The Indelible Bonobo Experience

Renaissance Monkey: in-depth expertise in Jack-of-all-trading. I mostly comment on news of interest to me and occasionally engage in debates or troll passive-aggressively. Ask or Submit 2 mah authoritah! ;) !

One of the most heinous of these policies was introduced by the creation of the Federal Housing Administration in 1934, and lasted until 1968. Otherwise celebrated for making homeownership accessible to white people by guaranteeing their loans, the FHA explicitly refused to back loans to black people or even other people who lived near black people. As TNC puts it, “Redlining destroyed the possibility of investment wherever black people lived.” (via The Racist Housing Policy That Made Your Neighborhood - Alexis C. Madrigal - The Atlantic)
To understand the depth of the racism of these regulations, you have to read the descriptions of the grades that FHA gave to neighborhoods from A (green) to D (red). I’ve included them all at the end of this post, but here is the “C” classification (emphasis added), which is where my Oakland neighborhood fell (keep in mind restrictions as used here, means clauses, written into the title, not to sell to non-whites).  

"Yellow areas are characterized by age, obsolescence, and change of style; expiring restrictions or lack of them; infiltration of a lower grade population; the presence of influences which increase sales resistance such as inadequate transportation, insufficient utilities, perhaps heavy tax burdens, poor maintenance of homes, etc. “Jerry” built areas are included, as well as neighborhoods lacking homogeneity. Generally, these areas have reached the transition period. Good mortgage lenders are more conservative in the Yellow areas and hold loan commitments under the lending ratio for the Green and Blue areas.

And, of course, the mortgage industry as a whole—the expansion of which allowed people without large savings or family money to buy homes—adopted many of these same practices. This had all sorts of truly horrific consequences for black people, black families, and black neighborhoods. 

One of the most heinous of these policies was introduced by the creation of the Federal Housing Administration in 1934, and lasted until 1968. Otherwise celebrated for making homeownership accessible to white people by guaranteeing their loans, the FHA explicitly refused to back loans to black people or even other people who lived near black people. As TNC puts it, “Redlining destroyed the possibility of investment wherever black people lived.” (via The Racist Housing Policy That Made Your Neighborhood - Alexis C. Madrigal - The Atlantic)

To understand the depth of the racism of these regulations, you have to read the descriptions of the grades that FHA gave to neighborhoods from A (green) to D (red). I’ve included them all at the end of this post, but here is the “C” classification (emphasis added), which is where my Oakland neighborhood fell (keep in mind restrictions as used here, means clauses, written into the title, not to sell to non-whites).  

"Yellow areas are characterized by age, obsolescence, and change of style; expiring restrictions or lack of them; infiltration of a lower grade population; the presence of influences which increase sales resistance such as inadequate transportation, insufficient utilities, perhaps heavy tax burdens, poor maintenance of homes, etc. “Jerry” built areas are included, as well as neighborhoods lacking homogeneity. Generally, these areas have reached the transition period. Good mortgage lenders are more conservative in the Yellow areas and hold loan commitments under the lending ratio for the Green and Blue areas.

And, of course, the mortgage industry as a whole—the expansion of which allowed people without large savings or family money to buy homes—adopted many of these same practices. This had all sorts of truly horrific consequences for black people, black families, and black neighborhoods. 

Why are nearly 10 million people still out of work today? Was it because in September 2008, the U.S. government failed to bail out the insolvent investment bank Lehmann Brothers? Was it because the two U.S. housing finance giants Fannie Mae and Freddie Mac guaranteed too many mortgages securitized by Lehman and other Wall Street firms to low-income borrowers in the run up to the housing and financial crises? Or does blame rest with the Federal Reserve’s too-easy-money policies in the wake of the brief dotcom recession in the early 2000s? (via The Atlantic)
Princeton University professor Atif Mian and University of Chicago Booth School of Business professor Amir Sufi pin the blame squarely on policymakers, but not for any of these three reasons, all of which are variously popular with policymakers on different sides of the political divide in Washington. Instead, in their just-released book, House of Debt, they argue that the Great Recession was the result of a sharp fall-off in consumption due to the unevenly accumulated household debt in the first six years of the 21st century. In that period, mortgage-credit grew more than twice as fast in neighborhoods with low credit scores than in neighborhoods with high credit scores, a marked departure from the experience of previous decades. When the housing bubble popped, the economic consequences were sharply magnified by the way debt was distributed across households and communities.
How did this happen? Why did lenders suddenly shower less-creditworthy borrowers with trillions of dollars of credit? Mian and Sufi demonstrate this was enabled by the securitization of home mortgages by investment banks that did not seek federal guarantees from Fannie and Freddie—so called private-label securities, made possible by financial deregulation and the glut of cash in world markets in the wake of the Asian financial crisis of the late 1990s. That private-label mortgage-backed securities were at the core of the housing meltdown is no longer in doubt, but what Mian and Sufi bring to the debate is how an unequal distribution of debt magnified the economic risks—based on their path-breaking microeconomic research—and a new framework for considering who is to blame among policymakers for the still reverberating debacle.

