House flippers triggered the US housing market crash, not poor subprime borrowers

Gwynn Guilford in Quartz:

The grim tale of America’s “subprime mortgage crisis” delivers one of those stinging moral slaps that Americans seem to favor in their histories. Poor people were reckless and stupid, banks got greedy. Layer in some Wall Street dark arts, and there you have it: a global financial crisis.

Dark arts notwithstanding, that’s not what really happened, though.

Mounting evidence suggests that the notion that the 2007 crash happened because people with shoddy credit borrowed to buy houses they couldn’t afford is just plain wrong. The latest comes in a new NBER working paper arguing that it was wealthy or middle-class house-flipping speculators who blew up the bubble to cataclysmic proportions, and then wrecked local housing markets when they defaulted en masse.

Analyzing a huge dataset of anonymous credit scores from Equifax, a credit reporting bureau, the economistsStefania Albanesi of the University of Pittsburgh, the University of Geneva’s Giacomo De Giorgi, and Jaromir Nosal of Boston College—found that the biggest growth of mortgage debt during the housing boom came from those with credit scores in the middle and top of the credit score distribution—and that these borrowers accounted for a disproportionate share of defaults.

As for those with low credit scores—the “subprime” borrowers who supposedly caused the crisis—their borrowing stayed virtually constant throughout the boom. And while it’s true that these types of borrowers usually default at relatively higher rates, they didn’t after the 2007 housing collapse. The lowest quartile in the credit score distribution accounted for 70% of foreclosures during the boom years, falling to just 35% during the crisis.



Friction burns

Flip Chart Fairy Tales:

As Frances says, there is something very nineteenth century about a focus on tariffs and free trade agreements. The UK economy in 2017 doesn’t work like that any more. It is no longer the workshop of the world. It is a section within a vast production line that stretches across Europe. Disrupting that will do severe damage to all its parts but it will be easier for the rest of the EU to repair its parts than it will be for us to repair ours. The more obstacles we put in the way of trade, the worse it will be. Whatever happens, this is going to cost us dearly.


Why The Government Can’t Bring Terrorism Charges In Charlottesville


When Attorney General Jeff Sessions was asked how he viewed the car attack in Charlottesville, Va., here’s how he responded:

“It does meet the definition of domestic terrorism in our statute,” he told ABC’s Good Morning America.

That certainly seems to suggest the government is looking into a possible terrorism charge against the suspect, 20-year-old James Alex Fields Jr. At Saturday’s rally organized by white supremacists, a car slammed into counterprotesters, killing one and injuring 19.

But according to the Justice Department and legal analysts, it’s simply not possible for the government to file charges of domestic terrorism, because no such criminal law exists.

The Patriot Act does define domestic terrorism, and under this designation, the Justice Department has broad powers to investigate, said Neal Katyal, a Georgetown University law professor who served as former President Barack Obama’s acting solicitor general and as the national security adviser to the Justice Department.

He said the government has three basic ways to approach the Charlottesville case.

“No. 1, this is a hate crime, under the hate crime statutes,” he said. “The second is that this is a conspiracy to deprive individuals of civil rights.”

“And the third is, this is an act of domestic terror, which isn’t itself a crime,” he noted. In short, the government can’t file a criminal charge of domestic terrorism, but so defining the incident does allow it to investigate not only an individual suspect, but also any group the suspect may be affiliated with.

In an email to NPR, the Justice Department made the same point.

A revealing insight into the state’s priorities.

In 1927, Donald Trump’s father was arrested after a Klan riot in Queens

Washington Post:

On Memorial Day 1927, brawls erupted in New York led by sympathizers of the Italian fascist movement and the Ku Klux Klan. In the fascist brawl, which took place in the Bronx, two Italian men were killed by anti-fascists. In Queens, 1,000 white-robed Klansmen marched through the Jamaica neighborhood, eventually spurring an all-out brawl in which seven men were arrested.

One of those arrested was Fred Trump of 175-24 Devonshire Rd. in Jamaica.  This is Donald Trump’s father. Trump had a brother named Fred, but he wasn’t born until more than a decade later. The Fred Trump at Devonshire Road was the Fred C. Trump who lived there with his mother, according to the 1930 Census.

The predication for the Klan to march, according to a flier passed around Jamaica beforehand, was that “Native-born Protestant Americans” were being “assaulted by Roman Catholic police of New York City.” “Liberty and Democracy have been trampled upon,” it continued, “when native-born Protestant Americans dare to organize to protect one flag, the American flag; one school, the public school; and one language, the English language.”

As BoingBoing (which broke the original story) notes:

The events described in the Times’ article took place 22 years before Donald Trump was even born, and he’s not responsible for any youthful sins his father may have committed. But given the racially-charged tone of the younger Trump’s campaign, it raises questions about the values he was taught by the man whose fortune he inherited.


