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Subprime Mortgage Crisis

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Economist Robert J. Shiller writes in the NYT:

How Tales of ‘Flippers’ Led to a Housing Bubble
Economic View
By ROBERT J. SHILLER MAY 18, 2017

There is still no consensus on why the last housing boom and bust happened. That is troubling, because that violent housing cycle helped to produce the Great Recession and financial crisis of 2007 to 2009. We need to understand it all if we are going to be able to avoid ordeals like that in the future.

But the explanations for what happened in housing are not, I think, to be found in the conventional data favored by economists but rather in sociologically important narratives — like tales of getting rich through “flipping” houses and shares of initial public offerings — that constitute the shifting mentality of the era.

I don’t doubt that shows on TV about flipping houses played a role. But isn’t it striking that after almost a decade: “There is still no consensus on why the last housing boom and bust happened”? It was the biggest news story since 9/11, and yet Dr. Shiller himself, perhaps the leading housing economist, is still pretty hazy on how it happened.

I would suggest that one reason economists are still so baffled by what happened is because one obvious partial contributor to the fiasco — immigration / diversity — is a Sacred Cow. So without grappling with things like the Bush Administration’s Ownership Society and anti-downpayment, anti-documentation Increasing Minority Homeownership initiatives, you can’t get close to the full story.

But it’s safer, careerwise, to remain puzzled, so they do.

 
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https://www.youtube.com/watch?v=7ZknOAZy8NA

This Super Bowl Rocket Mortgage commercial seemed to be aimed at regulators and politicians as much as borrowers. It was vaguely reminiscent of George W. Bush’s speech at the 2002 White House Conference on Increasing Minority Homeownership and Angelo Mozilo’s 2003 Harvard address about how Bush’s regulators should get the message that old-fashioned standards on down payments and documentation are old-fashioned downers.

Still, it was interesting that 13-years ago, Bush and Mozilo played the race card a lot harder in arguing for hog-wild lending as necessary for racial equality, while this time Quicken used old postwar Keynesian “Good for the Economy” rhetoric in arguing for 8-minute mortgages.

On the other hand: the fact that a side effect of the White Death is constipation didn’t seem to cause the makers of a pill for opioid-induced constipation any worries about political reaction:

https://www.youtube.com/watch?v=vtA_FqLNm_o

 
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With Jeb Bush and Donald Trump arguing over whether George W. Bush failed to stop 9/11, it’s worth going to the videotape (47:28) of the second Presidential debate of 2000. On 10/11/2000, the Texas governor denounced heightened scrutiny of Arab airline passengers by airport security. Bush said on national TV:

Secondly, there is other forms of racial profiling that goes on in America. Arab-Americans are racially profiled in what is called secret evidence. People are stopped, and we have to do something about that. My friend, Senator Spencer Abraham of Michigan, is pushing a law to make sure that Arab-Americans are treated with respect. So racial profiling isn’t just an issue at local police forces. It’s an issue throughout our society. And as we become a diverse society, we’re going to have to deal with it more and more. I believe, though — I believe, as sure as I’m sitting here, that most Americans really care. They’re tolerant people. They’re good, tolerant people. It’s the very few that create most of the crises, and we just have to find them and deal with them.

Note that when the future President said “we just have to find them and deal with them,” the “them” he was referring to as having to be dealt with were not Arab skyjackers but airline and airport employees worried about stopping Arab skyjackers.

In accordance with this statement, Bush appointed Democrat Norman Mineta Secretary of Transportation and directed him to root out profiling of Arabs at the airport.

In 2005, airport counter clerk Michael Tuohey told Oprah Winfrey of his encounter early on 9/11/2001 with the leader of the terrorists:

“I got an instant chill when I looked at [Atta]. I got this grip in my stomach and then, of course, I gave myself a political correct slap…I thought, ‘My God, Michael, these are just a couple of Arab businessmen.’”

