From: nobody@huge.cajones.com (Huge Cajones Remailer)
Date: Tue, 10 Dec 1996 00:15:42 -0800 (PST)
To: cypherpunks@toad.com
Subject: Re: Redlining
Message-ID: <199612100815.AAA09236@mailmasher.com>
MIME-Version: 1.0
Content-Type: text/plain



I seem to have upset you, Matt Miszewski, and I am sorry for that.  It
appears to me that the problem we have is that we have different ideas
about what is right and different perceptions of the nature of the
world.

It may appear that I intentionally put words in your mouth.  This is
not the case.  We have different ideas about what is obvious.  I have
made assumptions, but they seemed clear to me.  Apparently, they were
not.  We may still have a fruitful discussion.

At 4:17 PM 12/9/1996, Matthew J. Miszewski wrote:
>At 03:14 PM 12/4/96 EST, Bovine Remailer wrote:
>>At 11:26 AM 12/4/1996, Matthew J. Miszewski wrote:
>[snippo]
>>If I earned my very own money honestly and I choose to lend it only to
>>Albanians, you believe that this would be inefficient and, therefore,
>>forbidden.  
>
>Actually I didnt say anything about private lending.  But as this thread
>goes on you seem to assume much.

I am assuming that you agree that somebody who has earned their money
honestly should be able to lend it to whomever they please for
whatever reason they like.  You call this private lending.  (Please
correct me if I am wrong.)

I believe that five friends should be able to get together, pool their
resources, and lend their money to whomever they like.

I believe that ten, or a hundred, or a thousand people should be able
to pool their money and lend it to whomever they please for whatever
reason they like.

That, essentially, is what a bank is.  I do not believe the government
should dictate which people you, or your bank, are allowed to lend to.

>>In other words, you do not believe that I should be able
>>to lend money to anybody I please.  You can call it "equal access to
>>capital" or "denial of opportunity", but the clearest and simplest
>>description is that you believe I should not be able to lend my money
>>to whomever I please.  Instead of pretending otherwise, just say "I
>>believe you should not be able to lend your own money which you earned
>>honestly to anybody you please.  I believe you should be allowed only
>>to lend money in these circumstances..."
>
>I dont assume that anyone (or any corporation) has earned their money
>honestly.  Quite often that is not the case.

It does not seem reasonable to me to tell people who they may lend
money to on the grounds that some people might have obtained their
money dishonestly.  What would be reasonable would be to charge the
dishonest people with their crimes and return the property to the
rightful owners.

>I have said a few times already that I *do* believe in limited
>regulation.

However, we disagree about which regulations are just.

>And apparently you believe that ad hominem is cool.

>>Of course, non-discrimination is a vague term.  
>
>Actually it is not.  I am an employment law attroney.  I know the
>definition.  I know also what I need to do to prove it.  I also know that
>many times the definition (legal) fails to meet the reality of the
>situation.  But as I said before, we do not live in a perfect society.

I do not believe that in practice discrimination is clear at all.

If I put up a sign in my store saying "Irish need not apply", then
there is a case.  Usually, it is not so clear.

It is difficult to prove discrimination because merit is so hard to
determine.  Many factors go into a hiring decision.  In the end, it is
usually made on the gut level.  There is really no way to prove that
the decision was discriminatory.

Consider the computer industry.  For whatever reasons, right now there
are very few African-American software engineers who are amongst the
very best.  They exist, but you don't see them very often.  What this
means is that you can't look at the percentage of African-Americans
working for a software company to decide whether the company makes
discriminatory hiring decisions.

>>>I agree.  I am not arguing that we need to withdraw Title VII.
>>>Aparently you are?
>>
>>I do not know what is in Title VII.  Perhaps it would be better to
>>ask me about particular policies.
>
>It is all becoming clear to me now.  Perhaps you should understand
>what laws you are rallying against before you attempt to defeat them.
>I have no need to ask *you* about policies.  Considering you have
>recently popped up, you have not even a small collection of
>reputation built up.