Collecting tax due on rent and buy-to-let gains is not hard but the government refuses to do it

Richard Murphy on Tax Research UK:

What is as staggering is the government’s refusal to recognise the scale of this issue, or to still tackle it properly. What is absurd is that, as Newham has shown, doing so is not hard.

If all landlords had to be registered with HMRC informed much to the problem would be resolved, and landlords could be made to pay the cost.

If only HMRC checked all property transactions for potential gains disclosure (which would not be hard; they are subject to stamp duty or its equivalent in most cases, after all) much of the rest would go away.

This does not happen though, for three reasons.

First, the government would rather cut what they call red tape than collect tax.

Second, they would rather cut costs at HMRC, using the excuse of austerity than collect tax. They are significantly cutting the number of staff at HMRC over the next few years.

And third, they’d rather inequality increased, which this failure on their part permits, than collect tax.

There is gross negligence by taxpayers going on here. But the reality is that the greater negligence is by government who refuse to collect tax owing for dogmatic reasons. We all have a right to be very angry with them.

Why Corrupt Bankers Avoid Jail

New Yorker:

The failure to prosecute white-collar executives might be more justifiable if there were any indication that fines and deferred-prosecution agreements deterred corporate wrongdoing. The evidence, however, is not promising. Pfizer has been hit with three successive deferred-prosecution agreements, for illegal marketing, bribing doctors, and other crimes. On each occasion, the company paid a substantial fine and pledged to change—then returned to the same type of behavior. You might think that the price for flouting a deferred-prosecution agreement would be prosecution. But after offering Pfizer a second chance, only to have misconduct continue, the government was apparently happy to offer a third.

Jed Rakoff, the prosecutor who indicted United Brands, became a judge, and he has emerged as an outspoken critic of the prevailing approach to corporate crime. He has argued that companies may come to view even billion-dollar fines as a “cost of doing business.” In an article in The New York Review of Books, titled “The Financial Crisis: Why Have No High Level Executives Been Prosecuted?,” he highlights the farce of obliging a corporation to acknowledge criminal wrongdoing without identifying or prosecuting the managers who were responsible. Rakoff is dubious of obligatory promises from companies to change their corporate culture, and suspects that “sending a few guilty executives to prison for orchestrating corporate crimes might have a far greater effect.”

In recent years, the Department of Justice, sensitive to criticism of its kid-glove approach to corporations, did actually indict a string of banks, including Credit Suisse, BNP Paribas, J. P. Morgan, and Barclays. The banks pleaded guilty and, despite all the alarmism about “collateral consequences,” they all stayed in business, and there were no major shocks to the global economy.

In “Why They Do It: Inside the Mind of the White-Collar Criminal,” the Harvard Business School professor Eugene Soltes points out that, in the 2015-16 academic year, ten companies recruiting for new hires at Harvard had recently been convicted of a federal crime or entered into a deferred-prosecution agreement. By now, Soltes suggests, corporate deviance may have become so routine that even pleading guilty to a felony is no big deal. What had once been described as a badge of ignominy that could put a company out of business was now just a bit of unpleasantness: a passing hassle, like a parking ticket.

Kaczyński’s Threat to Europe

Via John Naughton, a former Deputy Prime Minister of Poland, Jacek Rostowski:

The EU therefore faces not just an “illiberal democracy” in its midst, as it does with Victor Orbán’s Hungary. For the first time in its history, the EU must confront the prospect of a member state that is a non-democracy, in the fundamental sense of lacking free, unrigged elections. And Kaczyński can count on Orbán to provide him cover (in the expectation of reciprocation when needed), by vetoing any attempt at depriving the PiS government of its vote within the EU, a move that would require member states’ unanimous support.

If Kaczyński succeeds in controlling Poland’s Supreme Court, or if he finds another way to rig Polish elections, the implications for the EU will be profound and far-reaching. Unless Hungary’s veto can be circumvented, a non-democratic state will participate in legislating for the populations of the remaining democratic member states for many years.

As in the case of Brexit, Poland’s domestic political turmoil reveals how intertwined the EU’s member states have become. If democracy and the rule of law are overthrown in one, serious repercussions for all the others cannot be avoided. But the EU seems to lack effective mechanisms for resolving this problem, despite being legally, politically, and indeed morally unable to permit it to persist. To rein in Kaczyński, Europe’s lawyers and politicians will have to put their heads together – before the entire structure falls apart.


Trump Jr., Kushner and the Lie of Inherent White Innocence

Truth Out:

Scaramucci is paid to lie; Don Jr.’s “friend” might well be Trump Sr. throwing his voice again; and O’Reilly has always done a piss-poor job of pretending to be a real journalist. But beyond all that, it’s incredible to watch them pitch this saintly reimagination of Kushner and Don Jr., two full-grown men aged 36 and 39 respectively, with eight children of their own between them. Put aside for a moment the question of why, if Don Jr. and Kushner are such unprepared political rubes, they were entrusted with so much responsibility in the first place. This infantilizing strategy isn’t just a cynical ploy to try to erase questions of their guilt. It’s a case-in-point example of how innocence is assumed of whiteness, a privilege black folks are consistently denied.

