#Subprime mortgage crisis

[courseyoulovemeyoudontknowme]

The Big Short (2015, Adam McKay)

01/09/2024

[professionalmomentruiner]

Listen. listen. I was working in affordable housing right before the crash in 2008 and we saw it coming. but we were city employees, working on the scale of a single city, so we saw something big coming but we didn't know what it was.

The kind of housing I worked in was called "inclusionary development". Developers would be given permission to build luxury condo developments on the condition that some number of units (usually between 10 and 20%) had what's called a deed rider on them. The deed rider contained a bunch of legal requirements that amounted to ensuring that only people who could barely afford one of these units were qualified to buy them. This was supposed to be a "hand up, not a handout" (I hate that phrase so much), but it created a basically permanent class of house-poor people who were nearly broke all the time, but they had achieved the dream of owning a home. In the libertarian utopia of the mid-aughts, these people had been "removed from the cycle of poverty" or some such shit but in fact, they'd just been placed permanently in the jaws of the crocodile, and one thing destabilizing their financial situation would result in foreclosure and homelessness.

When people talk about "subprime mortgages" or "subprime lending", that's code (in part) for situations like this. People who couldn't qualify for "normal" loans went through an intrusive process where they were verified to have very little in the way of cash or investments and to make juuuuuust enough money to be able to pay a really awful mortgage as long as nothing went wrong. As a prize for putting up with third parties being all up in your money business, you were offered the chance to sign up for a pile of loans at 0% down with absolutely punishing interest rates such that you could realistically never expect to get ahead on your payments. The idea was the the property would itself somehow magically make you solvent while bleeding you dry for the enrichment of the banks and the white men who profit from them. Of course, the game was rigged so that the property couldn't help you, the owner, unless you cheated- got help paying off your loans, rented it out to earn more income the way rich people are expected to, hid money on the audit, or lied. If you did those things and got caught, you could lose your home and the white men at the top still profited. Libertarianism at its purest.

Even so, we saw about two foreclosures a year for roughly 2002-2006. and then, in the first half of 2007, we saw two per month. My manager and I were alarmed, and she asked me to call all the people who'd been foreclosed on in the last year and ask if they'd be willing to share what happened. I emphasized when I called that there was absolutely no legal requirement for them to share, but that my manager and I were hoping there would be some kind of common thread that we could try to do something about about.

Some of these people I had talked to personally in my compliance role, even multiple times. All of them knew who my agency was and that we were tasked with making sure they were acting in accordance with the legal requirements they'd signed at more or less financial gunpoint. What I am saying is that all of these people had a complicated relationship with me and the agency I worked for.

They all shared, and for every single one of them, the reason was medical bills. Most of them had had something awful happen personally (car crash, cancer), a couple had sick or injured family members. But for all of them it was the other half the grift, the for-profit medical system, which was making them unable to fulfill their legal agreement to be milked dry by the mortgage portion of the grift.

This last episode of Leverage fucks me up because this is so, so, so important.

“This is a big ass speech. This is a big ass stop the show, this is the moral framework of the entire five years you’ve seen. Nate Ford justifies 77 episodes of Leverage in this speech, cause you know what? It is the last goddamn episode, you’re gonna know why we made the show. We didn’t make the show cause we thought it was clever or cute or fun. I always say this, no show succeeds unless somebody loves it and you know what, everybody loves this show and to me, what Nate’s saying here is important enough to say out loud. No one should be allowed to cheat and get away with it.” - John Rogers, The Long Goodbye Job DVD Commentary

[signode-blog]

The 2008 Market Crash: Causes, Impacts, and Lessons Learned

l. Introduction The 2008 market crash stands as one of the most significant financial upheavals in modern history, reshaping economies and livelihoods around the globe. Understanding the causes and impacts of this crisis is crucial for navigating future economic challenges. ll. Background of the 2008 Market Crash A. Economic conditions leading up to the crash Prior to 2008, the United States…

[shut-up-and-eat-your-salad]

I never knew this. A suitably confusing end to horse ebooks I guess??

