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Friday, June 29, 2012

Financial Xenophobia

I must be one big heartless, grouchy, mean, tight-wad SOB.

One of the quickest ways to get my boxers in a bunch is to talk about how some group is under-served.  Or disadvantaged.  Or distressed.  Or some other Statist-speak phrase that indicates the "demographic" isn't consuming adequate amounts of redistributed wealth  - as defined by some bureaucrat in DC or a state capital.

After all, they wouldn't be in the piss-poor situation they find themselves in if only more money were thrown their way, right?

When I get pissy over this topic, I get gasping, horrified protestations that I want to take food from the mouths of babes I didn't sire.  Or have my sanity questioned about how could I be so stupid to not want to "invest" in the higher education of some person I've never met.

I guess I'm just xenophobic when it comes to my pocketbook.

What spun me off this time?  This [link] memo from the FDIC regarding the Community Reinvestment Act (CRA).
The federal bank and thrift regulatory agencies today announced the availability of the 2012 list of distressed or underserved nonmetropolitan middle-income geographies where revitalization or stabilization activities will receive Community Reinvestment Act (CRA) consideration as "community development."
You know that the CRA is the core cancer of our current financial woes, don't you?  In my old banking days, I used to be the contact person when the CRA did their audits.  I know this cancer inside and out.  Since you insist, I'll give you the condensed version of how we got here:
In 1999, Clinton passed legislation that gutted the Glass-Steagall act.  Glass-Steagall is the Depression-era law that had prevented commercial banks from owning investment banks (and vice versa).  The former being financially conservative institutions that brought in deposits, made loans, and made their profits on the interest rate spread.  The latter type of bank are high-risk (and potentially high-return) gamblers.

In return for taking the ownership handcuffs off of the Republican-sponsored banks, the banks agreed to a more expansive version of the Democrat-sponsored CRA.  You wanna play, you gotta pay.

The banks could either give money directly to "disadvantaged" groups, or they could make them loans.  Figuring they at least had a chance to get some money back from a loan, they mostly took (and still take) that path.

But it still wasn't enough.  Destroyers Of The Realm, Mssrs. Frank and Dodd, pushed for still lower credit standards for people financially unable to own a home (you're considered underserved if you don't have any money or a house - at least this way, Frank and Dodd could give you a house).

Things "progressed" but still not quickly enough.  Frank and Dodd got Freddie Mac and Fannie Mae to guarantee these shoddy home loans.  The banks went nuts.  Who wouldn't?  I'd make a loan to a corpse if the federal government guaranteed repayment!

The debt contagion really spread now.  Since the "paper" was federally guaranteed, it could be securitized - bundled into huge chunks of loans and sold as investment grade paper to insurance companies, REITs, investment houses, foreign governments - you name it.

The bubble burst and all of this "wealth" evaporated.  It never was real wealth, it was debt masquerading as wealth.

So now, the brain trust in the CRA is looking to find other wealth-sinks.  They've scoured the nation and found new places for banks to dump invest money - distressed or underserved nonmetropolitan middle-income geographies.

Gawd, I just want to projectile vomit.  Throw money at a problem and the problem is fixed.  No consideration for "natural" economic cycles of growth and contraction, because contraction means someone will lose, and we just can't have THAT.

Expect another bubble, folks.  While this isn't directly your money, it is indirectly.  Banks will pay for this with new fees, higher borrowing rates, lower (if possible) deposit rates and essentially "free" loans from the Federal Reserve.

One way or the other, you're payin'.


I'm really not a monster.  I feel a moral obligation to help those in my community that are having a tough go of it.

And I meet that obligation.  Where I choose.

What I can't live with is when someone else decides where my money goes.

For instance, could someone please explain to me the societal benefits of spending tax dollars on Low Income Housing?

