Scott Adams, author of the Dilbert cartoons, blogs about lending:

In one of my earlier career incarnations I was a banker. My job for a few years included reviewing and approving commercial loans for doctors and dentists. One day I declined a loan application for a dentist who, according to his recent tax returns, didn’t have enough cash flow to repay the loan. My boss at the time reviewed my work and turned the decline into an approval without even looking at the financials. When I asked why, he explained that the borrower had a Chinese name. I questioned the wisdom of this lending procedure and he directed me to the files of delinquent borrowers, challenging me to find any Chinese names in there. There weren’t any. I’m not judging, just telling you what happened.

Scott Adams Blog: Predatory Lenders 10/03/2008

Technically, this is as illegal as refusing to lend to someone because you don’t like their race–all the members of groups with many delinquent borrowers in the files could sue. And the manager may have considered that the dentist may have had more ability to pay than would show on his tax return. According to John Derbyshire “A Chinatown merchant would think himself a fool if he paid more than nominal tax on his revenues.“

In the LA Times today, Warren Buffett endorsed the bailout plan as “a rescue plan for America.” He went on to say:

“If we could do the deal that is available to the United States government and have its staying power, and its borrowing costs, we would make significant money. I would love to have, if they buy the assets at market price, I would love to have 1% of the profit or loss that results from buying these assets from troubled financial institutions.”

Okay, well, that suggests a second deal:

I hereby offer to sell, straight up, my family’s share of the bailout, both payouts and subsequent profits, to Mr. Warren Buffett. If he’ll write me a check for what it will cost me in taxes, I’ll sign over to him my share of the profits, if any.

Seriously, if Buffett really “would love to have 1% of the profit or loss that results from buying these assets from troubled financial institutions,” then I am all in favor of him ponying up $7 billion for 1% of the action.

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I frequently get told that the reigning Diversity ideology couldn’t have had any effect on the mortgage meltdown because A. Minorities are, by definition, a minor, insignificant part of the population. B. Minorities don’t have any money so they can’t lose much money investing foolishly.

Instead, I’m told, the California disaster was all the fault of Ed McMahon for defaulting on his Beverly Hills mansion.

Of course, the biggest single problem was likely that loosening credit standards to add 5.5 million more minority homeowners (as President Bush demanded in 2002) loosened credit standards not just for minorities but for everybody. But the minority contribution alone was significant. And it’s crucial to understand this because it’s only going to get more significant as the population of Hispanics increases by about 100 million from 2000 to 2050 (according to Pew Hispanic Center projections).

There are now 100 million minority individuals in the U.S., and while they may or may not have much money, they certainly took out a lot of dubious mortgages in the housing bubble, expecially in California and a few similar states.

One off the things I’ve been trying to explain is that the late mortgage bubble was so crazy because, unlike most bubbles, it was not a bet on the rich getting richer (as in the Internet Bubble). Betting on smart young people to invent new Internet stuff wasn’t nuts — they actually did invent a whole lot. The nutty part was that there weren’t many ways to use an open system to achieve a quasi-monopoly and earn above normal returns on investment.profit from the inventions. (more…)

You do the math.