Wall Street is Cooking Up Another “2008-Style Housing Crash” and They Plan on Using Joe Biden’s Presidency to Launch It
October 14, 2020 (1y ago)

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In 2008, disastrous policies by America’s political and financial elite caused the worst financial calamity since the Great Depression. Ever since that crash, the American middle and working classes have been in decline. But the plutocrat class came out of the disaster richer and more powerful than ever. So it’s hardly surprising that right now, they’re laying the groundwork for another housing bubble, and another disastrous crash. And Joe Biden’s presidential campaign is egging it on.

On Thursday, banking giant JPMorgan Chase announced a $30 billion plan to “advance racial equity”:

The New York bank said it is committing $30 billion over the next five years toward programs that include earmarking more money for getting Black and Latino families into homeownership and providing additional financing to build affordable rental housing units.

“Systemic racism is a tragic part of America’s history,” said JPMorgan Chase CEO Jamie Dimon in a statement. “We can do more and do better to break down systems that have propagated racism and widespread economic inequality.” [AP]

Specifically, JPMorgan’s plan is to create thousands of new mortgages based not on creditworthiness but on skin color:

As part of our commitment to promote and expand affordable housing and homeownership for underserved communities, we will take actions to increase equity, affordability and access to housing by:

    • Originating 40,000 new home purchase loans for Black and Latinx households through an additional $8 billion commitment in mortgages
    • Helping an additional 20,000 Black and Latinx households achieve lower mortgage payments through refinancing loans totaling up to $4 billion
    • Financing an additional 100,000 affordable rental units through a $14 billion commitment in new loans, equity investments and other efforts [JPMorgan]

JPMorgan’s new loan pledges are based on the idea that its lending practices have been racist, and that it has so far refused to provide profitable home loans to minority communities for no other reason besides prejudice. Its solution is to lower standards to provide loans it previously would not have, in the name of greater equality.

JPMorgan isn’t just pledging its own money to this foolish cause. In the company’s announcement, it vows to lobby Congress for changes to the law it says will generate another $500 billion in mortgages for those whose credit is currently too poor to obtain one.

It is no exaggeration to say that this is the exact recipe for another calamitous housing crash and economic disaster for all Americans. And we know this because it’s the same strategy used prior to the 2008 housing crash.

For decades, both political parties have sought higher home ownership rates in America. This isn’t a bad thing. People who own their own homes are more invested in their communities, have a stake in society, and have something to be proud of. But home ownership can only be effectively increased by keeping houses affordable, and by providing the wages and economic stability people need to make payments on them.

Instead, JPMorgan is pushing more debt and lower standards for favored races and acting like this magically will not result in a cascade of defaults by borrowers.

Two decades ago, George W. Bush embraced the same disastrous thinking.

In a 2002 speech at St. Paul AME Church in Atlanta, President Bush outlined his plan for increasing minority home ownership in America:

It is stunning how much overlap there is between Bush’s plan and JPMorgan’s. Bush blasted down payments as a “barrier” to buying a home, as though they are an arbitrary obstacle rather than a critical sign of a borrower’s ability to save money and build wealth. Now, 18 years later, JPMorgan is promising a new “down payment and closing cost assistance fund.”

Bush promised a $2.4 billion “affordable housing” initiative; JPMorgan promises $14 billion for the same.

Bush announced a grand push for financial education and “housing counseling;” JPMorgan pledges to “amplify education and counseling programs to prepare more Black and Latinx communities for sustainable homeownership.”

Just like JPMorgan, Bush explicitly racialized his push for greater home ownership. “By the year 2010, we must increase minority home owners by at least 5.5 million,” he said in his 2002 speech. Companies were urged to cut standards to achieve Bush’s mission, and cut standards they did. In one infamous case, a California strawberry picker earning $15,000 a year was handed a $720,000 mortgage. By 2006, almost a quarter of all new mortgages were subprime, higher-interest loans given to individuals who didn’t meet conventional lending standards.  Nearly half of all black and Hispanic borrowers assumed subprime mortgages.

