Random Links LVI

More California Default Links:








Immigration Attrition Strategy:  “The Obama administration is expanding a program initiated by President George W. Bush aimed at checking the immigration status of virtually every person booked into local jails. In four years, the measure could result in a tenfold increase in illegal immigrants who have been convicted of crimes and identified for deportation.”

Obsessive Housing Disorder:

1.  CRA, IMHO, didn’t directly contribute much to the crisis.  (See Fed studies)

2.  Indirect effect (i.e., threat of CRA noncompliance used to convince banks to lower lending standards) is more plausible than #1; but even if so, there’s no inherent reason why banks’ lending standards should’ve slipped across-the-board (i.e., to non-CRA-related lending as well as CRA stuff).  A rational bank would’ve limited the underwriting slippage to CRA lending (basically, affirmative action as applied to mortgages), instead of generalizing it to all lending.  This is basically the “CRA made banks stupid” argument.  I am unconvinced.

3.  Frannie did contribute some (via purchases of subprime & Alt-A MBS), but significant private demand for private-label MBS suggests to me that, even absent Frannie purchases, we still would’ve had plenty of buyers for such securities.  Hence, Frannie wasn’t a necessary cause for this aspect of the crisis.

4.  Malanga does, however, get the general mentality correct:  “Promoting homeownership” has always been a political winner in DC.  As such, that mentality probably did much to both anesthetize government to the dangers of the housing bubble (which was driven by increased demand for housing – and how can that be a bad thing?), and to reduce their willingness to take actions (e.g., regulatory bans on mortgage “innovation” in favor of high-DP, fixed-rate mortgages; regulations arresting the general decline in underwriting standards) that _would_ have hindered the housing bubble.

5.  True “root cause” of declining underwriting standards was belief in perpetual housing appreciation.  Given such a belief, it was rational for banks to dumb down underwriting, since rising home prices would always ensure that they’d get paid.

6.  Pro-homeownership mentality of #4 was necessary but not sufficient; one could increase homeownership w/o eroding lending standards.  E.g., subsidizing DP’s & monthly payments.  If done gradually, this needn’t have bubbled the housing market (it still would’ve buoyed prices, but gradually increased supply could’ve moderated such price increases).

7.  His citation of Harriss is accurate; see http://www.nber.org/books/harr51-1.  HOLC’s difficulties in dealing w/ delinquency (due to policy imperatives that made them reluctant to FC) are yet another example of the dangers of politicized lending.

Transactional v. Revolving Credit:



Credit Card Interest Rates:



MTM Redux:



Optimal Foreclosure Timelines:  “…the “sweet spot” for foreclosure timelines–long enough to allow borrowers to cure, short enough to correct incentives and control costs to investors–is “roughly 270 days” from DDLPI to completion.”

ROK Credit Card Crisis:  Interesting, though I would’ve preferred to see more statistics.

Feline Evolution:  “…whereas other domesticates were recruited from the wild by humans who bred them for specific tasks, cats most likely chose to live among humans because of opportunities they found for themselves.”  Why am I not surprised?

Green Bubble

Credit Report Tyranny

Crisis & Economic Pedagogy


One Response to “Random Links LVI”

  1. WRT feline evolution, it would probably be a little more accurate to point out that humans didn’t need to breed cats for specific tasks, because the primary advantage we derive from them is a task that they were already highly adept at performing. Of course, given their size and natural inclinations, early humans would probably have been hard-pressed to figure out what _else_ to do with them, anyways. Of course, there is also ample anecdotal evidence to suggest that early humans may also have adopted cats because “they’re so cute.”

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