[faxxmodem]

i haven't dnf'd a book in a very long time but i might have to do it with the big short..... not ashamed to say i do not and may never understand the finance world, and also i really don't enjoy the feeling of undiluted rage that comes over me every time the author lauds some guy whose first instinct upon seeing a precarious financial situation is to figure out how best to profit. also x2 i picked it as a research book but it's so far divorced from any of the perspectives i was looking for as to be completely unhelpful for my purposes

[kc22invesmentsblog]

The 2008 Financial Crisis: A Global Wake-Up Call

Written by Delvin The 2008 financial crisis stands as a stark reminder of the fragility of the global financial system. Triggered by the collapse of the subprime mortgage market in the United States, this crisis had far-reaching consequences that reverberated across the globe. In this blog post, we will delve into the key factors that led to the crisis, its impact on the global economy, and the…

[cvsette]

Halloween costume idea: Margot Robbie in a bubble bath explaining the subprime mortgage crisis/2008 financial crisis

[gentlemans-code20]

#Luminaries - Ben Bernanke

Ben Bernanke, in full Benjamin Shalom Bernanke, (born December 13, 1953, Augusta, Georgia, U.S.), American economist who served as chairman of the Board of Governors of the Federal Reserve System (“the Fed”), the central bank of the United States, from 2006 to 2014.

[thepolicewanttostealmythoughts]

just witnessed the very slight misteach thats going to create a huge error in some students first big corporate/govt job

[mostlysignssomeportents]

Intuit: “Our fraud fights racism”

Tonight (September 27), I'll be at Chevalier's Books in Los Angeles with Brian Merchant for a joint launch for my new book The Internet Con and his new book, Blood in the Machine. On October 2, I'll be in Boise to host an event with VE Schwab.

Today's key concept is "predatory inclusion": "a process wherein lenders and financial actors offer needed services to Black households but on exploitative terms that limit or eliminate their long-term benefits":

https://journals.sagepub.com/doi/10.1177/2329496516686620

Perhaps you recall predatory inclusion from the Great Financial Crisis, when predatory subprime mortgages with deceptive teaser rates were foisted on Black homeowners (who were eligible for better mortgages), resulting in a wave of Black home theft in the foreclosure crisis:

https://prospect.org/justice/staggering-loss-black-wealth-due-subprime-scandal-continues-unabated/

Before these loans blew up, they were styled as a means of creating Black intergenerational wealth through housing speculation. They turned out to be a way to suck up Black families' savings before rendering them homeless and forcing them into houses owned by the Wall Street slumlords who bought all the housing stock the Great Financial Crisis put on the market:

https://pluralistic.net/2022/02/08/wall-street-landlords/#the-new-slumlords

That was just an update on an old con: the "home sale contract," invented by loan-sharks who capitalized on redlining to rip off Black families. Back when banks and the US government colluded to deny mortgages to Black households, sleazy lenders created the "contract loan," which worked like a mortgage, but if you were late on a single payment, the lender could seize and sell your home and not pay you a dime – even if the house was 99% paid for:

https://socialequity.duke.edu/wp-content/uploads/2019/10/Plunder-of-Black-Wealth-in-Chicago.pdf

Usurers and con-artists love to style themselves as anti-racists, seeking to "close the racial wealth gap." The payday lending industry – whose triple-digit interest rates trap poor people in revolving debt that they can never pay off – styles itself as a force for racial justice:

https://pluralistic.net/2022/01/29/planned-obsolescence/#academic-fraud

Payday lenders prey on poor people, and in America, "poor" is often a euphemism for "Black." Payday lenders disproportionately harm Black families:

https://ung.edu/student-money-management-center/money-minute/racial-wealth-gap-payday-loans.php