For a while, Bush’s magical thinking worked. Millions of easy loans were handed out to people who previously wouldn’t have received them. The home ownership rate reached a record high of 69.2% in 2006:

As subprime loans piled up, a few voices warned that banks were courting calamity. They were met with derision and mockery. In 2007, economist and University of Chicago professor Austan Goolsbee wrote a smug New York Times op-ed ridiculing critics of the sub-prime lending craze and suggesting they were racist:

[T]he mortgage market has become more perfect, not more irresponsible. … As Professor Rosen explains, “The main thing that innovations in the mortgage market have done over the past 30 years is to let in the excluded: the young, the discriminated against, the people without a lot of money in the bank to use for a down payment.” It has allowed them access to mortgages whereas lenders would have once just turned them away.

The Center for Responsible Lending estimated that in 2005, a majority of home loans to African-Americans and 40 percent of home loans to Hispanics were subprime loans. The existence and spread of subprime lending helps explain the drastic growth of homeownership for these same groups. [New York Times]

It took just a few months to expose Goolsbee’s idiocy. Housing prices peaked in 2006, and as they declined, millions of Americans were underwater on their mortgages. Americans unable to make payments were also unable to pay off their mortgages by selling their houses. The housing bubble popped and unleashed a global economic calamity.

The maze of collateralized debt obligations and credit-default swaps on Wall Street obscures the heart of the 2008 crisis: Americans given home loans they were unable to afford. No matter how much idiots shriek about racism, it turns out that the main reason low-income households of any race don’t get loans is that they are much less likely to repay them. According to the Chicago Federal Reserve, by 2006 fully 20% of subprime loans were going into default within a year of being issued.

These underwater loans were heavily concentrated among the minority homeowners President Bush was obsessed with helping. Among Americans who received home mortgages between 2004 and 2007, by 2013, 31% of Hispanic borrowers were delinquent or had been foreclosed on. For black borrowers, the figure was 28.2%. For Asian and white borrowers, the delinquency rates during these crisis years were just 14.7% and 12.1%, respectively. It wasn’t racism that caused different home ownership rates. It was credit-worthiness. When banks and the federal government made the politically-motivated decision to ignore reality, everyone paid the price.

And what about Austan Goolsbee, who cheered on this calamity? Just like the architects of Bush’s Iraq War, Goolsbee was rewarded with tremendous professional success for pushing one of the worst policies in American history. He chaired President Obama’s Council of Economic Advisors, and afterwards returned to his cushy position at the University of Chicago. Now, he’s a top advisor to the Biden campaign on how to close the racial wealth gap. When terrible ideas with catastrophic consequences aren’t punished, they return with a vengeance.

By itself, JPMorgan’s newfangled idiocy is not enough to bring the economy to its knees. But the company’s action is reflective of the political winds. Kamala Harris’s presidential campaign (using Joe Biden as a puppet) promises to federalize credit reporting — not to improve accuracy, but to remove racial “disparities:”

Today’s credit reports, which are issued by just three large private companies, are rife with problems: they often contain errors, they leave many “credit invisible” due to the sources used to generate a credit score, and they contribute to racial disparities, widening the African American homeownership gap. Biden will create a new public credit reporting agency within the Consumer Financial Protection Bureau to provide consumers with a government option that seeks to minimize racial disparities, for example by ensuring the algorithms used for credit scoring don’t have a discriminatory impact. [JoeBiden.com]

The Biden Harris campaign also vows to expand the Community Reinvestment Act to require more lending in low-income areas, while at the same time pressuring banks not to raise standards — even in response to the COVID-19 economic downturn.

JPMorgan isn’t blazing a new trail. It’s merely getting out ahead of what the Democratic Party will be demanding of it anyway. And it knows that as a “too big to fail” institution, responsible Americans will be handed the bill when the jig is up.

There is nothing charitable about any of this. There is a reason so many religions put usurers in the deepest bowels of Hell. Giving people loans they can’t afford is destructive and evil. Recipients either default and lose their homes, or they suffer for years trying to pay off burdensome debts. When too many borrowers default, banks falter (until taxpayers bail them out), and the economy fails.

There are only two ethical and sustainable ways to increase black and Hispanic home ownership. Either houses must be made cheaper, so more can afford them, or blacks and Hispanics must be economically elevated so they can more reliably pay off their loans. Ignoring reality helps nobody. In the long run, it will bring ruin to the entire country.

