At least since September, I've been pounding the table in VDARE.com about the most overlooked cause of the Crash of 2008: President Bush's 2002-2004 crusade to raise minority homeownership by 5.5 million households through easy credit (for example, eliminating down payments) in order to bribe minorities into becoming Republican-voting homeowners.
Needless to say, our ruling class hasn't much paid attention to me. Republicans didn't want to hear about Bush messing up again. Democrats didn't want to think about the role "diversity" played in the disaster.
The causal connection, though, is so obvious that the establishment press is starting to echo my analysis.
For example, the long New York Times article White House Philosophy Stoked Mortgage Bonfire [by Jo Becker, Sheryl Gay Stolberg, and Stephen Labaton, December 21, 2008 appears to have been drawn in part from my VDARE.com columns, such as my September 28, 2008 essay Karl Rove—Architect of the Minority Mortgage Meltdown.
And on Sunday, the Washington Post pointed out in Karl Vick's Silver Lining of Subprime Slips Away in Calif. Suburb [December 28, 2008] about a Central Valley town that blacks flocked to from violent Oakland:
"And if Stockton [CA] today is the foreclosure capital of the nation—as several surveys show it to be—it also showcases a little-known upside of the 'subprime crisis': the elevation nationwide of hundreds of thousands of African Americans into homeownership."
Vick goes on to quote a black activist:
"For every $1 of net worth in a household headed by a white person, a household headed by a minority has 13 cents. Earlier this decade it was 6 cents … It is all because of homeownership that we've at least moved up to 13 cents."
Sadly, not for long.
Additionally, in Saturday's New York Times, Peter S. Goodman and Gretchen Morgenson profile one of the most egregious subprime lenders, Washington Mutual ["WaMu"]. (By Saying Yes, WaMu Built Empire on Shaky Loans, December 27, 2008). Their anecdotes about "stated income" mortgage fraud give a sense of the ethnic angle:
"Yet even by WaMu's relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer. Mr. Parsons could not verify the singer's income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved. …
"On one loan application in 2005, a borrower identified himself as a gardener and listed his monthly income at $12,000, Ms. Zaback recalled. She could not verify his business license, so she took the file to her boss, Mr. Parsons. He used the mariachi singer as inspiration: a photo of the borrower's truck emblazoned with the name of his landscaping business went into the file. Approved."
In short, my Big Idea—that there's been a Minority Mortgage Meltdown, precipitating a Diversity Recession—is now well on its way from scurrilous, racist calumny to part of the Mainstream Media's [MSM] Conventional Wisdom [CW].
Isn't it great that Pulitzer Prizes can now be awarded to webzine writers?
So now let me suggest another even less welcome Big Idea for the rest of the media to get around to in the next several months:
The Crash is telling us that this readjustment can no longer be papered over or postponed.
There are three kinds of financial crashes—in order of severity:
A liquidity crisis, in which lending drops because lenders worry that some people and institutions are too broke to repay.
A solvency crisis, in which lending drops because lenders know that many people and institutions are too broke to repay.
A wealth crisis, in which lending drops because nobody is as wealthy as they had thought they were.
Unfortunately, we appear to be at Level Three. Much of the wealth we thought we had two years ago didn't really exist.
One reason is that there was supposed to be what we should call an immigration-driven "Diversity Dividend". But of course it turned out to be politically-correct hot air.
Notice that a large majority of defaulted mortgage dollars are in just four states: California, Nevada, Arizona, and Florida. Each has a long history of massive Hispanic immigration.
Now if you assume, as you are constantly assured, that every ethnic group is equal in productive capacity per capita, a huge influx from south of the border would have to make land prices go up.
So, naturally, the Housing Bubble would be concentrated in the four Hispanic-impacted states.
Essentially, the Bubble was a speculative bet that Hispanicization of the population was "good for the economy."
If you had been lectured for your entire life on the virtues of multiculturalism, as most young Wall Streeters have been, that assumption made perfect sense. Or, to be precise, its converse—that diversity is not strength but weakness—is nowadays literally almost unthinkable to well-socialized younger people.
California's strength was its diversity, right? So, of course, Californians could pay off all those half million dollar with zero down payment mortgages. They're diverse!
But in fact, as we've since seen, there is no "Diversity Dividend". The law of financial gravity wasn't suspended in California.
The real—and quite frightening—question: is there a "Diversity Deduction"?
There's no doubt that, say, Mexicans tend to be more economically productive in America than in Mexico, due to the superiority of American institutions and American managers. But how much more productive?
The conventional wisdom in America is that the simple act of immigration makes immigrants equally, if not more, productive, than the average American. When you point out that there's no statistical evidence for this widespread belief, then you are told that their children will no doubt rise up to complete equality. When you point out that Latino sociologists have studied this question out to the fourth and fifth generations after immigration and concluded that convergence just doesn't eventuate—well, typically the conversation ends.
From 1970 to 2007, the minority share of the U.S. population doubled, from 17 percent to 34 percent. The Census Bureau predicts that minorities will exceed 50 percent by 2042—only a third of a century from now.
Hispanics and blacks tend to average somewhere around two-thirds of the income of non-Hispanic whites. That suggests that the increase in minority share of the population over the last 37 years lowered the national income by about five percent, compared to what it would have been if the increase had been in proportion to the U.S. racial balance in 1970.
However, the disparity in net worth between whites and non-Asian minorities (NAMs) is much greater than the income gap, running about an order of magnitude.
This suggests that the per capita wealth shortfall caused by demographic change is more like 15 percent.
And, it's only going to get worse—unless immigration policy is changed.
With the Immigration Act of 1965, which unleashed mass immigration again after a forty-year pause, our ruling class in effect decided that the U.S. would not evolve into a Switzerland, but instead into a Brazil.
This doesn't just mean intensified racial division and social stratification—a land of gated communities and favelas. It also means systematically poorer economic performance.
[Steve Sailer (email him) is movie critic for The American Conservative. His website www.iSteve.blogspot.com features his daily blog. His new book, AMERICA'S HALF-BLOOD PRINCE: BARACK OBAMA'S "STORY OF RACE AND INHERITANCE", is available here.]