The Case Of The “Disappeared” Subprime Minority Borrower

It was on a bitterly cold and
frosty morning, towards the end of the winter of `07,
that I was awakened by a tugging at my shoulder. It was
Holmes. The flashlight in his hand shone upon his
intense face. I knew at once that something was amiss.

Watson, come!"

he cried.

"The game is afoot. Not a
word! Into your clothes and come!"

My friend had recently sunk
into his customary melancholy, his presence but a
wailing violin behind a closed door. Nevertheless, as I
was hurriedly getting dressed, I remembered that a
change had come upon him on the previous morning.

Mrs. Hudson had just brought
in the morning papers, along with our toast. I was
fiddling with the dial of our new Marconi, when Holmes`
sharp cry from the breakfast table diverted my
attention. He was marking with his fountain pen an item
in the paper. The luster had returned to his eyes.
Curious, I let go of the dial knob and leaned over
Holmes` shoulder.

The underlined column read:

Minorities` `dream` foreclosed
and underneath,

The subprime-mortgage crisis will cost black and Hispanic
homeowners up to $256 billion—the worst financial hit

for minorities in


Just then, the

Afro-American voice
had been carrying on in the radio program cohered into
distinctive words:

money-lenders have already sucked the value out of whole
communities, urban and suburban. The wealth loss is
staggering: People of color have collectively lost
between $164 billion to $213 billion over the past eight
years, with Latinos losing slightly more than African

Holmes was buttering his
toast and listening. 

the crisis hit,"

the distinctive voice was now choked with indignation,
"it was estimated
that it would take 594 years—more than half a
millennium!—for Blacks to catch up with Whites in

household wealth
. Now, in
the aftermath of the home mortgage massacre, it could
take ten times as long—more than 5,000 years!—before
Blacks achieve homeowner parity with Whites."

Holmes leaned back in his
chair with a whimsical smile, as the commentary
"Looking backward, that stretches from now to when the

great pyramids

were built!"

I turned off the wireless and
sat down at the table.

"A cup of tea, Watson?"

Holmes said.

"A nation destroys its banking system and its

to fake the
putative minorities` creditworthiness,"
my friend
continued as he poured my morning restorative, "… and showers unearned benefits on them. When the subterfuge falls

impact on the same minorities

is twisted around to bolster
an imputation of racial discrimination."

He stood up, tying the sash
of his dressing gown.

"I say,
Watson, from the point of view of the criminal expert,
new opportunities are arising that may alleviate my
singular boredom since the

of the late
lamented Professor Moriarty."

As we alighted into the hansom cab, I had a premonition
that a new adventure had just begun, related somehow to
that statement…


The Adventure of the Abbey Grange
, with
apologies to Sir Arthur Conan-Doyle

The financial debacle of a $1.4
trillion pool of subprime mortgages of which at least
half are unpayable and 25% are irrecoverable did not
start in a political vacuum. For years, the American
political Establishment

badgered the banking industry
about the

"racism" implied in its
loan portfolio.
The denial of mortgage
loans to
at a greater percentage than denial to
whites has been deemed a
prima facie
evidence of racial discrimination.

socialism called for direct state ownership of the means
of production, distribution, and exchange"
wrote Peter
in a 1993
National Review
article discussing a clash he had had in
Magazine with the race-drunk mortgage industry critics.

"Neosocialism just aims at
political control. Socialism claimed to be more
efficient. Neosocialism claims to be more equitable.
Above all, neosocialism professes to combat `racism,`
since this magic word cows all opposition. Apparent
neosocialist objective of the season: commandeering the
banking system and forcing it to subsidize key client
At Work?
By Peter Brimelow, National Review, w:st="on">April 12, 1993].

related how the
Wall Street Journal
had carried five stories in late
1992 alleging, based on raw rejection rates, that
lenders were discriminating against minorities. Such
allegations were obvious rubbish, as they took no
account of standard credit considerations like
employment, income, and net worth.

the WSJ
reported on a Federal Reserve Bank of Boston study that
did correct for these criteria, and still found that
minorities were rejected at a slightly higher rate.
[Mortgage lending in
: Interpreting HMDA data
Paper 92-7
difference, the Boston Fed had concluded, could only be
due to racism.