It’s tempting to ascribe JPMorgan’s stunt to simply forgetting the past. But another, more sinister possibility is worth considering. After the 2008 mortgage implosion, the federal government bailed out the financial industry to the tune of $634 billion. JPMorgan received $25 billion of that, and its executives got to keep all the bonuses they made blowing the bubble. The company may simply have concluded that, as long as it remains in Washington’s political graces, it will always be eligible for another bailout. In America’s increasingly corrupt  version of “capitalism,” political connections and support from fellow globalists matter far more than honest success on the free market. After all, a few billion in bad loans is a tiny price to pay to secure a permanent spot in America’s oligarchy.

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Sean D
1 year ago

Darren—this is truly excellent work. I’m so impressed with what you’ve been doing. Thank you! You’re kicking butt and taking no prisoners.

For years, I wondered why the media never explained the financial crisis properly. It seemed obvious to me.

This is the first time that I’ve read an article that accurately reflects the truth. The banks are purposely confusing cause and effect. You don’t create a responsible borrower by way of irresponsible lending. Nor do you create the economic conditions for growth by faking reality.

1 year ago

I, too, would like to thank Darren for this. Not only did he explain briefly yet comprehensively what happened during the last bubble and bust, but how it will happen again. Very similar to a pump and dump scheme.

It was once explained to me by an attorney who worked in finance that the banks are the government and the government is the banks. Truer words were never said.

Kudos to Revolver News for these great reports.

1 year ago

They should get Andrew Cuomo to help them. He has experience with causing calamities such as this.


Darren Kelama
1 year ago

Excellent article.

“There are only two ethical and sustainable ways to increase black and Hispanic home ownership. Either houses must be made cheaper, so more can afford them, or blacks and Hispanics must be economically elevated so they can more reliably pay off their loans. Ignoring reality helps nobody. In the long run, it will bring ruin to the entire country.”

Unfortunately, there’s nothing to be ‘economically elevated’ to anymore. The new Bolshevik system being installed transcends race and seeks to create dependency on government for basics like food and housing.

With that stick in hand, they will beat people into submitting to RNA vaccines and cryptographic digital ID’s – this isn’t a bad movie – it’s reality and it’s already happening. Normally, this is where churches are supposed to step up and warn against tyranny but the only place we’re seeing leaders of the mainstream churches is on the back of milk cartons.

There is one church fighting back but they’re small. They’re issuing Religious Exemption Affidavits for masks, Covid testing and RNA vaccines. Maybe you’ll find it useful:


Dean G
1 year ago

Nailed it! Trumps’ plan of deregulation to bring industry back to the U.S. and curbing immigration to eliminate the overcrowding of the housing market while pressuring businesses to raise wages for the middle class is the more responsible option. Ironic that many who would have ultimately benefited from this approach will be lured away by the promise of a quick easy fix based on a grievance industry lie.

In AZ, not a day goes by we are not inundated with calls and texts from investors looking to buy property. Has been going on for two years now. Apparently, they see this state as a rising market and indeed current prices have escalated to even higher than 2007 levels. This, despite tens of thousands of new builds in the area. A real estate friend tells me most of his customers are moving here from CA but warns of a bursting bubble in the future. A free down payment might sound great but at these prices I will just continue to save and be ready for the next crash.

1 year ago

It’s one thing for a multinational corporation to get ‘religion’ and help poor people by investing billions of dollars into whatever weird above-board scheme that allows the investors, board, and CEO to sleep at night (it’s their money- if they all agree why should I care?)- but lobbying Washington to utilize a taxation system that imposes under the threat of governing violence billion-dollar ‘values’ upon unwilling participants is unadulterated corporation-driven tyranny that should be rejected at all costs by anyone interested in liberty.

Pillaging a society that SHOULD be serving the purposes of participants at the individual and community level is remarkably consistent behavior for those ensconced in the jaded ethos of unlimited elite arrogance. Within the narrow minds of moneyed globalists human life mimics lifeless pawns in schemes so grand that corruption becomes a skill and game rather than a crime and sickness.

I’m a critical capitalist, but I have no interest in being part of hideous corporate schemes that use useful cheap pin-striped slaves in state legislatures and D.C. halls to purchase my life production as a form of slavery.