This horrific social engineering scheme gives a financial incentive to people who are unable to afford to live in a given town, neighborhood, or state.  The authority that is providing this incentive is making the following statement:
We understand that you can't afford to live here.  We want to have you come to our town, and we'll help pay for your housing.  Since you can't afford the rent, chances are you can't afford the food, utilities, medical and other living expenses.  No worries, they're on us.

Statistics in our state show that the crime rate in areas with subsidized housing (either in public housing or in Section 8 homes) is MUCH higher than it is for the general population, so we also acknowledge that you will consume more than your "fair share" of police and emergency medical services.  Again, no worries.  You're worth it!

Now, don't go gettin' all "self-reliant" on us!  You do realize that you'll be penalized - that means 'cut off' - if you go out and make too much money to qualify for our tax dollars, right?  Just stay under the radar and you'll be able to stay on the Gravy Train for your entire life.  

Be sure to teach your kids these lessons as well.
Welcome to our community!
I will happily give my money to support organizations that qualify and discriminate.  
How many times have you been here to use our limited resources?  Twice?  Well, sport, you're on your last leg.  Three times, and you're out.  We're gonna help you this one last time, so you'd better make it stick.  Otherwise, meet Mr. Gutter.  It will be your new home.

Why is this attitude of expecting people to care for themselves so foreign to us nowadays?  

Everyone, and I mean everyone, can find themselves in a situation where they are at the bottom of their barrel and need help. 

Back in the early 1990's, I found myself damned close, so I get it.  A series of events all happened at once, and I was caught by surprise.  I thankfully never had to ask for help, but it was so close we had the paperwork filled out.

Our first instinct wasn't to ask for help, it was to figure it out for ourselves.  I sold real estate and worked for a temp agency during the day, and in a warehouse at night.  It was horrible, insufficient pay, but it WAS some pay.  It let us bob and weave until another decent banking job came around.

I don't want to get all puffy-chested, but I had personal pride.  The last damned thing I would ever let happen was for someone else to pay for the food going into the mouths of my kids.  There would have to be no other options whatsoever before I'd succumb to that.

I guess I'm just some freak who is out-of-touch-with-reality.

Today, girls get knocked up and go straight for the TANF [link] and WIC [link].  They don't go after their baby's daddy 'cause that just ain't cool.  Let Uncle Sugar foot the bill.

There's no shame.  Since they don't feel the social or economic pain of their choice to spread their knees or seed, they continue their behavior unabated.  Why not?  They're rewarded for doing so.

Keep feedin' the beast.  See how well it's turned out?

Copyright 2012 Bison Risk Management Associates. All rights reserved. Please note that in addition to owning Bison Risk Management, Chief Instructor is also a partner in a precious metals business. You are encouraged to repost this information so long as it is credited to Bison Risk Management Associates.


Adam said...

All good points. I deal with this every day as a police officer. Go into section 8 housing and they have better cars and better stuff than I do. It's because their rent, utilities, and food are all paid for, so they can spend their money on the material things.

I have no problem with helping someone out a couple times if they fall on hard times and need limited assistance. But we shouldn't be funding entire multi-generational families. It is how we are bankrupting our nation. Unfortunately, austerity will eventually happen, the sooner the better. If it happens too late, then handouts will be all that many people have known and won't know how to cut back and work for something.

Chief Instructor said...

Adam, yeah, we're screwed. We've got much of two generations (at least) who have no concept of how to care for themselves.

They only know how to take.

I've mentioned here before that my now-deceased mother in law was one of these people. She spit out 8 kids, and we all paid for their rearing.

Half of her kids (including my honey) ran the opposite way, half embraced the socialist darkness.

If the "social safety net" for leaches like her were to disappear, she would have truly had no idea how to feed, clothe and house herself. As she eventually became bedridden, she would have just laid there and died.

A 35 year old who has been on the same teat-sucking path wouldn't just lay there and die. They'd riot or rob and steal. They'll get their free food, even if they have to work for it by cracking open your skull.