and his Forbes
magazine co-author Leslie Spencer had inquired of the
Boston Fed whether it had taken under account default
rates for black and white mortgage holders. It had, the
Boston Fed`s Research Director replied, and it had found
equal default rates.
Hidden Clue
, Forbes
January 4, 1993

then pointed out that this proved pure market forces
were working in mortgage lending. Mortgage lenders were
somehow able to weed out impartially credit risks,
reducing defaults down to the same rate for whites and

"[That] is
a sophisticated point"
responded the Boston Fed`s Research Director.
"I do believe
discrimination occurs"
, she reiterated, but then
conceded, "I do
not have evidence … no one has evidence"

"They don`t
have evidence, but they sure have convictions"
concluded Brimelow,

how the Boston Fed study`s fatal flaw
would be passed over by the mass media. He concluded:

"Neosocialism, however, is
not science. What`s going on here is a witch-hunt,
conducted by the religious Left and aided by key
elements of the civil service. The innocent victims will
be the banking system, the savers of America, the
economy, and ultimately liberty itself. The craven
banking industry cannot be expected to resist. It is
time conservatives stopped piously chanting about
capital-gains tax cuts and woke up to the fact that
their capital is under attack"

The same
wishful assumptions masquerading as
"research" by
high public officials and reported by journalists as the
truth were examined by four specialists, who published
their findings in a 1996 paper,
Discrimination and FHA Loan Performance
Their conclusion:

"Results of the analysis fail to find evidence of better performance on
loans granted to minority borrowers. Indeed, black
borrowers are found, all else being equal, to exhibit a
higher likelihood of mortgage default than other
borrowers. These findings argue against allegations of
substantial levels of bias in mortgage lending."

Three years later, two finance
professors, Stanley D. Longhofer and Stephen Peters,
pointed to the same fatal flaw behind all the
caterwauling about the higher rejection rates for black
and Hispanic mortgage applicants.


Fair Housing Act
and the
Equal Credit Opportunity Act
prohibit discriminatory
lending considerations by reasons of race, gender,
marital status, religion, national origin, familial
status, and handicap. Longhofer and Peters stated that,
grand labels notwithstanding, these laws have nothing to
do with fairness: they target social inequality, not
bigotry. It`s socialism through the back door.

"[E]verything else being the
same, minority applicants are probably less
creditworthy, on average, than whites. Therefore, in the
absence of fair lending laws, it is

likely that minorities would be denied loans more
frequently than whites
and would pay higher interest
rates and fees on approved loans…
laws have the perverse effect of forcing lenders to
cross-subsidize minority borrowers from the higher
profits they earn on white borrowers. Such
cross-subsidization is inherently `unfair` because it
works as a tax on one group that is used as a subsidy
for another."
Is Mortgage Discrimination Illegal? A Fresh Look at the
Mortgage Discrimination Debate,
Longhofer and
Peters, Cato Institute,


Thirty years of faked research and
horrendous noise from
"social justice"
carnies, all amplified by the left-driven mass
media, and the political elite figured out which
direction held out the most rewards. A heavy dose of
demagoguery followed. Some of these sub-eligible
politicians, such as Congressman

Barney Frank
, Chairman of the
Services Committee
, are still on the job, acting as
though they have no part in the financial train wreck
they have instigated.

Finally, with further pushing by
different government branches and agencies, mortgage
lenders found a solution to inconvenient reality. It was
the subprime loan, with sub-viable variations such as



No forces were available to combat
the American economy`s unbalancing by cultural Marxists,

noisy "minority" chieftains
and power-hungry opportunists. Instead of
leading a counteroffensive, the federal government
(mostly under Republicans) pushed toward the fall. And
the bankers went along—even though it was their
depositors` capital they were converting to cotton

Banks started dishing out mortgages
as though they were consolation prizes for the poorly
educated of shaky employability, or achievement awards
for the undisciplined and uneducable with no collateral.

Overwhelmingly, these prize-winners
have been "people
of color."