By the way, on a personal note, this may have been when I started to realize I was the world’s least viral journalist. I’m not sure if the word “viral” had that meaning on 9/11/2001, but if it did, I was sure that the President’s 11-month-old denunciation of anti-terrorism efforts would soon go viral. I vividly recalled watching Bush say this to a huge television audience less than a year before. Back then you couldn’t post video, but it was easy to find a transcript. So I stayed up late that night writing up “Bush had called for laxer airport security” so I wouldn’t get scooped too badly by all the other pundits.

In all the rush, it didn’t get published for about a week. Yet by then, nobody else had brought it up. When my piece didn’t get any attention, well, lots of stuff was happening.

Every few years since then, I’ve brought up Bush’s statement, but it never seems to register on anybody other than my core readers. It’s an interesting example of the Sapir-Whorf effect in action. We are given categories to file facts away in: e.g., Republicans Are Racist; Bush Protected Us from Terrorism, etc. It’s very hard to remember anything that doesn’t fit in the right slots.

This is the first time I’ve posted video of Bush saying this. We’ll see if this makes any difference in the impact, although by now, after 14 years, I doubt it.

Similarly, the big Bush Push of 2002-2004 to ease traditional credit standards, such as down payments and documentation, that have disparate impact on black and Hispanic mortgage-seekers is practically impossible for most people to remember because it doesn’t fit in the categories: Republicans Are Racist; Bush Protected Us from Liberalism, etc.

Here’s a video of Bush telling his federal regulators that down payment requirements are keeping minorities from achieving the American Dream:

But I’ve posted this before with negligible impact.

 
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For the last seven years, academics have been quietly compiling a mountain of evidence that the Housing Bubble and Bust was, like I’ve been saying since 2007, intertwined with contemporary America’s sacred cow of Diversity. For example, from a 2015 issue of Real Estate Economics:

Immigrants and Mortgage Delinquency

Zhenguo Lin
Department of Finance
Mihaylo College of Business and Economics
California State University, Fullerton,

Yingchun Liu
California State University, Fullerton,

Jia Xie
Bank of Canada

… Through the years, administrations touted home owning as a way to put immigrant and low-income families on a path to social and financial stability by promoting a more involved citizenry.1

1Clinton and Bush administrations launched ambitious programs to promote home ownership, especially for low-income households. For instance, President Clinton’s National Homeownership Strategy set a goal of allowing millions of families to own homes, in part by making financing more available, affordable, and flexible. President George W. Bush famously said in 2002 that “We can put light where there’s darkness, and hope where there’s despondency in this country. And part of it is working together as a nation to encourage folks to own their own home,” and in a 2004 speech he said again that “We’re creating … an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, welcome to my house, welcome to my piece of property.”

Actually, I don’t think Bush’s speeches on Increasing Minority Homeownership are all that famous unless you were in the mortgage industry or read iSteve.

Increased home ownership may not only build wealth for immigrant households, but perhaps equally important, it is a signal of assimilation and achievement of the “American Dream.” As a result, the expansion of housing credit in the United States from the mid-1990s to the mid-2000s was largely cheered, and home ownership by households of immigrants and others reached record-high rates in the mid-2000s. According to the Census, the home ownership rate among immigrant households increased from 46.5 percent in 1995 to 53.3 percent in 2006. Meanwhile, the home ownership rate among native-born Americans increased from 66.1 percent in 1995 to 68.8 percent in 2006. In other words, the gap in home ownership between immigrant and native households dropped from 19.6 percent in 1995 to 15.5 percent in 2006.

As the housing and economic crises developed in 2007-2009, however, immigrants were blamed by the media for the large increase in delinquencies, defaults, and foreclosures in the housing market that helped to trigger the housing crisis and ultimately facilitated the bankruptcies or near-bankruptcies of multiple financial institutions (Malkin, 2008).2

The citation is to a Michelle Malkin column.

Should immigrants really be blamed for the current housing crisis? In particular, are immigrants more likely to be delinquent on mortgages than natives and, if so, why?

Personally, I think those are great questions to ask; but, to be honest, the total number of people in the media who are interested in them consists pretty much of Michelle Malkin, me, and a handful of other disreputable sorts.