Payday lenders are just unlicensed banks, who deploy a layer of bullshit to claim that they don't have to play by the rules that bind the rest of the finance sector. This scam is so juicy that it spawned the fintech industry, in which a bunch of unregulated banks sprung up to claim that they were too "innovative" to be regulated:

https://pluralistic.net/2023/05/01/usury/#tech-exceptionalism

When you hear "Fintech," think "unlicensed bank." Fintech turned predatory inclusion into a booming business, recruiting Black spokespeople to claim that being the sucker at the table in the cryptocurrency casino was actually a form of racial justice:

https://www.nytimes.com/2021/07/07/business/media/cryptocurrency-seeks-the-spotlight-with-spike-lees-help.html

But not all predatory inclusion is financial. Take Facebook Basics, Meta's "poor internet for poor people" program. Facebook partnered with telcos in the Global South to rig their internet access. These "zero rating" programs charged subscribers by the byte to reach any service except Facebook and its partners. Facebook claimed that this would "bridge the digital divide," by corralling "the next billion internet users" into using its services.

The fact that this would make "Facebook" synonymous with "the internet" was just an accidental, regrettable side-effect. Naturally, this was bullshit from top to bottom, and the countries where zero-rating was permitted ended up having more expensive wireless broadband than the countries that banned it:

https://www.eff.org/deeplinks/2019/02/countries-zero-rating-have-more-expensive-wireless-broadband-countries-without-it

The predatory inclusion gambit is insultingly transparent, but that doesn't stop desperate scammers from trying it. The latest chancer is Intuit, who claim that the end of its decade-long, wildly profitable "free tax prep" scam is bad for Black people:

https://www.propublica.org/article/turbotax-intuit-black-taxpayers-irs-free-file-marketing

Some background. In nearly every rich country on Earth, the tax authorities send every taxpayer a pre-filled tax return, based on the information submitted by employers, banks, financial planners, etc. If that looks good to you, you just sign it and send it back. Otherwise, you can amend it, or just toss it in the trash and pay a tax-prep specialist to produce your own return.

But in America, taxpayers spend billions every year to send forms to the IRS that tell it things it already knows. To make this ripoff seem fair, the hyper-concentrated tax-prep industry, led by the Intuit, creators of Turbotax, pretended to create a program to provide free tax-prep to working people.

This program was called Free File, and it was a scam. The tax-prep cartel each took a different segment of Americans who were eligible for Freefile and then created an online house of mirrors that would trick those people into spending hours working on their tax-returns until they were hit with an error message falsely claiming they were ineligible for the free service and demanding hundreds of dollars to file their returns.

Intuit were world champions at this scam. They blocked their Freefile offering from search-engine crawlers and then bought ads that showed up when searchers typed "freefile" into the query box that led them to deceptively named programs that had "free" in their names but cost a fortune to use – more than you'd pay for a local CPA to file on your behalf.

The Attorneys General of nearly every US state and territory eventually sued Intuit over this, settling for $141m:

https://www.agturbotaxsettlement.com/Home/portalid/0

The FTC is still suing them over it:

https://www.ftc.gov/legal-library/browse/cases-proceedings/192-3119-intuit-inc-matter-turbotax

We have to rely on state AGs and the FTC to bring Intuit to justice because every Intuit user clicks through an agreement in which we permanently surrender our right to sue the company, no matter how many laws it breaks. For corporate criminals, binding arbitration waivers are the gift that keeps on giving:

https://pluralistic.net/2022/02/24/uber-for-arbitration/#nibbled-to-death-by-ducks

Even as the scam was running out, Intuit spent millions lobby-blitzing Congress, desperate for action that would let it continue to privately tax the nation for filling in forms that – once again – told the IRS things it already knew. They really love the idea of paying taxes on paying your taxes:

https://pluralistic.net/2023/02/20/turbotaxed/#counter-intuit

But they failed. The IRS has taken Freefile in-house, will send you a pre-completed tax return if you want it. This should be the end of the line for Intuit and other tax-prep profiteers:

https://pluralistic.net/2023/05/17/free-as-in-freefile/#tell-me-something-i-dont-know

Now we're at the end of the line for the scam, Intuit is playing the predatory inclusion card. They're conning Black newspapers like the Chicago Defender into running headlines like "IRS Free Tax Service Could Further Harm Blacks,"

https://defendernetwork.com/news/opinion/irs-free-tax-service-could-further-harm-blacks/

The only named source in that article? Intuit spokesperson Derrick Plummer. The article went out on the country's Black newswire Trice Edney, whose editor-in-chief did not respond to Propublica's Paul Kiel's questions.

