I have a friend that has a Masters in Psychology. We usually confine our discussions to beer, softball, women, and beer. The man is a master of manipulation. I have seen him deflect arguments with such skill that the other person walks away in a cloud of befuddlement. Sometimes we discuss politics. I brought up the growing divide in our country and told him I have little hope that we will ever bridge it. He explained to me the nature of this divide and why we may never come together again as a nation. These are the five logical fallacies that prevent us from agreeing.
Argumentative Theory of Reasoning: states that humans didn’t learn to ask questions and offer answers in order to find universal truths. We did it as a way to gain authority over others.
Neglect of Probability: states our brains are great for doing a lot of things. Calculating probability is not one of them.
The Trust Gap: states we just do not trust other people to do the right thing.
Fundamental Attribution Error: states when other people screw up, it’s because they’re stupid or evil. But when we screw up, it’s totally circumstantial.
Confirmation Bias: states our brains weigh information on a position we hold, not based on the logic, but on the emotional and social consequences of that position being wrong.
I bring this up because what I am about to write will not change the mind of a single liberal in the country. If you have not yet read the article, Paul Sperry for the Investor’s Business Daily has the single most damning information yet that the housing bubble, and thus the financial crises rests on the shoulders of the Clinton Administration.
At President Clinton’s direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties.
I will not go into a detailed analysis; it is just not my specialty. Mata has done some incredible writing on the crises and explained it much better than I could ever begin. I just ask that you read the article, the policy statement, and Mr. Sperry’s analysis. I will leave some highlights for those too busy to read the full article.
Confronted with the combined force of 10 federal regulators, lenders naturally toed the line, and were soon aggressively marketing subprime mortgages in urban areas. The marching orders threw such a scare into the industry that the American Bankers Association issued a “fair-lending tool kit” to every member. The Mortgage Bankers Association of America signed a “fair-lending” contract with HUD. So did Countrywide.
…It warned lenders who rejected minority applicants with high debt ratios and low credit scores to “be prepared” to prove to federal regulators and prosecutors they weren’t racist. “The Department of Justice is authorized to use the full range of its enforcement authority.”
For my friends on the left, once you have read the article, look back at the five logical fallacies, especially Confirmation Bias. I am not denying there was no greed on the part of the banks or Wall Street. Paul Sperry acknowledges that in his conclusion:
The fair-lending task force’s original policy paper undercuts the notion the financial crisis was all about banker “greed,” though it certainly played a role after the fact. Rather, it offers compelling evidence that the crisis evolved chiefly from government mandates and threats to increase lending to applicants who could not afford them.
But ask yourself one question. What facilitated this greed?