To shed light on these and related questions, we investigate the mortgage delinquency behavior of immigrant households by using the 2009 Panel Study of Income Dynamics (PSID) data.

… We use the 2009 wave of the Panel Study of Income Dynamics (PSID), that is collected by the University of Michigan Survey Center. PSID is a longitudinal household survey which started in 1968, with a sample of over 18,000 individuals living in over 5,000 families in the U.S. Individuals in each household were followed annually from 1968 to 1997, and biannually after 1997. …

We should note that all of the immigrant households in the PSID came to the U.S. before 1999. Hence, the duration of their stays ranges from 10 to 40 years …

We restrict the data used in the current study as follows: the sample includes only mortgage-indebted households, i.e., those who own (rather than rent) their primary residences and who have at least one mortgage on their primary residence. After omitting observations with missing values, the final data include information on 2,383 households. Around 6.7 percent (159) of the households are immigrant households, and around 5.6 percent (125) of native-born households are second generation households.

… The difference in the mortgage delinquency rates between immigrants (15.7%) and natives (4.4%) is significant.

It’s also big: the 20th Century immigrants’ self-admitted delinquency rate of 15.7% is over 3.5 times the size of the natives’ rate of 4.4%.

Screenshot 2015-10-12 23.56.28

We find that immigrants are more likely to be delinquent on mortgages than natives, even after controlling for a rich set of household demographic and socioeconomic status and mortgage characteristics. This finding is unlikely to be driven by unobservable financial constraints, local housing market conditions or unobservable characteristics of the metropolitan areas where immigrants tend to cluster. There is evidence of imperfect immigrant integration: the relatively high delinquency rate of immigrants is mainly driven by the relatively recent immigrants who have been in the U.S. for 10 to 20 years.

The paper doesn’t give the raw delinquency rate for the 25% of the immigrants in the sample who arrived from 1989-1999 (keep in mind that no immigrants arriving after 1999 were included in the sample, so these are the most recent ones we’ve got). But I’d guesstimate the delinquency rate for the most recent immigrants in the sample was six to nine times as high as the natives’ delinquency rate.

And the delinquency rate in 2009 for immigrants arriving from 2000 onward was likely even higher than for the highly delinquent cohort that arrived in 1989-1999. My guess would be that immigrant mortgage-holders who arrived in 1989-2009 would have been delinquent about an order of magnitude more often than white native mortgage-holders.

 
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With the federal government working up a new housing ploy, I figured it’s timely to dredge up the 2008 short story I published in The American Conservative:

 

Unreal Estate

Memorial Day Weekend, 2005

“So, this guy joins a monastery where he’s not allowed to talk.” Travis, your brother-in-law, is telling a joke. He’s told it to you before. “After five years, the head monk tells him he can say two words. ‘Tiny room,’ the guy answers.”

“That reminds me,” Travis continues, “You kids have been engaged, like, what? Two years now? That’s great. No rush to get married, not with the market the way it is in West LA. Who can afford to marry and settle down in LA? I couldn’t. Georgie Cooney can’t afford to get married in LA.”

While you’re trying to figure out whether Travis means actor George Clooney or boxer Gerry Cooney, he’s already onto his favorite topic, “Still, isn’t it time to buy a place of your own? I mean, West LA’s a great place to meet somebody, but, c’mon, are you going to entrust your kids — and I know how much my wife’s little sister wants some (you know how women are, they can’t keep a secret) — to the Los Angeles United School District?”

You have this conversation, if you could call it a conversation, each time you visit your brother-in-law’s house. Travis lives out in the Santa Clarita Valley, an hour or two north of West Los Angeles. You get on the 405 at Pico, head over Sepulveda Pass, down through the Valley, onto the 5 and up through Newhall Pass into LA County’s northern exurbs.

You’re sitting on the edge of the Travis’s deck, overlooking a canyon lined with oaks and sycamores. It’s hotter out here than back in West LA, where your $1900 per month one bedroom apartment doesn’t have air conditioning because it seldom gets over 82. It’s hot out here, but it’s not bad. There’s a breeze blowing with a hint of the far-off ocean.

