attention to any children?

But perhaps gay men are more successful on average otherwise, and can bequeath benefits to their nieces/nephews. So I took a look at the General Social Survey (GSS) to see if there's any evidence of such a phenomenon. I looked at the GSS variables SEXSEX5 - which asks respondents the sex of anyone they've had sexual relations with over the last 5 years - and CONINC which is a measure of income in constant (inflation-adjusted) dollars. This question has been asked since 1991 so I tracked this over that time.

While the incomes of gays are jumpy, the incomes for straight males are substantially higher for all years but three. If there were a tendency for gays to be highly successful and thus well situated to help out their relatives, it sure doesn't show up here.

But, the sample sizes for gays are small, so how reliable are this data? Gay men constitute around 2 to 3 percent of the male population (I'm leaving out those with bi-sexual relationships - their incomes are consistently lower with one outlier). So if we wanted to validate that such a small population could be represented with reasonable accuracy at such low numbers, what might we look at - particularly when it comes to income? Obviously, Jews make up about the same proportion of the population, and the fact that Jewish incomes significantly outstrip those of non-Jews is well known. So this should show up clearly in the GSS if the income figures are reliable. Well here it is:

Just as we'd hope to see, incomes of Jews are significantly higher than non-Jews. Similarly, if gays were consistently more successful than non-gays, we should expect to that here as well - but we see, mostly, the opposite.

So the lesson is, if you want help from your uncle, you'll be much better off if he's Jewish than if he's gay.

Gays and Jews get a lot of attention in the media. While I know the readers of this blog are well aware of it, it might not be clear to the random person exactly what proportion of the population these groups constitute. Below, in full scale, are the percentages of those self-identifying as Jewish among all respondents and those reporting sexual relations exclusively with other men among all male respondents in the GSS: