One of the things that happens when you get old is that what seems like news to others can look like a re-run of something you have already seen before. It is like watching an old movie for the fifth or sixth time.
A headline in the September 14th issue of the New York Times says: “Blacks Hit Hardest By Costlier Mortgages.” Thirteen years ago, virtually the identical story appeared in the Wall Street Journal under the title, “Federal Reserve Details Pervasive Racial Gap in Mortgage Lending.”
Both stories are based on statistical studies by the Federal Reserve showing that blacks and whites have different experiences when applying for mortgage loans — and both stories imply that racial discrimination is the reason.
The earlier study showed that blacks were turned down for mortgage loans a higher percentage of the time than whites were and the later story shows that blacks resorted to high-priced “subprime” loans more often than whites when they financed the purchase of a home.
Both amount to the same thing — less credit being extended to blacks on the same terms as credit extended to whites.
Both studies also say that this is true even when black and white loan applicants have the same income. The first time around, 13 years ago, this seemed like a pretty good case for those who blamed the differences on racial discrimination.
However, both research and old age tend to produce skepticism about things that look plausible on the surface. Just scratching the surface a little often makes a plausible case collapse like a house of cards.
For example, neither study took credit histories into account.
People with lower credit ratings tend to get turned down for loans more often than people with higher credit ratings, or else they have to go where loans have higher interest rates. This is not rocket science. It is Economics 1.
Blacks in the earlier study turned out to have poor credit histories more often than whites. But the more recent news story did not even look into that.
Anyone who has ever taken out a mortgage loan knows that the lenders not only want to know what your current income is, they also want to know what your net worth is. Census data show that blacks with the same income as whites average less net worth.
That is not rocket science either. Not many blacks have affluent parents or rich uncles from whom they could inherit wealth.
The earlier study showed that whites were turned down for mortgage loans more frequently than Asian Americans and the more recent study shows that Asian Americans are less likely than whites to take out high-cost “subprime” loans to buy a house.
Does that mean that whites were being discriminated against? Or are statistics taken seriously only when they back up some preconception that is politically correct?
These are what could be called “Aha!” statistics. If you start out with a preconception and find numbers that fit that preconception, you say, “Aha!” But when the numbers don’t fit any preconception — when no one believes that banks are discriminating against whites and in favor of Asian Americans — then no “Aha!”
Both this year’s study and the one 13 years ago provoked an outburst of accusations of racism from people who are in the business of making such accusations. Moreover, where there is a “problem” proclaimed in the media there will almost invariably be a “solution” proposed in politics.
Often the solution is worse than the problem.
The older study showed that most blacks and most whites who applied for mortgage loans got them — 72 percent of blacks and 89 percent of whites. So it is not as if most blacks can’t get loans.
Apparently the gap has narrowed since then, for the New York Times reports that lenders have developed “high-cost subprime mortgages for people who would have been simply rejected outright in the past on the basis of poor credit or insufficient income.”
Of course, the government can always step in and put a stop to these high-cost loans, which will probably mean that people with lower credit ratings can’t buy a home at all.