Then Black Enterprise got in on the game, publishing "Critics Claim The IRS Free Tax Prep Service Could Hurt Black Americans." Once again, the only named source for the article was Plummer, who was "quoted at length." Black Enterprise declined to tell Kiel where that article came from:

https://www.blackenterprise.com/critics-claim-the-irs-free-tax-prep-service-could-hurt-black-americans/

For Intuit, placing op-eds is a tried-and-true tactic for laundering its ripoffs into respectability. Leaked internal Intuit memos detail the company's strategy of "pushing back through op-eds" to neutralize critics:

https://www.documentcloud.org/documents/6483061-Intuit-TurboTax-2014-15-Encroachment-Strategy.html

Intuit spox Derrick Plummer did respond to Kiel's queries, denying that Intuit was paying for these op-eds, saying "with an idea as bad as the Direct File scheme we don’t have to pay anyone to talk about how terrible it is."

Meanwhile, ex-NAACP director (and No Labels co-chair) Benjamin Chavis has used his position atop the National Newspaper Publishers Association to publish op-eds against the IRS Direct File program, citing the Progressive Policy Institute, a pro-business thinktank that Intuit's internal documents describe as part of its "coalition":

https://www.documentcloud.org/documents/6483061-Intuit-TurboTax-2014-15-Encroachment-Strategy.html

Chavis's Chicago Tribune editorial claimed that Direct File could cause Black filers to miss out on tax-credits they are entitled to. This is a particularly ironic claim given Intuit's prominent role in sabotaging the Child Tax Credit, a program that lifted more Americans out of poverty than any other in history:

https://pluralistic.net/2021/06/29/three-times-is-enemy-action/#ctc

It's also an argument that can be found in Intuit's own anti-Direct File blog posts:

https://www.intuit.com/blog/innovative-thinking/taxpayer-empowerment/intuit-reinforces-its-commitment-to-fighting-for-taxpayers-rights/

The claim is that because the IRS disproportionately audits Black filers (this is true), they will screw them over in other ways. But Evelyn Smith, co-author of the study that documented the bias in auditing says this is bullshit:

https://siepr.stanford.edu/publications/working-paper/measuring-and-mitigating-racial-disparities-tax-audits

That's because these audits of Black households are triggered by the IRS's focus on Earned Income Tax Credits, a needlessly complicated program available to low-income (and hence disproportionately Black) workers. The paperwork burden that the IRS heaps on EITC recipients means that their returns contain errors that trigger audits.

As Smith told Propublica, "With free, assisted filing, we might expect EITC claimants to make fewer mistakes and face less intense audit scrutiny, which could help reduce disparities in audit rates between Black and non-Black taxpayers."

Meanwhile, the predatory inclusion talking points continue to proliferate. Nevada accountants and the state's former controller somehow coincidentally managed to publish op-eds with nearly identical wording. Phillip Austin, vice-chair of Arizon's East Valley Hispanic Chamber of Commerce, claims that free IRS tax prep "would disproportionately hurt the Hispanic community." Austin declined to tell Propublica how he came to that conclusion.

Right-wing think-tanks are pumping out a torrent of anti-Direct File disinfo. This surely has nothing to do with the fact that, for example, Center Forward has HR Block's chief lobbyist on its board:

https://thehill.com/opinion/finance/4125481-direct-e-file-wont-make-filing-taxes-any-easier-but-it-could-make-things-worse/

The whole thing reeks of bullshit and desperation. That doesn't mean that it won't succeed in killing Direct File. If there's one thing America loves, it's letting businesses charge us a tax just for dealing with our own government, from paying our taxes to camping in our national parks:

https://pluralistic.net/2022/11/30/military-industrial-park-service/#booz-allen

Interestingly, there's a MAGA version of predatory inclusion, in which corporations convince low-information right-wingers that efforts to protect them from ripoffs are "woke." These campaigns are, incredibly, even stupider than the predatory inclusion tale.

