Re:

["Matthew J. Miszewski" <mjmiski@execpc.com>]

>>I consider it my business also, when people are denied opportunity because
>>of where they live.
>
>Why not simply disagree with me?  You do not believe that people may
>lend their very own money, earned honestly, to anybody they please.

Actually, I never said that.  Anyone may.  I may hire only white people
(even with the intent not to hire others).  I will also pay the
consequences.  And if someone feels that they need to do this, the teachers
of civil disobedience indeed state it is their duty to.

Anyone may give their money to whomever they choose.  I was simply stating
it was morally wrong.

>If you are ashamed of that, change your mind.  If you are not ashamed,
>proclaim it the world and justify it.

I have never been ashamed of my opinions.  Its just that I never said they
couldn't do it.  I justify my position as follows:

It is costly to everyone in the state to have areas of under and
unemployment, poverty and usually high-crime rates.

It is unjust and costly to deny opportunity based upon residence.

It is just and efficient to allow markets to indeed be free instead of
falsely supporting a certain hegemony based upon residence.

Free and full competition is the only way to achieve a free market.  This
can only happen when access to capital is equal with regard to worthless
indicators (race, sex, residence and aga's favorite, sexual orientation).

I have never suggested that provably bad credit risks should be given money.

>>I may also hire whomever I wish, but I would have to pay the
>>consequences if I happened to discriminate based on a protected class
>>while doing so.  That is the society in which I live.  If I dont like
>>it, I try to change it.  Our society is not libertarian.
>
>Current policy doesn't matter if we are discussing the wisdom or
>justice of possible policies.

It does if my argument is that this part of the system *is* just.  I
realize you disagree, but I am sure you are not dismissing my argument
out-of-hand.  If you disagree, as you say, then disagree.

>It isn't clear to me whether you are discussing policy options or
>whether one should violate laws one does not like.  When an action is
>illegal, it is still permissible to discuss its legalization.

I agree.  I am not arguing that we need to withdraw Title VII.  Aparently
you are?

>>There are times when government should intervene.  I believe it
>>should be as infrequent as possible, but would not want to live in a
>>society where disinfranchised people have no possible recourse.  Your
>>choice would apparently be different.
>
>Perhaps.  In any event, it is important to understand precisely the
>mechanisms through which people are disenfranchised, if that is in
>fact what has happened.  It is also important to understand the
>ramifications of phrases like "no possible recourse".  To borrow
>money?  It is safe to say that most poor people should be saving money
>rather than borrowing it.

Why are you stepping around your opinion?  "...if that is in fact what has
happened."  Just say it.  You do not believe poor people are
disenfranchised.  I understand the ramifications of "no possible recourse".
 How should poor people save money?  Through some forms of civil
disobedience like stealing food and clothes and then putting that money in
the bank?  Of course, the police will understand.  The government will back
them.

Look, capital begets capital.  I favor increasing opportunity.  As I will
discuss below, there are reasons why capital does not flow to poor areas.

>>I have not heard serious doubts for a while that redlining occurs.
>
>It seems likely that people draw lines around certain areas and decide
>not to lend money there.  What is less clear is that this is
>unreasonable.  There may be a few good credit risks in poor
>neighborhoods.  But, it may just be too much trouble weeding through
>the others to make it a paying business.

I thought that it didnt matter where people came from as long as the risk
was low in reality.  Banks weed through the people coming to them from the
suburbs.  Is it harder for them to see past a red line?  More costly?  How?
 It is too much trouble because of the way that bankers think.

>It may also be the case that people lending money are behaving
>irrationally and drawing lines around neighborhoods for simple racial
>reasons and for no others.  There is a word for this: opportunity.

It also screws up the market.  I am glad that you admit that racism is
irrational.  That is the core as to why the problem doesnt go away.  It is
an infinite loop.  Current interests wont go there.  Generally, people who
understand the problem are without access to capital.  They would like to
go there.  They cant get capital.  When they approach current interests,
they wont go there.

>Bank of America was built by a man who perceived and exploited one
>such opportunity.  Italian shop keepers in California could not get
>good banking services for, it turned out, irrational reasons.
>

There are a few examples of people who actually realize this as a
problem/opportunity.  Oddly enough, this point reinforces mine.  Redlining
did exist.  Bank of America realized it and made a lot of money.  But it
still exists elsewhere.  Why dont business plans around the country spring
up on venture capitalists desks with an approved stamp on them?

>>I would love to have the financial wherewithal to startup such an
>>enterprise.  Unfortuantely I reside in one such neighborhood.
>
>People start businesses without their own capital all the time.  If
>there really is such a great opportunity, go find some rich people.
>Rich people, like other people, are always happy to hear about ways to
>make more money.  

Ahhh.  This is the key (which I probably did not make as clear as I should
have).  They wont.  It is a bit irrational, I know.  But we just discussed
irrationality.  Racism doesnt see green.  If it did, I agree with you that
capital would flow there.  It doesnt.

>They don't even have to put the money in for a long
>time.  Once you've set up a package of mortgages, you can sell them
>off on the CMO market which is liquid and, I believe, quite
>colorblind.  The beauty of this scheme is that you can take your
>profits right away and let other people take on the long term interest
>rate risk, default risk, and management hassles.  This will make your
>plan easier to sell to investors.

