[lbo-talk] Goolsbee: subprime was pretty groovy (in 2007)

[Charles Turner]

On Sun, 30 Nov 2008 23:02:09 -0500, Doug Henwood wrote:
> 
> On Nov 30, 2008, at 10:02 PM, Max B. Sawicky wrote:
> 
>> And in general looser credit is better than tighter credit, within 
>> limits that
>> were obviously breached, but looser is the more liberal impulse.
> 
> Well, no. Loose credit is often the cowardly solution to class 
> conflict. Instead of taking money from the rich, they're encouraged 
> to lend it to the poor. Instead of having a rational housing policy, 
> which insulates shelter from the idiocies of speculative markets, we 
> have subprime loans to people who shouldn't be borrowing gobs of 
> money. This is one of the foundational defects of populism.

<http://www.fanniemaefoundation.org/programs/hpd/pdf/hpd_1503_Wyly.pdf>

"These trends have magnified inequalities in the inner city. Our 
evidence 
rcveals a strong surge of mortgage capital investment into the 
gentrifying 
central areas of two dozen large cities, a surge driven by the 
decisions of 
middle-class and wealthy home buyers and the well-capitalized banks 
that 
cater to them. Yet deep racial and ethnic disparities persist in these 
same neigh- 
horhoods and cannot be explained away as the product of borrower 
deficiencies. 
Indeed, institutional characteristics are crucial, particularly in new 
forms 
of stratification where a lender's willingness to serve blacks has 
become closely 
linked to specialization in higher-cost subprime credit. New lines of 
stratified 
rem vestment are laid atop prior rounds of redlining, discrimination, 
and dis in- 
\TSrl11ent. Institutional segmentation is replacing exclusion and 
credit 
rationing. Mortgage lending has been woven into ever more complex 
secondary 
and tertiary markets, splintering financial commitments into multiple 
relation- 
ships that are unhinged from at least some of their underlying 
fundamentals. 
\X'c l11av be seeing a partial autonomy for housing debt markets as 
circuits of 
production and investment in their own right. This wave of financial 
innova- 
tiOJl has certainly created new opportunities for many homeowners and 
home 
hu\Trs, hut the benefits are precariously mortgaged on the continued 
with- 
drawal of surplus value from nonhousing sectors or disinvested 
neighbor- 
h()()d~, regions, or countries in order to fuel the capitalized house 
price 
infLnion of a relativelv few favored submarkets."

(Sorry for the bard OCR!)

Charles