1 year ago

Racial disparities are not because of skin color. They are a result of cultural differences in behavior. This is proven by the racial equity initiatives that seek to target people of color in order to achieve a specific racial makeup in hiring. Same thing for mortgages.

How do they target people by race for mortgages or job applications? They must look at behavior of people of color. For example: How do you find more Hispanic applicants? Cinco De Mayo celebrations? Hispanic language newspapers? Hispanic TV? It means that there are differences in behavior, otherwise it would be impossible to target any given race. Bottom line they must stereotype “behavior” by race, in order to target a specific race.

That is the definition of racism. Treating someone differently because of their color. I think it is time to make it illegal to question race on any application for anything.

Rick Martinez
11 months ago
Reply to  Bigmike

I’ve said that for years, the secret is in the name right? I don’t ever mark it, I just looked at them and said: You really can’t figure it out by my full name?

1 year ago

The housing crash is cooked up by the owners, not by Wall Street. The owners are international banksters running a Pnzi monoploy, creating money out f thin air. They want to get paid, and you di not pay. So no they collect it with a scam called COVID

1 year ago

Here is my edited version:
The housing crash is cooked up by the owners, not by Wall Street. The owners are international banksters running a Ponzi monopoly, creating money out of thin air. They want to get paid, and you did not pay. So now they collect it with a scam called COVID.

Tom SteChatte
1 year ago

I’m okay with this because I already have my house. The federal government is going to dissolve before 2025, and with it, most of Wall Street Investment Banks, which own most mortgages, which do so with FED QE, which will become worthless with the dissolution of the federal government. So then there will be no one to whom to pay my mortgage, not to mention no value in the currency for which the mortgage is priced. To sum up: when the federal government dissolves, so will the mortgage industry, and reflexively then, so will my my mortgage–ergo–FREE HOUSE! Woohoo! Then, my life will become a living memorial to the classical libertarian philosophies of “come and take it” and “get off my lawn,” both of which would be dreams come true for me.

Mike Wilhelm
1 year ago

Brilliant article. Thank you! Please rerun this at least two more times before the election.

1 year ago

On the other hand.
If Trump gets reelected, the people will need this help when they get jobs or higher-paying jobs and move up the ladder of success. But, they will not default on their loans this time. Jobs will be coming back, due to the tax relief of having a business in this country. Government’s help in bringing these companies back will accelerate this phenomenon even quicker. Just hoping for the best.

1 year ago

Great article/analysis.
Sounds like another pump and dump.
Many Americans find economics tedious,
the way you’ve laid it out makes it digestible.
Thank you.

1 year ago

While Bush did his part to pump up the housing bubble, Clinton actually started the whole thing when his administration started the National Homeownership Strategy; you can find a decent writeup @ https://www.investors.com/politics/editorials/hillary-and-bill-cause-of-housing-financial-crisis/

rob lake
11 months ago

“There are only two ethical and sustainable ways to increase black and Hispanic home ownership. Either houses must be made cheaper, so more can afford them, or blacks and Hispanics must be economically elevated so they can more reliably pay off their loans. Ignoring reality helps nobody. In the long run, it will bring ruin to the entire country.”

That may be a simplistic way of framing it. Unfortunately, it’s not that simple. Affordable homes for the poor are usually in very poor neighborhoods (that need a lot of work). Let’s put it this way, would you buy a unit in a ghetto, if that’s all you could afford and live there? People are likely not to invest in ghettos or very poor neighborhoods. It’s a complicated problem that requires multi-prong approach (that does both at the same time). What you need is community investment vehicles that invest on several things:
1. Transformation of a neighborhoods through rehabilitation/Refurbishment (buy them on pennies on the dollar through grants by those communities)
2. Provide Job/vocational training in housing: carpentry (sheetrock, trim, flooring, etc.), plumbing, electrical, etc. and other trades, but other jobs as well.
a. apply those skill sets in refurbishing those homes/buildings (under supervision/tutors, GCs, of course),
b. loose restriction of housing codes, etc, w/out compromising safety – making it less expensive to refurbish.
3. Provide (SBA) loans for small businesses w/tutoring that guarantees success for small mom & dad shops, but for a diversity of businesses as well, office, retail, mfg.
4. Provide low interest loans (subsidized by the federal grants – for the transformation of those communities) to people who invest in those communities thru sweat equity, etc., b) organize associations that oversees the maintenance of those communities – interacting w/owners, and ensuring they neither default or run them down. (some controls on renting would be in order too).
5. Limit outside individual investors in homes, by capping them @ 20/30% (base on income), so that most can be earmarked to the poor that live in those communities, but at the same time, increase the diversity of the community w/out gentrifying it. Over time, the value goes up, people move out to more expensive homes w/more equity.
I could say more, but it’s beyond the scope of this comment section to do so. However, I agree wholeheartedly: Deliberately forcing un-affordable mortgages to the very poor is unconscionable. It’s a ploy to enrich the rich.