I agree with you that it is a financially attractive proposition.  At the
Center for Public Representation where I worked during Law School we
approached investors.  The ROI was extremely attractive not to mention the
added "goodwill" in a largely liberal community (I went to Law School in
Madison, Wisconsin).  No one bit.  Hmm?

>You might also look into the microlending market.  The idea is to lend
>poor people small amounts of money (less than $10,000) to start
>businesses and the like.  The default rates are claimed to be
>surprisingly low.  I have my doubts, but it sounds as if you do not.
>Good luck.

Actually, I am very glad you brought it up because I was just going to.
Microloans are successful not only in this country but in India and around
the world as well.  The Grammeen Bank initiated its microloan program in
India by loaning usually less than $100 to individuals.  They fixed up
their residences or started extremely small businesses.  The default rate
was less than 5%.  (BTW, the system also encouraged community by a system
of cyclical neighborhood lending where neighbors took responsibility for
neighbors).  

Compare this now to people whom banks would generally consider a good risk.
 College Graduates.  Generally, these folks live outside of the red line.
Good risks right?  What about those nasty student loan default rates?  The
red lines dont make business sense.

>>It is difficult enough to raise money to run a small business (and
>>turned out to be much easier to do without any bank lending at all).
>>I have talked with people about starting their own banks.
>
>In principle, there is no reason at all why banks are the only
>institutions that can lend money for mortgages.  There may be legal
>impediments, but then we are back to the actual culprit, the
>government.
>
>You might find that opening a bank was easier if all you had to do was
>take deposits and lend money rather than wading through the morass of
>legal requirements and paperwork.

I favor the elimination of illogical regulation.  I favor ridding banks of
burdensome personal property taxes.  Hopefully the deregulation set for
1997 will help.  My desire for regulation in this case is to eliminate
redlining.  It is far more burdensome to retain this system than it would
be to eliminate it.

>>When you are working to make sure all the bills are paid it is a bit
>>difficult to also build an entirely new socio-economic structure.
>
>You don't have to build an entirely new socio-economic structure.  You
>just have to find some good credit risks, some people with money to
>lend, and put them together taking a cut for yourself, unless the
>government has thrown up some obstacles to this.

I wish it were this easy.  Economically depressed areas need new structures
built.  The current structure adds to the cycle of poverty.  First,
earnings are low.  Second, costs are high (Warehouse foodstores dont locate
there so corner stores become the means of feeding the family ($$$)).
Again, business plans have been presented to no avail.  Even private
foundation subsidized events were tried.  To no avail.  

>No, actually they do care, they just don't think (correctly) that they
>can get it easily.
>
>I have no idea if your local bank has "anonymous accounts".  More
>probably, they have accounts for which they do not report transactions
>in excess of $10,000, but which are held by people they know fairly
>well.  This is more common than you might think, and not just for
>laundering drug money.  Tax evasion is widely practiced.

I am aware of this.  But drug dealers hold more cash than CEO's.  Aparently
the laundromat isnt open for everyone. ;-)

>But wouldn't the racist banks be hurting their business?  Doesn't the
>punishment go quite closely with the "crime"?

They would not be making as much as they could.  Irrational, I know.

>If you believe that there is a huge opportunity which the racist banks
>(i.e., all of them) will not take advantage of, you had better explain
>why there is nobody anywhere with any capital who wouldn't want to
>make even more money off poor people.  Can it really be the case that
>99+% of rich people will run fleeing from such a great opportunity?

I once believed much like you.  I saw an "opportunity" the existance of
which I could not explain.  It seemed irrational.  And it was.  Racism is
irrational.  As you seem aware (BTW, I applaud you on what seems to be an
honest degree of care) some are trying to break through the cycle.  The
south side of Chicago recently started there own bank.  It is working.  As
you mention, historically, the Bank of America story.  Redevelopment
efforts "seem" to abound.

>Oh, and speaking of racism, where do wealthy African-Americans invest
>their money?

Huh?  What is your point?

>>Everyone can now clamor that it just isnt true.  Banks have never
>>discriminated.  Its all a big lie.  Whatever.
>
>Banks have practiced discrimination, and not just against black
>people.  They have been able to get away with it.  How?  Because the
>government has protected the banking guild from competition.
>
>If opening a bank were as easy as forming a corporation, you would not
>see much discrimination, I assure you.  There is no reason why a bank
>shouldn't be that easy to open.

We agree.  But I feel that a legal elimination of redlining would decrease
costs to the industry.

>Appeals to the very people who are exploiting you are not likely
>to meet with success, are they?

If they never did we would still have slavery and only white, adult, male,
land-owners would vote.  While success is rare, it has prevailed when the
cause is just.

>>The real world I live in is just not as simple as the Libertarian Wet
>>Dream(TM).
>
>Then it should be fairly easy to refute my points instead making
>fatuous remarks such as the one above.

Come on, one fatuous remark in a whole post?  I thought that was good ;-)


>Red Rackham
>

Matt