Presto! Many more
"people of color"
could achieve
"the American Dream"
—some a few times over, as
people with no money and no assets were able to buy
several houses each, hoping for a quick and profitable

And the occupants of CEO suites
were happy too. They had gained points with
lobbies and their vast cohorts of useful
idiots. Not to mention the favors of weathervane
politicians—and enormous end-of-year bonuses to boot.

In trampling on rules of sound
banking going back at least to medieval Italy, our
financial wizards discovered the eternal quest of
alchemy—how to convert lead into gold, for a while at
least, before it turns into garbage. Employing PhD`s in
high mathematics, they diced and mixed financial offal,
stuffed it into sausage skins, gave this dubious bologna
properly pinstriped labels such as

"Collateralized Debt Obligations",

and sold it off by the slice to equally greedy and
heedless financial institutions down the line.

From inception through each change
of hands, each putrid sausage slice ("tranche")
generated fat fees for its handlers.

But reality is stubborn. The
underlying loans went sputtering, then died. The new,
miracle collateral reverted to the ordure it had always
been. Mortgage lenders started dying off from collateral
toxemia. The sausage makers—the major financial
powerhouses of the w:st="on">United States
and Europe—started
writing off tens, eventually hundreds, of billions of
dollars in "nonperforming" assets. Insurance companies that guaranteed all that pungent
and the guarantors of the fermenting meat byproducts
that went into them—Fannie and Freddie to you—started
swooning too.

In February 2008, the forward
estimated total of total losses in the global banking
industry was
$600 billion
. By mid-July 2008, that estimate had
risen to

$1.6 trillion
. With the $10.1 trillion equity loss
in the global stock market between December 2007 and
July 2008 alone, the subprime debacle qualifies as the
greatest financial disaster in history.

That`s before the
demise of Lehman Brothers
, the world`s largest
underwriter of mortgage bonds; the US Federal Reserve`s
$85 billion loan to rescue the world`s largest insurance
company, AIG, from a similar fate; and the shotgun
marriage of w:st="on">America`s
largest brokerage house, Merrill Lynch. And before the
black week`s wipe-out of another $3.6 trillion dollars
in equity, reversed when the government announced a plan
to buy all US stocks, bonds, mortgages and bank deposits
for a down payment of $1 trillion plus fateful
installments down the road.

And it`s before this financial
system shock has fully fed through into the real
economy, precipitating what
has aptly named
Diversity Recession

mega-hustlers who steered venerable financial
institutions into this mega-iceberg, are not hurting.
The press described the CEOs of two of the greatest
malpractitioners of banking, Merrill Lynch and
Citigroup, as having
"fallen on their
—but not for these types

such a noble end
. Stan O`Neal, the ousted CEO of
subprime-bombed Merrill Lynch, received a $160 million
package. The

golden chute
for Chuck Prince, the CEO who led
Citigroup to the biggest loss in its 196-year history,
was $42 million. John Mack, the CEO of Morgan Stanley,
had to forego his 2007 bonus, but it`s some consolation
that at the height of the subprime scam, in 2006, he
copped $41 million.

Dick Fuld, the CEO of bankrupt
Lehman, took home $45 million in 2007, so he won`t have
to mourn the vaporization of his 401k.
Cayne, the former CEO of the former Bear Stearns,
similarly burned on his vested stocks, presumably
retired to his $28 million apartment in the Plaza Hotel,
to lick his wounds.

The banks themselves have not had
to drink the hemlock they had brewed either. Instead of
falling under the weight of their own malpractice,
except for Lehman they have basked in the largesse of
the Federal Government. Technically, it`s not a bailout
using taxpayer money—just a wide-open
"discount window",
a spigot from which poured over a quarter trillion
dollars in just four days in mid-September `08. But it`s
a bailout nonetheless, as pointed out by Barry Grey

on the World Socialist Website

government-backed bailout plan for Citigroup and Wall
Street underscores the increasingly parasitic and
socially destructive operations of American and world
, says this socialist writer.
"The role of the SIVs [Structured Investment Vehicle, funds that
raise capital by selling short-term securities at low
interest and then buy long-term securities at higher
interest, very often packaged, subprime mortgage loan
 exemplifies the
degree to which immense wealth is generated for a layer
of multimillionaires and billionaires on the basis of
financial manipulations almost
entirely divorced
from the process of production and
socially useful investment."