Travis says, “I’d be all for you staying in LA if you were an entertainment lawyer or something where you need to be working with the stars. But you manage a drug store and Emma’s a nurse. People buy drugs and get sick everywhere.

“I bought this place in 2000 for $255,000,” Travis says, repeating a number you know by heart now. “Here we are, five years later, and the Schmidts next door just sold their’s for $810,000. So I’m up, what, six, seven hundred thousand? The home equity loans have paid for some nice vacations, I’ll tell you. My house is my ATM.

“I know what you’re thinking,” says Travis, who generally does know what you are thinking.

“You’re wondering why I’m the lucky bastard who turned 32 in 2000 and decided it was the right time in my life to get out of an apartment in LA and buy a house back when houses in California were cheap. Meanwhile, you’re 32 in 2005, when they’re expensive. Well, they seemed expensive then, too. But I took the plunge anyway.

“I also know you’re thinking you don’t have $810,000. Who does? That’s what they got mortgages for. And you’re good with numbers so you’ve already figured out what a 20 percent down payment on $810,000 is. It’s, like … a lot.

“Okay, coupla things you need to bear in mind.

“First, Emma’s told me about how your dad always talks about the years saving up for the 20 percent down payment he made when he got that 30 year fixed rate mortgage on his little place in Sherman Oaks. “That’s ancient history. Dude, nobody puts down 20 percent down anymore, no matter how iffy they seem.”

Travis’s voice has gone up a third of an octave. When he’s talking about the Lakers or whatever, he’s laidback. But when he gets going on real estate, which is more and more often over the last couple of years, he lets his inner Dennis Hopper out.

“These days, somebody arrives in California from Gautelombia and wants to buy a house, do you think they make him document his credit history? It’s in Spanish, and who knows how many million pesetas were worth a dollar in 1985, and besides, the courthouse in El Carrumbo collapsed in an earthquake anyway, so he doesn’t have a paper trail. Documents? He’s undocumented. He don’t need no steenking documents! He just pays some extra points on his rate, but that’s all on the backend. Everybody’s happy.

“Don’t you watch the news? The President says down payments are un-American because they keep minorities from buying houses. But you don’t have to be diverse to get a zero down loan. IndyMan is happy to hand them out to everybody.

“Second thing, Santa Clarita seemed like a long way out when I moved from Venice in 2000. So, maybe you got to move a little farther, like out to Palmdale, Lancaster. Antelope Valley’s the new Santa Clarita!”

You’re not quite sure how it happens, but ten minutes later, you’re standing on his driveway admiring the rims on Travis’s Lexus SUV, which are bigger than the tires on your Corolla. Soon, you’re rolling northeast on the 14, past the slanting Vasquez Rocks where, according to Travis, lots of Westerns were filmed, but you only remember them from Bill and Ted’s Bogus Journey. The highway turns north away from the mountains through the high desert. A sign says you are heading toward “Edwards AFB.”

“Edwards Air Force Base!” exclaims Travis. “T he Right Stuff, man! That’s where Chuck Taylor broke the speed barrier in 1957. This is All-American country out here,” he says, gesturing vaguely at the brownish-gray sagebrush. “Granted, it’s a haul from the jobs in LA, but with Iraq calming down now that they captured Saddam Insane, soon they’ll be pumping like crazy from those Iraqi oilwells and the price of gas will be back down to a $1.00 per gallon.”

You pass another sign. This one reads, “San Andreas Fault.” Travis doesn’t seem to notice.

Once off the highway, you see at least one person standing at every intersection twirling or jiggling a giant arrow pointing to an open house. “Human Signs,” nods Travis. “Like back in the Depression when guys would walk around wearing sandwich boards reading ‘Eat at Joe’s.’ But this is the opposite of a depression. Real estate commissions are six percent, so, on a $400k house, that’s $20k, which pays for a lot of twirling.”

