Mortgages and Blacks: Trying the same scam again
September 23, 2005, 11:40 AM
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Tom Sowell deploys one of the most ruthless intellects currently to be seen commenting in the MSM - he positively scared my wife at a Manhattan Institute lunch years ago, given, I think, to mark the publication of his book Civil Rights: Rhetoric or Reality. And he refuses to be bullied, abandoning his Forbes column, I understand, rather than tolerate increased interference after the retirement of the great Jim Michaels as editor of that magazine.

So it is not a surprise to find him devastating the latest attempt to allege racism as the cause of less favorable access to mortgage credit by blacks (which is doubtless preparatory for a campaign for state-mandated preferences).

This matter is something of a family business. My brother, with co-author Leslie Spencer, did a lot to derail the previous bandwaggon run. They pointed out in a Forbes article that the 1992 Boston Federal Reserve study was fatally flawed in failing to comprehend the implication of the similarity between white and black default rates:

The market, in short, worked. The mortgage lenders somehow weeded out the extra credit risks among minorities, down to the point where white and minority defaults were at an equal, apparently acceptable, rate.

The current effort makes much of the heavier reliance by blacks on the recently-developed high-cost subprime mortgage product. It remains to be seen if force-feeding credit like this is really good either for the borrower or the lender. As Sowell observes:

Often the solution is worse than the problem.

Hat Tip American Renaissance