For example, there's a well-coordianted campaign to block the junk fees that the credit card cartel extracts from merchants, who then pass those charges onto us. This campaign claims that killing junk fees is woke:

https://pluralistic.net/2023/08/04/owning-the-libs/#swiper-no-swiping

How does that work? Here's the logic: Target sells Pride merch. That makes them woke. Target processes a lot of credit-card transactions, so anything that reduces card-processing fees will help Target. Therefore, paying junk fees is a way to own the libs.

No, seriously.

If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2023/09/27/predatory-inclusion/#equal-opportunity-scammers

[quasi-normalcy]

In one sense there is nothing remarkable in observing that capitalists would prefer individuals who agree to work and consume in ways that most advantage capital. We need only to consider the ravages of the subprime mortgage industry that helped trigger the great financial crisis of 2008 or the daily insults to human autonomy at the hands of countless industries from airlines to insurance for plentiful examples of this plain fact. However, it would be dangerous to nurse the notion that today’s surveillance capitalists simply represent more of the same. This structural requirement of economies of action turns the means of behavioural modification into an engine of growth. At no other time in history have private corporations of unprecedented wealth and power enjoyed the free exercise of economies of action supported by a pervasive global architecture of ubiquitous computational knowledge and control constructed and maintained by all the advanced scientific know-how that money can buy. Most pointedly, Facebook’s declaration of experimental authority claims surveillance capitalists’ prerogatives over the future course of others’ behaviour. In declaring the right to modify human action secretly and for profit, surveillance capitalism effectively exiles us from our own behaviour, shifting the locus of control over the future tense from “I will” to “You will.” Each one of us may follow a distinct path, but economies of action ensure that the path is already shaped by surveillance capitalism’s economic imperatives. The struggle for power and control in society is no longer associated with the hidden facts of class and its relationship to production but rather by the hidden facts of automated engineered behaviour modification.

Shoshana Zuboff, The Age of Surveillance Capitalism

[galwednesday]

This week's deep dive rec is TAL: The Giant Pool of Money, a collaboration between This American Life and NPR News, that was the first long-form reporting that really made me understand how the hell subprime mortgage defaults led to a global financial crisis:

This American Life producer Alex Blumberg teams up with NPR's Adam Davidson for the entire hour to tell the story—the surprisingly entertaining story—of how the U.S. got itself into a housing crisis. They talk to people who were actually working in the housing, banking, finance and mortgage industries, about what they thought during the boom times, and why the bust happened. And they explain that a lot of it has to do with the giant global pool of money.

And since one hour isn't as much of a deep dive as usual (an hour and a half if you listen to the new reporting in the second half of their follow-up episode from a year after the financial collapse), I'll double-rec Michael Lewis's The Big Short: Inside the Doomsday Machine which goes even more in-depth on the financial and regulatory mechanisms at work.

[sleepysera]

"The Indian Removal Act of 1830 The annexation of 55 percent of Mexico in 1848 The forced taking of the Philippines The forced taking of Puerto Rico The forced taking of Hawaii Japanese internment camps The destruction of a thriving Black community in Tulsa, Oklahoma The destruction of a thriving Black community in Rosewood, Florida Past and present-day redlining The abandonment of Black New Orleanians during and after Hurricane Katrina Predatory lending leading to the subprime mortgage crisis that wiped out billions in Black wealth

This is just a short list but, I hope, you get where I am going with this. Our American history is simply too rife with documented instances in which land occupied by people of color has forcibly been taken, preyed upon, intentionally devalued, or flat out destroyed for any well-meaning white people to roll their eyes when an old Black woman says that she believes that white people had an organized plan to take land occupied by Black people in D.C."

-Dax-Devlon Ross, Letters to My White Male Friends (2021)

[desert-horned-lizard]

yo mama so subprime they used to call her mortgage crisis