should government try to expand home ownership?

I'd love to hear some explicit thoughts from various bloggers about one of the fundamental questions of the mortgage mess: should we as a society be invested in spreading home ownership?

I am extremely unimpressed by the efforts of some (most prominently Ann Coulter, but also more respectable pundits) to make this debacle into the fault of minority and poor homebuyers, and the guilt-ridden liberals who pushed for mortgages for these buyers. People smarter than I have already made pretty short work of this nonsense, so I won't belabor the point beyond saying that the timeline makes no sense, CRA mortgages are a tiny portion of the subprime mortgages contributing to this mess, CRA mortgages have performed better than the average subprime loan, and that ultimately the system rests on the idea that the lenders are responsible for judging whether any individual loan is prudent.

There are two reasons for why this meme has developed. The first is the simple desire for any partisan to be able to spin bad news against his or her opponent. The financial crisis is scary, it's huge, and it is in everyone's face, which insists that it will be used as political fodder. I'm not complaining about the use of national events politically; Democrats are doing this sort of thing too, and this sort of opportunism is inevitable. But I find this a particularly ugly and frankly baseless charge. And that leads me to my second reason: there is, in fact, an undercurrent of distaste and quiet hatred for the real underclass in this country. This is the sort of thing that gets me in trouble, so let me be clear: I'm not saying that all conservatives or most dislike the poor. And there are some liberals and Democrats who feel this way too. But I find that, in America, we tend to only ever talk about class conflict when conservatives are accusing liberals of waging "class warfare" by, say, advocating universal healthcare. As much as there is resentment from the poor to the rich, there is also resentment towards the poor from the rich and the middle class; the latter just tend to be more politic and quiet about it.

But, look. Let's set aside the questions of which mortgages in particular are to blame. Clearly, there was a failure in the mechanism used to make home ownership available to more people. But I think it makes sense to ask whether or not we as a society think that we should continue to make home ownership more accessible and common. My answer is yes, and I think that better integrating the working class into the middle class experience should be a goal for our country. That seems to me to be a rather non-ideologically stratified notion, though I admit that there are many (primarily libertarians, I imagine) who would disagree. I hate the fact that "abundance" is made to mean "consumption" in so much of our discourse, and I don't think that relative affluence is a good proxy for fulfillment, happiness or actualization. Home ownership, though, has more salience and more meaning than simple consumption, and I think it is an appropriate use of our government to use responsible means to extend home ownership to more of our citizens. (When I think of this subject I immediately think of Grand New Party; this sort of policy seems right up Ross and Reihan's alley.)

There are many psychological and symbolic cues to the notion of the middle class, and it would take someone smarter and more patient than I to untangle them all. As I harp on constantly, though, I think it say a lot about our culture that two of the most important status markers of middle-classedness are home ownership and a college degree, both of which require, for almost everyone, taking on enormous debt. I would hazard that we should think less about the ways for government to subsidize them, and more about ways to effectively lower the costs to begin with.

Of course, there's an "and a pony" to all of this, because of course the larger question is how government could do this without creating the kind of situation we're in now. But I do think it behooves us to decide whether this is a venture we want to commit to in general. I'd love to hear Megan McArdle, Reihan Salam, Ross Douthat, Will Wilkinson, and/or Matt Yglesias weigh in on this.

Update: Geez.

OK, here we go. CRA is not responsible for the subprime mortgage crisis. It's not even close. CRA has been on the books for over 30 years. The idea that it created a speculative bubble after three decades on the books is ludicrous. The vast majority of subprime mortgages were sold by institutions not under the umbrella of CRA. CRA mortgages have a better default rate than other subprimes. Here's another article that contains statistical information that pretty much demolishes the notion that CRA is responsible for this mess.

Of course, as it is utterly clear that CRA is not behind the subprime problem, Steve Sailer, George Will, Ann Coulter et al. are moving on to new ways to try and blame this problem on black and Hispanic people and the liberals who tried to get them mortgages. It's still bullshit. As Stephen Bainbridge points out, 72% of subprime mortgages are held by white people, in line with their percentage of the population. Black people got 16% of the subprime mortgages, or about 3% higher than their percentage of the population-- not a significant enough number to filter out the statistical noise. What's more, it's been credibly suggested that black people were much more likely to be sold subprime mortgages with identical qualifications to white counterparts, making their slight overrepresentation a product of the banks, not the people. (This, of course, also does a lot to damage the idea that lenders were being overly kind to minorities.) Hispanics, despite the efforts of some to make them out to be a culture-destroying menance, only hold 6% of the subprime mortgages, less than half their percentage of the country. Additionally, there's no way to know how many of the people represented in these percentages actually defaulted.

Bainbridge links to this in an update:

ComplianceTech, a provider of technology and business intelligence for consumer lending institutions and government agencies, has released an industry report indicating that the majority of subprime-rate loans originated in 2006 were made to non-Hispanic Whites and upper-income borrowers (conventional, 1st lien, 1-to-4 family, owner-occupied, home purchase and refinance).The findings are contrary to the way subprime-rate lending has been portrayed. Frequent media portrayals and congressional dialogue refer to subprime-rate lending as a minority and low-income issue. Findings in the report are based on data submitted by lenders under the Home Mortgage Disclosure Act (HMDA) analyzed with the data-mining tool LendingPatterns(TM).

What is particularly absurd is the line of argument that says "Well, it's true that the large majority of subprime mortgages were taken on by white people, and by middle class people... but the effort to get minorities into houses created a culture that made easy lending and borrowing more acceptable, and created this mess." This is a favorite kind of argumentation for Sailer and the like, taking an inherently unknowable and unverifiable thread of quasi-sociological argumentation and backing it up with the usual Sailer dancing. How could you possibly prove that it's a "culture of irresponsible lending" that created this problem, and how could you possibly prove that it was political correctness that created that culture? That's just it exactly; you can't prove it, so you can't prove the opposite. Sailer relies on this sort of thing all the time. The data doesn't bare it out, the causal thread is nonsense, but he's Steve Sailer, so dollars to doughnuts, the conclusion will be to blame minorities and liberals. As usual, the thought "because these ideas are not-PC, they must be true" carries an awful lot of logical water here.

On his website, apparently, Sailer's crew is grabbing bits of statistical data and ignoring the national percentages. So they say "look! in this largely minority community, X percentage of people have subprime loans!" Which is just about the most flagrant and obvious cherry-picking I could possibly imagine. Could I find communities where 100% of the people with sub-prime mortgages were white? Yup! Easily. But I won't do that, because that's intellectual dishonesty of the highest order. This is a national problem; nationally, minorities are not over-represented in the sub-prime mortgage pool relative to their percentage of the population, and that's what's important. Looking to find tiny chunks of data that prop up your opinion, when the great majority of that same data cuts against your opinion, isn't fighting political correctness. It's fighting basic standards of intellectual integrity and meaningful analysis.

Update II: I've lightly edited the update for clarity, to tone down some rhetoric and remove a little bitchiness.

Update III: rortybomb, an extremely bright guy or girl, nails it in the comments: "Getting the median wage to more closely resemble the GDP/capita would do more wonders for stability of home ownership than another government program here."