Exactly right, says this
anti-socialist. w:st="on">America`s main
industry, finance, has turned out to be a pyramid scheme
of reckless, interlocking bets, essentially a
stratospheric swindle.

But all this is just one side of
the picture. For at the other end of the spectrum from
the princes of finance are the mostly
rubes who bought houses they could not afford with money
they did not have, based on income data they had
falsified, egged on frequently by crooks in the employ
of companies such as

—that self-lauded
sponsor of the American Dream

And there are enough of them, and their skin
tones are compelling enough, to generate enormous
political pressure for government action to bail them
out too.

into Google recently yielded 544,000
links, with typical items reading:  

Even this small sample reveals the
main sources of the incessant harangue:

ethnic grievance lobbies,
socialist fronts, and
their three megaphones: lawyers, academics and the
Mainstream Media.

To save greed-demented bankers and
freeloading borrowers from themselves, the Fed has
repeatedly cut interest rates and pumped tens of
billions of dollars at artificially low rates to the
subprime-tainted banks. As of
September 7, 2008
, the Bush administration,
on behalf of the American taxpayer, essentially wrote a
check for $200 billion to bail out the two fences of illicit
mortgage loot
and Freddie t
o you—and assumed over $5 trillion in
their liabilities, doubling the national debt.

When Fannie and Freddie were
profitable, their profits went to the investors. Now
that they have losses, those have been

assumed by the US taxpayer

And so we have a government
practicing selective socialism on behalf of insatiable
corporations on one end and improvident individuals on
the other—at the expense of the vast majority in

It`s socialism that plunders the
renters, the old and retired, the savers and the bond
investors in order to shower their money onto

home owners-by-error
, the debtors, and speculators
in financial fancy.

This is even more unjust and stupid
than simple socialism, for that socialism aimed to
plunder a rich minority in order to benefit the middle
and bottom majority. This American mutation, however,
aims to plunder the middle majority in order to bail out
the bottom and top minorities of race and riches.

The refreshingly named
Housing Bubble
has named this fiscal mega-crime
Capitalism for Dummies.

What`s going on is a base
perversion of both morality and justice. It substitutes
an innocent party to be punished for the malfeasance of

All the
government efforts to prop up falling dominoes stoke
inflation, devaluing

, and sabotaging the

responsible, provident citizen

As of August 2008, inflation in the w:st="on">United States
is rising at the fastest pace since 1981. The
government, knowing this,
cooks the books.  Summer `08 inflation
rates were up to 12.5%, but the government Core Consumer
Price Index figures were 7% lower. To know the truth,
one has to rely on
American equivalents of samizdat
, in
the best
USSR tradition

de facto
devaluation of the dollar has now accelerated so much
that a formal devaluation may be necessary. Therein lies

specter of the Weimar Republic
: people exchanging
wheelbarrows of banknotes for a

loaf of bread
…and a strong, indignant leader saving
them from the nightmare with passionate oratory,
national socialism, and the goose-step.

Already bank branches
are under siege
by people facing foreclosure who
were primitive enough to sign

mortgage papers that they did not understand
, in a
language they often did not know—English.

In effect, what`s going on in the
realms of both the subprime Wall Street swells and the
little mortgage borrowers
with subprime intelligence
is a slow but relentless pressure to unravel contracts
entered into by consenting adults. That is an erosion of
Contract Law, the very foundation of civilized society.

This farce in four acts, with wigs,
masks and costumes, trapdoors, sliding plywood scenery
and weeping violins in the orchestra pit has been
enacted for 40 years without letup for one reason only:
to camouflage or otherwise deny racial group differences
in IQ, and in mean ethnocultural traits such as the
importance attached to education and to obeying the law.
In the realm of statistical reality, all these, and not
"racism", bear directly on the chances of material success in
life—including home ownership.