Stretching off to the horizon are half-built houses and recently finished ones. Eventually, you follow one particularly active arrow to the Cypress Creek Estates. “Yeah, I know,” says Travis, “The nearest creek is 20 miles south and the nearest cypress tree is 100 miles west in Santa Barbara. But that’s not the point, the point is that everybody in Guatelombia grew up watching Baywatch and has wanted to move to California ever since. Do you know how many people there are in the world? Well, I don’t either, but, trust me, it’s a big number. There’s an endless supply of people who want to live in California. And their brothers, too! Do you think Bush is going to shut the borders? The President says, “Family values don’t stop at the Rio Loco.’”

Travis’s voice gets intense. “They’re coming, man, and nothing can stop them. It’s the American Dream!”

“Same with the money,” he continues, in a more relaxed tone. “When the Chinese get a check from Wal-Mart for a billion bucks for their latest boatload of plastic crud, they ask the smartest guy in Peking where to invest it. He calls up the smartest lad in London, who tells him, “Lend it to people buying California real estate. It’ll be safe as houses.” Nobody cares where they lend in California, just so long as it’s in California. You should see the prices they’re getting this year for dumps in Hawaiian Gardens, Bakersfield, Pacoima, Compton. Compton.

“See, in Abu Dubai, nobody knows nothing about Hawaiian Gardens, other than it’s in California. Over in Arabia, Sheik Rattleandroll thinks, ‘It’s like “Hawaii” and it’s full of “Gardens,” so how bad could it be?’

“Although, you’d figure,” muses Travis, shaking his head, “That by now, even an Arab would’ve heard of Compton.”

“There’s no stopping them. And the same with normal American people moving to the exurbs. Every year, kids get out of college and move from Mom and Dad’s house in the boring ‘burbs to an apartment in the sexy city. They love hanging out in Hollywood. But after ten years or so, they’ve found somebody. The one. They start looking at the price on those cute little cottages around the corner from their favorite restaurant on San Vicente. The price has seven digits. And it doesn’t start with a “one.” They wonder, “How does anybody buy in the city?” They finally realize: people do it family style. If they’re American and they buy on the Westside, then you know that Mom and Dad gave them a half mil, at least. If they’re Armenian, they have mom and dad move in with them, along with cousin Aram and his uncle-in-law. But Americans can’t live with their relatives. We go nuts. So, it’s out to the exurban frontier for us. It’s a perpetual motion machine.”

You pull up in front of an attractive Mediterranean-style model house. Two stories, 3,150 square feet, the sheet says. It seems enormous — both compared to your apartment and to its lot, with its miniature front yard consisting of a tiny sapling and a tinier sodded lawn. It’s hotter than in Santa Clarita, so the walk from the Lexus to the front door through the grit-laden wind has you sweating. “It’s breezy out here, but that’s good, it lowers the wind-chime factor,” observes Travis.

Then you’re hit by the blast of air conditioning, and you’re standing in the Great Room, with a 20’ ceiling. “Sure, it seems kind of big, but that’s the crucial element,” explains Travis. “What are they asking, $450k? That’s not a cost to you, that’s an investment, like joining a country club. The sticker price keeps out the riff-raff. You don’t want every peon in Guatelombia who grew up dreaming about Baywatch moving in next door to you, do you?

“What you want is like … well, look at Valencia High School near my house. It’s diverse. It’s … What does the LA Times call the neighborhood when there’s a gang shooting in South Central? … It’s vibrant. But Valencia High School is not too vibrant, if you know what I mean. Valencia’s like mostly white, some Asian, the black kids’ parents are all celebrities. The son of what’s his name, Wesley Snipe Dogg, rushed for 2,500 yards last year. The Latino kids are all from solid home-owning families, no accents, everybody’s dad is a contractor or something. You can’t afford to buy in my neighborhood if you aren’t in a cash business.”

One stair creaks loudly as you ascend to the lavish master bedroom suite on the second floor. “The construction’s just settling in,” assures Travis. “This house is only, it says here, nine months old. The owner is flipping it. Probably moving to a 4000 square foot house with the $50k he’s going to make and do it again. With a no down payment mortgage and a low teaser rate for the first two years (which you deduct on your 1040, by the way), that’s about a … a million percent return on investment. Can you get that kind of interest on your CDs?”