In fact, that privilege has been specifically denied in the past by the very same players involved here. Trump wants us to believe his son is just a sweet kid with the best of intentions, even though Don Jr. tweeted a string of emails that definitively prove he actively tried to work with a hostile foreign power to undermine democracy. The same man now declaring his son’s innocence bought a full-page ad in 1989 calling for the summary execution of five black and brown teens who were falsely accused, without a shred of evidence, of raping a white woman. The Central Park Five were all exonerated by DNA evidence. But that hasn’t stopped Trump from going around and claiming they’re guilty, because he simply can’t imagine black and Latino children as anything but criminals.

The same is true of O’Reilly, whose air-tight defense of Kushner is based on the fact that his babyface is white. Back in 2013, O’Reilly essentially declared 17-year-old Trayvon Martin guilty of his own murder because of what he was wearing. “The reason Trayvon Martin died was because he looked a certain way, and it wasn’t based on skin color,” O’Reilly said. “If Trayvon Martin had been wearing a jacket…and a tie…I don’t think George Zimmerman would have had any problem with him. But he was wearing a hoodie and he looked a certain way. And that way is how ‘gangstas’ look. And, therefore, he got attention.”

Got it, black people? O’Reilly says respectability politics will save us. Except that he also told black Columbia University professor Marc Lamont Hill — who happened to be wearing a suit and tie at the time — that he looked like a cocaine dealer. Guess racism can’t be distracted by the right clothing after all.

This belief in whiteness as innately innocent, and blackness as inherently guilty, is interweaved with this country’s history of racist violence, from lynchings to the murder of Emmett Till to the fatal shootings of nine black churchgoers by Dylann Roof. It’s why the tragic and unjust death of Justine Damond, an unarmed white woman murdered by Minneapolis police, has triggered an outpouring of emotion in white communities unmoved by other incidents of police brutality.

“[Justine was] the most innocent victim” of a police shooting, according to Robert Bennett, the attorney hired by the Damond family. “I’m not saying Philando [Castile] wasn’t innocent, too, or that Frank Baker wasn’t innocent. But here is someone who called the police and was trying to stop someone from being hurt…and ends up being shot in her pajamas.”

Whiteness is the only possible factor Baker can be using to quantify Damond’s death as more undeserved than black victims of police violence. Otherwise, what makes Damond more innocent than Carl Williams or Bryan Heyward, who in separate incidents were both shot in their own homes by cops they’d called to help them stop burglaries? How is Damond possibly more innocent than 7-year-old Aiyana Stanley-Jones, who was fatally shot as she slept; or 15-year-old Jordan Edwards, shot in the head by cops as he left a party in a car; or Jonathan Ferrell, a 24-year-old who approached cops thinking they’d help him with his stalled car; or Tamir Rice, a 12-year-old shot by cops as he played in a park with the same kind of toy gun that does not get white kids killed?

Damond is assumed more innocent than the teenage girl at a pool party thrown to the ground by a white cop twice her size and criticized as “no saint” by Megyn Kelly; more innocent than Mike Brown, who the New York Times called “no angel” and characterized as a “handful” as a baby because “when his parents put up a security gate, he would try to climb it.” It takes whiteness to achieve the innocence that compelled cops to at least give a dying Damond CPR, which police never bothered to perform on shooting victims Akai GurleyWalter Scott or Eric Garner.


The rise and fall of the property-owning democracy

Flip Chart Fairy Tales:

Sometime in the late 1980s, a friend who was on the libertarian right of the Conservative Party explained the idea of the property-owning democracy to me. The point, he said, was to detach the respectable working class from their poorer neighbours, encourage them to identify with the middle-class and thereby turn them into Tories.

It worked for a while. Middle earners had been doing relatively well since the 1970s and home ownership was within the reach of many once mortgages became more readily available. Helped along by cheap council house sales, home ownership rose. In recent years, though, things have started shifting back the other way. The property-owning democracy is now looking like a one-off event rather than the ongoing process it was meant to be.

Property analyst Neal Hudson pointed out that, as a proportion of all tenure, home ownership peaked in 2003 but mortgage ownership peaked in 1996. As older property owners paid off their housing debts, they were not being replaced at the same rate by new  mortgagors.

The rise in home ownership exacerbated the rise in inequality. Until the 1990s, the cost of housing only made a slight difference to the inequality figures but from the 1990s, housing tenure became a significant factor in the make up of people’s disposable income and the divide between owners and renters widened.