The statistical facts imbedded in
the last paragraph are 
considered so unacceptable in this country that
the verb "to
is deployed here in its transitive mode,
the way it has been in the political practice of
banana republics.
Nevertheless, these phenomena are
not only observable in one`s daily life—if one but
unplug those electrodes

implanted in the brain since kindergarten
—but are
based on thousands of peer-reviewed studies going back
100 years. Corollary issues of ethno-cultural group
differences have been studied with conclusive results
for almost as long. [Race
and Psychopathic Personality
, By Richard Lynn,
American Renaissance, July 2002]. But woe is him who dabbles in

proscribed science



mean group IQs
of 70 for
sub-Saharan Africans
, 85 for Afro-Americans and
Polynesians and 88 for the main
"minority" in
the US, the Mexican mestizos, versus 100 for American
whites. (The latter containing

with an IQ mean as high as 115.) This is
as close to science as anything has ever got in the
social sciences. An authoritative review of the last 30
years of relevant research is

and a comprehensive understanding of
the subject is available for the intelligent layperson
at websites such as

Steve Sailer`s archive
, the best available
bridge between the relative science and common sense

implications of the
IQ differences for success
in education, employment,
home ownership etc. are

and, again, covered in depth by major
researchers, ad infinitum. Here is Professor

"People with IQs between 75 and 90 are 88 times more likely to drop out
of high school, seven times more likely to be jailed,
and five times more likely as adults to live in poverty
than people with IQs between 110 and 125. The 75-to-90
IQ woman is eight times more likely to become a chronic
welfare recipient, and four times as likely to bear an
illegitimate child than the 110-to-125-IQ woman."
General Intelligence Factor
Linda Gottfredson,
Scientific American, Volume 9, Number 4, Winter 1998.]

Due to the mathematical properties
of the bell curve, 68.3% of the distribution lies within
one standard deviation ("sigma") from the mean, and 95.5% lies within 2 sigmas. Since the
sigma in intelligence studies of the American population
is set at 15, that has

deep implications
relative to

educational and other attainments

An IQ of 100 is considered
necessary for a successful completion of high
school—real completion of a real high school, as opposed
to the "social
of the dumb through the



American School
s (11). With a mean IQ of 100 for
American whites, 50% of them have the capacity to
acquire that high school graduation ticket to further
knowledge and prosperity. But a mean IQ of 85 for
American blacks means that only 15.9% of them have that
capability. Nonwhite Mexicans have a slightly higher
ratio. Nature, unlike

Lake Wobegon
, does leave children behind.

The subprime scandal is only one
example of the political elite`s willful blindness.
Other adventures of

  • The US
    Transportation Security Administration spends $5
    billion a year to delay, harass and annoy

    677 million passengers on 10.3 billion occasions per
    for the sake of weeding out their
    toothpaste tubes and making them feel equally
    debased as they crawl toward the selection chute
    beltless and barefoot.

All this in
order not to have to notice that a definite statistical
portrait—excluding the overwhelming majority of all
passengers—emerges from tabulating the ethnic and
demographic markers of the thousands of terrorists who
have attacked American and European targets over the
last quarter century.

  • The
    American educational systems spends over half a
    trillion dollars per year K-12 education—but it`s a

In a 2007
comparison of 29 OECD countries, the US came up  first
in education expenditure, spending approximately $10,000
per year, per pupil, while scoring (among 15 year olds)
24th in math and 17th in Science
In the latest reading skills comparison of 44 countries,
the US was

. Meanwhile, to cite one of many,
the Czech Republic spends on education about $3,000 per
year per pupil, yet in international comparisons it`s 6th
in math, 5th in science and 2nd in

Could it
be, perchance, that America `s vaunted
"strength in
has been overhyped when compared to
boringly "nondiversified"
, the


 Per US
Government statistics, 42% of students enrolled in
American public schools in 2005 were "minorities",
and 20% spoke
a language other than English at home.


is a euphemism that has nothing to do with population
percentages but everything to do with "disappearing"
the inconvenient truth of mean racial group differences
that handicap the
"minorities", but not the majority, in education and wealth

In reckoning with these metrics lie
the answers to all societal woes of the

Third World-
infused multiracial society. We have a
criterion by which to stop the pouring of further
enormous treasure down a bottomless well to
what are not the faults of society but the woof and warp
of the manifest forces of nature—or God, to one so
inclined. We have a yardstick by which to assess the
national interest with regard to unrestricted
immigration. We have a map by which to pursue more
effective solutions to the problems of crime, welfare,
education, cultural dissolution and more.