Wolf Strike
11 months ago

The entire Left’s motivation rests on the core of Marxist ideology.

Equality of outcome for all (Though for the Communist elites living in their dachas – mansions
in the old Soviet Union – that rule didn’t apply to them). Most Russians lived in sub poverty.

This latest move by spineless capitalists like JP Morgan is bribery money paid to the Left in
hopes they can avoid the coming bloody purge.

More evidence that America’s Marxists are a cancer upon us all.

Rick Martinez
11 months ago
Reply to  Wolf Strike

Words of Wisdom here… The results will the “American people’s vote to “imprison themselves” by allowing/voting “debtors prison to “Phoenix”. To bring back a DEADLY ERA of our “World History.

11 months ago

The one exception I can think of would be the case where a renter could lower their monthly expenses by buying and I’m sure there are many cases out there like this, however such people should already be covered by responsible lending standards and not need special rules. If they have a history of paying rent and other bills on time, their credit score should be decent. I do get the having no savings problem though, according to the federal reserve 40% of Americans don’t have $400 in the bank for emergency expenses. Not sure how the government can fix that though, Dave Ramsey knows how 😉

11 months ago
Reply to  Darren

The media’s focus on “40% without $400 for unexpected expenses” was apparently “pulled” from the Fed’s “Report on the Economic Well-Being of US Households in 2018”. And this is NOT what the report said as per factcheck.thedispatch.com. The Factcheck article ends with “There is no evidence to support Rep. Omar’s claim (which has been widely repeated by mainstream media outlets) that 40% of Americans don’t have $400 in their bank accounts, but her general assumption that most American families do not have the funds to subsist for an extended period of time during an emergency is almost certainly correct.” Statistical questions abound: 1) AMERICANS – I have six grandchildren under 12…they are Americans. 2) Each of them has more than $400, but funds are held at their brokerage firm, not in a bank account. Inquiring minds should check the math (numerator and denominator) and sources of information used by the 2018 report BEFORE letting the Omars and media of the world opine. And reopen the USA. Personal Responsibility will prevail. My extended family (8 among 3 generations) all ‘shared’ COVID in one setting. The kids continued to jump on trampolines; the adults ran low grade fevers for 1-3 days followed by lethargy. Not worth shutting down the economy!

Big Shot
11 months ago

Step 1 was getting rid of Glass Stegall.
Step 2 was letting the trading of credit default swaps start, grow and continue.
Step 3 was subprime mortgages to non credit-worthy people.
Step 4 was a massive taxpayer bailout and almost bankrupting the entire country.

Now, idiots like Goolsbee are coming back with their experience in academia and government, not business, and with the new administration’s flag that everything is racist will do the same, stupid thing all over again. I have already offshored my money, suggest you do the same.

Michael Lofton
11 months ago

When the people who do not qualify financially for a mortgage move into Jamie Simon’s neighborhood I’ll be all for it.

Michael Lofton
11 months ago

By the by, Andrew Cuomo should be doing time for his actions as HUD director during the time when he threatened institutions to make bad loans.

11 months ago

The fact that first a RINO (Bush 2) and now a Democrat (Biden) would back the same housing bubble plan shows there is no daylight between those supposedly different parties. Nothing is more important to the nation’s future now than for the real Republican rank and file to learn the difference between RINO’s and genuine conservatives who put the American people first, not Wall Street.

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