“In fact, I think I’m going to pick up one of these babies, too, and sell it in six months. We’ll be neighbors! Sort of. The mortgage company get a little snottier about down payments and interest rates when you tell them it’s an investment, so I’ll just check the “owner occupied” box. The broker doesn’t care. He gets his commission, then Countrywise bundles it up with a thousand other mortgages and sells it to Lemon Brothers. The Wall Street rocket scientists call this “secretization” because nobody can figure out what anything’s worth. It’s a secret.

“Lemon sells shares in the package all around the world. The Sultan of Brunhilde ends up owning a tenth of your mortgage. Do you think the Sultan’s going to drive around Antelope Valley knocking on doors to see if you’re really living there?”

“Maybe you’d like to come in with me on it, buy yourself a one-eighth share?”

 

Thanksgiving, 2005

The sky over the Antelope Valley is blue, your Marathon Sod minilawn is green, the temperature is 68, and your bride and her sister are cooking the turkey in your new granite counter-topped kitchen. Travis and you are standing in your driveway in Cypress Creek Estates, admiring the house you two own next door. Travis is explaining, “So, after ten years, the head monk, the abbatoir, tells the new guy he can say two more words. And the guy replies, ‘Roommate snores.’” By the way, this couple from Hermosa Beach counteroffered me $477k on our little investment. I told them I’d think about it. Nice people, they’d make good neighbors for you. But, I don’t think I’m going to sell it yet. I’m going to wait for an even $500k. There’ll be no problem getting that next spring. Yeah, it’s a nice neighborhood. Quiet.”

That it is. You don’t have all that many neighbors because about a third of the homes on the street appear to be unoccupied, owned by speculators waiting to flip them. And the people who do live on your street tend to start their commute to LA before dawn and get back after dark. It’s quiet, except on Sunday, when a stream of looky-loos pour through for the open houses.

 

Voice Mail, April 2006

“Hey, it’s Travis. Look, my accountant was crunching the numbers, and he says I’ve got a slight cash flow problem, what with me paying for 7/8ths of an empty house and the market not quite hitting our target price yet. So, he says that we should rent it out for awhile, just until we sell it. The thing is, what with everybody out there buying with no money down, there aren’t that many people left in the rental market. Most of the local jobs are in construction, building houses. (Well, construction and being a Human Sign.) Now, my accountant keeps the books for this contractor, who tells him he’s got some construction workers from this village down south who need a place to live. Real quiet hardworking types. You hablo un poco Espanol, right? If you need to talk to them, talk to their leader, Juan. He speaks Spanish. The rest of them only speak Mixed-Up. It’s an Indian lingo. But you won’t need to talk to them. They’re very quiet.”

 

July 2006

It’s Sunday afternoon. Travis peers down as you pry a flattened disk of lead out of the miniature crater in your driveway. “Well, they are real quiet, hardworking types from Monday through Friday,” he says. “You’ve gotta admit that. I guess they just want to relax on Saturday, have a little fiesta, drink some cerveza, shoot their pistolas in the air. It’s their culture. What are you, prejudiced?”

You look at Travis.

“Okay, okay, I’ll go talk to Juan.”

He comes back 20 minutes later. “Juan is gone, man. That’s what they kept telling me: ‘Juan is gone.’ One of the fellows had his stomach bandaged up. He just got back from the emergency room. I couldn’t quite follow what they were saying, but I think Juan had a bottle of tequila on Saturday night and stabbed this dude. Nothing serious. Just a friendly little argument. C’mon, they aren’t gangbangers, they’re working men … Okay, well, then Juan headed for the Border like OJ in his white Bronco. Juan is gone, and with the rent money they all owed us, too. Oh, man…”

 

Voice Mail, September 2006

“Hey, it’s Travis. I got good news. We’re not going to mess around anymore trying to extract our rent from some mob of illegals. No way, Jose. Instead, we’re going to get paid by check on the first of each month straight from the U.S. Treasury! The Department of Housing and Urban Development. Section 8 rent vouchers. They’re tearing down a housing project in the, uh, LA – Long Beach area, in, uh, Compton, I guess, to be precise, and they’ve got this highly respectable elderly grandmother who needs a place to stay with her family. Really cute grandkids. A few daughters, too. She wants a safe place with good schools to raise them. Actually, she’s not all that elderly. The HUD man said she’s 39. A church lady, you know, pillar of the community, big hat, all that. You’ll like your new neighbors.”