But perhaps not in our lifetime—not
until many more people can be described by 
Irving Kristol`s quip that a conservative is a
liberal who has been

mugged by reality.

Ultimately, each individual must be
judged on his own merit. His group`s mean
characteristics are essentially irrelevant. 

But by granting

racial group preferences to
based on the spurious assertion of
racial discrimination
, demagogues and
bien pensant
liberals actually compel truth-seekers to dig for
statistical findings related to such groups, to refute
the fraudulent charges of

Instead of condemning the suicidal
magnanimity of bestowing
home ownership
on the mostly-"minority"
improvident whose only qualifications were their skin
tones and
loudmouth advocates
, America is busy pouring ashes
on its head because of the inevitable consequences of
folly that,
by incredible coincidence, fall disproportionately on the selfsame

It`s not often in history that such
extraordinary delusions have been so pervasive, with
such negative consequences. But instead of facing
reality and learning to work with it, our Moriartys
lunge at our Sherlocks and wrestle them over the
precipice of the
the ultimate doom of the whole of society.

It`s a fraud to attack those who
speak out on racial differences as
"racists", as
though reckoning with salient characteristics of group
averages denies the potential of individual members of
such groups. It`s inexcusable to brainwash generations
of vulnerable schoolchildren that a pervasive
"racist" environment is responsible for the under-achievement of
It`s the

hereditary qualities
that are in free play here: IQ,

ancestral culture
, the hand that fate has dealt.

The cultural Marxist, or useful
idiot, intent on shouting down reality and seeing
everywhere, may drown in a lake whose mean depth is four
inches, while protesting that the second and third
tallest men in the world, who are Chinese, invalidate
comparisons of the mean height of the Chinese and the

For forty years now, and perhaps
for the first time in 350 years, the West,
en masse, has
been retreating from the Enlightenment that had
catapulted it to the pinnacle of civilization. The
forces of reason, empiricism, truth-seeking, basic
freedoms (before they became

flowering of genius
in all
areas of human endeavor
, all are in retreat
everywhere at the same time.

A liberal dogma, a totalitarian
taboo divorced from any reality that has ever existed,
has taken hold. The new Nicean creed posits that
discrimination, i.e. the perception of differences
between groups—males
v. females
; shepherd Muslims v. urban
post-Christians; Mexican
mestizo peasants v.

Danish professors of physics;
High Protestant
culture v.

Hmong tribal custom
—are the greatest, the cardinal,

The overwhelming preponderance of
black multimillionaires in


passes without a comment. No affirmative redress
action is available for short Ashkenazi Jews and

Bengali Indians
who feel unfairly excluded from the
NBA. But the preponderance of whites in the sciences,
the professions and upper corporate ranks, and the
material rewards that accrue to that, are seen as racism
that requires a disastrous re-engineering of society.

In finance, we have gone
laissez faire
on a group of reckless buccaneers disguised in

Savile Row
finery, selling

spoiled meat
from the back seats of

limos. But we have banished
laissez faire
in the main area where it is salutary: liberty to pursue
happiness with the hand of cards one has been dealt by
fate and DNA, played with will and character by the
rules of pure meritocracy. And this, rather than the
subprime meltdown of faked homeownership, is the
destruction of the American Dream.

A roomful of Professor Moriartys
could not have conceived a more diabolical scheme to
destroy, morally and materially, the w:st="on">United States.

Takuan Seiyo

is a multiethnic and multilingual Euro-American
immigrant, writer and former international media
executive. A happy and highly contributive Californian
for decades, TS left as a demographic, political and
fiscal refugee. He is now content to live in Japan, a

that does not actively pursue its own extinction
where he is an
oft-fingerprinted and respectfully discriminated-against
minority. An earlier, shorter version of this essay
appeared in print in the

Quarterly Review
,  March