In The General Theory of Employment, Interests, and Money, University of Cambridge economist John Maynard Keynes argued in 1936 that the distribution of income mattered for the stability of the macroeconomy. Increased spending, be it from consumers, government, greater exports, or investment, will multiply as it works its way through the economy. If additional income goes into the hands of those with a high marginal propensity to consume then the multiplier for consumption demand will be relatively larger. But if additional income goes into the hands of those with a lower marginal propensity to consume then the multiplier on consumption demand will be relatively weaker.


Two decades later, University of Chicago economist Milton Friedman hypothesized that although rich households appear to consume less, they have a pretty clear sense of what their standard of living will be on average year after year and they adjust their savings to keep themselves at that level. In good years, when they get an income bonus, they will save a more while in bad years, they won’t save as much—or will borrow—to maintain that average standard of living.

Mian and Sufi provide a definite “yes” to the question of whether we could have prevented the Great Recession—and the conclusion isn’t pretty. They argue that policymakers could have seriously mitigated the damage, pointing out that debt forgiveness would have been much more effective that the policies implemented because it would have targeted households with the largest marginal propensity to consume. This is a failure on a massive scale and more economists need to follow the lead of Mian and Sufi and look deep into the data to understand what we got wrong.
also, Timothy Geitner on Jon Stewart

Why are nearly 10 million people still out of work today? Was it because in September 2008, the U.S. government failed to bail out the insolvent investment bank Lehmann Brothers? Was it because the two U.S. housing finance giants Fannie Mae and Freddie Mac guaranteed too many mortgages securitized by Lehman and other Wall Street firms to low-income borrowers in the run up to the housing and financial crises? Or does blame rest with the Federal Reserve’s too-easy-money policies in the wake of the brief dotcom recession in the early 2000s? (via The Atlantic)

  • Princeton University professor Atif Mian and University of Chicago Booth School of Business professor Amir Sufi pin the blame squarely on policymakers, but not for any of these three reasons, all of which are variously popular with policymakers on different sides of the political divide in Washington. Instead, in their just-released book, House of Debt, they argue that the Great Recession was the result of a sharp fall-off in consumption due to the unevenly accumulated household debt in the first six years of the 21st century. In that period, mortgage-credit grew more than twice as fast in neighborhoods with low credit scores than in neighborhoods with high credit scores, a marked departure from the experience of previous decades. When the housing bubble popped, the economic consequences were sharply magnified by the way debt was distributed across households and communities.
  • How did this happen? Why did lenders suddenly shower less-creditworthy borrowers with trillions of dollars of credit? Mian and Sufi demonstrate this was enabled by the securitization of home mortgages by investment banks that did not seek federal guarantees from Fannie and Freddie—so called private-label securities, made possible by financial deregulation and the glut of cash in world markets in the wake of the Asian financial crisis of the late 1990s. That private-label mortgage-backed securities were at the core of the housing meltdown is no longer in doubt, but what Mian and Sufi bring to the debate is how an unequal distribution of debt magnified the economic risks—based on their path-breaking microeconomic research—and a new framework for considering who is to blame among policymakers for the still reverberating debacle.
  • In The General Theory of Employment, Interests, and Money, University of Cambridge economist John Maynard Keynes argued in 1936 that the distribution of income mattered for the stability of the macroeconomy. Increased spending, be it from consumers, government, greater exports, or investment, will multiply as it works its way through the economy. If additional income goes into the hands of those with a high marginal propensity to consume then the multiplier for consumption demand will be relatively larger. But if additional income goes into the hands of those with a lower marginal propensity to consume then the multiplier on consumption demand will be relatively weaker.