 

Voice Mail, December 2006

“It’s Travis. Okay, okay, I’ll admit that I hadn’t really thought through the part about the daughters having boyfriends, or grandma having boyfriends either, for that matter. But I think this whole Bloods v. Crips thing is being blown way out of proportion. It’s just graffiti. And lots of kids wear red these days. It’s a very In color. And these days all the young people make those goofy signs with their hands. For that matter, how can anybody know for sure that the Chevy that cruises by every night is full of MS-13 gangbangers planning a drive-by on the Bloods next door as payback for the race riots at the County Jail in Castaic? Are you sure you read the tattoos on their necks right? It’s nighttime, how can you be certain that their neck tattoos say ‘MS-13.’ Maybe they just have, like, ‘Mom’ tattooed on their necks. Did you think about that?”

 

May 2007

“So, after fifteen years, the abbadabbadoo tells the new monk he can say two more words, and—Whoa!” Travis flinches when the 120-pound Presa Canario lunges at him. The steel chain securing the dog to the front of the house across the street from your house snaps taut and its massive jaws come up short. “Man,” says Travis, shaken, “That’s one of those dogs that the Aryan Nation breeds to guard meth labs, isn’t it? What’s in that house? A meth lab? No, don’t tell me. I don’t want to know.”

“Look at this neighborhood,” he says, his dismissive gesture taking in the empty malt liquor bottles on the curb, the wheelless car jacked up on a brown front lawn, and the knots of sullen youths playing hip-hop and reggaeton on boomboxes. “All these speculators buy houses, hit a little bump in the road, need some cash, then start renting them out to lowlifes to get by until they can cash in. Property values drop like a rock. It would be no problem if just one investor did that, but when all these speculator jerks do it, the whole ‘hood is hosed.

“Oh, yeah, I came by to mention that in June the mortgage rates reset after two years. Bush put this new guy in at the Fed, Ben Barnacle, and he’s raised interest rates. So that will push up your share of the payment.”

 

Voice Mail, June 2007

“It’s Travis. Sorry to hear about you having to sell both your cars to make that new monthly nut. Taking the bus to work in that heat, man, that’s rough.

“But, that’s all history. I’ve got great news! I sold the house next door. To the Section 8 grandma. Who else would buy it? I only got what we paid for it, but I figure that was the smart play. She didn’t think she could qualify for the mortgage, but I told her to put down as her household income all the money made by all the people who have ever stayed there. What, is Washington Mutant going to be so racist as to question that a woman like her could have an income of $160,000?

“Don’t thank me for getting you out of that monthly payment. It’s the least I could do for you, bro.”

 

Phone call, October 2008

You pick up the ringing phone.

“It’s me, Travis. Long time no hear! Hey, I’m sorry about houses in your zip code being down 55 percent versus last year. Bummer.

“Anyway, I’ve been listening to Senator Omama’s speeches about how he is going to invest hundreds of billions to make America energy independent in ten years. So, I wanted to let you in on the next big thing. Alternative energy! When the Democrats get in come November, alternative energy will be bigger than houses. I’ve got great investments lined up with some start-ups in this emerging growth sector. Like biodiesel trolleys. Al Gore is this close to making a big investment. I just need a little help making the minimum required investment. They don’t need chump change. This is just for the big money boys. So, are you in or are you out?

You say nothing.

“Are you going to quit on me? Remember, quitters never prosper.”

You say: “I quit.”

Travis says: “Well, it’s about time. You’ve done nothing but bitch and moan since I met you.”

 
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Steve Sailer
About Steve Sailer

Steve Sailer is a journalist, movie critic for Taki's Magazine, VDARE.com columnist, and founder of the Human Biodiversity discussion group for top scientists and public intellectuals.


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