  • Two decades later, University of Chicago economist Milton Friedman hypothesized that although rich households appear to consume less, they have a pretty clear sense of what their standard of living will be on average year after year and they adjust their savings to keep themselves at that level. In good years, when they get an income bonus, they will save a more while in bad years, they won’t save as much—or will borrow—to maintain that average standard of living.

  • Mian and Sufi provide a definite “yes” to the question of whether we could have prevented the Great Recession—and the conclusion isn’t pretty. They argue that policymakers could have seriously mitigated the damage, pointing out that debt forgiveness would have been much more effective that the policies implemented because it would have targeted households with the largest marginal propensity to consume. This is a failure on a massive scale and more economists need to follow the lead of Mian and Sufi and look deep into the data to understand what we got wrong.

also, Timothy Geitner on Jon Stewart

Tim Lemieux is seen here with a backdrop of apartment and condominium complexes in downtown Toronto, Ontario Thursday March 20, 2014. Lemieux, 40, always thought he’d buy a home in Toronto; but he’s done some math and decided that continuing to rent rather than buying is his best bet. (via Financial Post)
But even with the down payment, he calculated that he would be almost doubling his monthly expenses with the mortgage, condo fees and property taxes; he now rents a one-bedroom apartment on the subway line for $900.
“It seemed like I was tying a lot of money down with not much of a living benefit or quality of life benefit,” says the 40-year-old Toronto resident who works at an insurance company. “I’ve decided I’ll never buy in Toronto. I invest and got a good financial advisor instead.”
People say that when you grow up, you buy a home. Who are these “people?” Your married friends, your parents and other grown-ups who ask: “Don’t you want to own something other than a bike? Aren’t you sick of putting money into your landlord’s pocket?”
“In some geographies, the people who own the property and are renting it to you, are renting it to you on a break-even basis or possibly even a loss; basically someone is subsidizing your living.”
Every time you buy a home, there are associated costs: lawyer fees, land-transfer taxes, moving costs, etc. Mr. Kaufman estimates that the total cost of buying and selling a home approaches 10% of the purchase price. “In my mind, the perfect time to buy is when you’re buying a home you expect to live in for a long time.”
Renting represents mobility. For those with wanderlust or those who plan to move for work, renting suits your nomadic, adventure-seeking lifestyle. Renting also comes with fewer responsibilities. With a home, when something breaks, you have to fix it; you can’t always anticipate the expense either — anyone who’s had water in her basement or raccoons ripping away roof shingles can attest to the headache. You’re also less likely to spend money on sprucing up or upgrading your rental unit.
“It frees up money for living and travel, rather than being sunk into property taxes or maintenance fees,” Mr. Lemieux says.

Tim Lemieux is seen here with a backdrop of apartment and condominium complexes in downtown Toronto, Ontario Thursday March 20, 2014. Lemieux, 40, always thought he’d buy a home in Toronto; but he’s done some math and decided that continuing to rent rather than buying is his best bet. (via Financial Post)

  • But even with the down payment, he calculated that he would be almost doubling his monthly expenses with the mortgage, condo fees and property taxes; he now rents a one-bedroom apartment on the subway line for $900.
  • “It seemed like I was tying a lot of money down with not much of a living benefit or quality of life benefit,” says the 40-year-old Toronto resident who works at an insurance company. “I’ve decided I’ll never buy in Toronto. I invest and got a good financial advisor instead.”
  • People say that when you grow up, you buy a home. Who are these “people?” Your married friends, your parents and other grown-ups who ask: “Don’t you want to own something other than a bike? Aren’t you sick of putting money into your landlord’s pocket?”
  • “In some geographies, the people who own the property and are renting it to you, are renting it to you on a break-even basis or possibly even a loss; basically someone is subsidizing your living.”
  • Every time you buy a home, there are associated costs: lawyer fees, land-transfer taxes, moving costs, etc. Mr. Kaufman estimates that the total cost of buying and selling a home approaches 10% of the purchase price. “In my mind, the perfect time to buy is when you’re buying a home you expect to live in for a long time.”
  • Renting represents mobility. For those with wanderlust or those who plan to move for work, renting suits your nomadic, adventure-seeking lifestyle. Renting also comes with fewer responsibilities. With a home, when something breaks, you have to fix it; you can’t always anticipate the expense either — anyone who’s had water in her basement or raccoons ripping away roof shingles can attest to the headache. You’re also less likely to spend money on sprucing up or upgrading your rental unit.
  • “It frees up money for living and travel, rather than being sunk into property taxes or maintenance fees,” Mr. Lemieux says.