We can certainly discuss policy without delving into Title VII and its
repeal.  One advantage of discussing the policy in general is that we
can make statements about entire classes of legislation, rather than
specific laws which should be added or repealed.

>>In fact, I am open to the possibility that poor people really are
>>disenfranchised.  
>
>No you are not.  You show your stripes below.

No, I told you my opinion.  So far nobody has demonstrated in a
persuasive manner how the poor are disenfranchised.  Consequently, I
believe that disenfranchisement is a small part of the explanation.

>>But, if I am to believe that I must hear an explanation that makes
>>sense to me.  If poor people are poor because absolutely nobody will
>>do business with them for completely irrational reasons, that seems
>>extremely unlikely.  Even if most rich people are able to control
>>their greed just to punish poor people of the wrong race, which is
>>already hard to believe, you actually have to claim that they are
>>all this way.
>
>Actually, I dont.  Not all rich people utilize their wealth.  Dont
>believe it?  Ask Bill Gates and the latest Slate.

It is true that not all rich people use their wealth to their own best
advantage.  I am not claiming that all rich people are greedy and
smart.  What I am claiming is that many rich people are greedy and
will certainly seize opportunities that are presented to them.

Let's say one in a thousand rich people is willing to exploit the
inefficiencies of the home mortgage market.  This represents a vast
pool of capital which we are not seeing in "redlined" areas, if what
you say is true.  When people with capital so universally avoid an
investment, my first thought is not that every last one of them is a
racist.  My first thought is that it is not a good investment.

(My next thought is "Gee, if they're wrong, I could make a lot of
money!")

>>Just like anybody else does.  You watch every penny.  You don't eat
>>meat.  When you buy food, you buy inexpensive healthy food like
>>lentils instead of expensive unhealthy food like Coca-Cola and potato
>>chips.  You do not go to McDonald's.  You walk when you can instead of
>>taking the bus or you ride a (used) bicycle.  You don't smoke
>>cigarettes.  You do not buy alcohol.  You do not buy other
>>recreational drugs.  You buy your clothing used.  You economize on
>>your living arrangements, perhaps by having a large number of
>>roomates.  (Note that this is illegal in most cities.  That is a form
>>of disenfranchisment.)  You do not make long distance calls.  If you
>>can, you share a phone with other people. etc. etc. etc.
>>
>>If you know poor people, you will know that few of them do these
>>things.
>
>My vocation is intimately involved with poor people.  I have been there
>myself.  I do not defend my beliefs on those grounds.

You asked me how poor people could save money.  I believe I have
answered the question.  I am sorry if I have pursued an irrelevant
line of inquiry.

>If I did I could easily just state the opposite.  But hey, Ill bet
>you arent racist either 'cause you have Black friends.

You have no idea of my race or my friends.  Yet, it appears that you
are making some assumptions based on a few thousand bytes of text.
Interesting.

>The poor people that I help are nothing like the media productions
>you believe in.

Actually, I believe my own experience of being poor and living with
poor people.  I am prepared to believe that my experience was unusual,
but you will have to provide some evidence, anecdotal at the very
least.

>I realized after reading this last paragraph what kind of person I am
>dealing with.

I may be the most terrible person in the world.  It is not relevant to
this discussion, is it?

>Poor people, in your eyes, remain poor because they apparently have
>no will of their own to get out.  If you *actually* understood utter
>poverty you would also understand the idiocy of the statement.

I like to think I am not an idiot.  Fortunately, you say little here
that makes me think I am.

You might find it more effective to explain in what way I am an idiot.
Remember, I and the thousands of other people who read this list may
not necessarily know what you know.  It may be that some of us only
lack a little explanation or a little helping hand to start us on the
road from idiocy.

>Many of personal friends have 'escaped from the killing fields' and
>have opened my eyes to the reality of the situation.  I will no
>longer try to open yours.  You are not interested in learning
>anything.

How will I learn if you call me an idiot instead of explaining your
other views?  That may be effective in convincing people who already
agree with you, but it is not a way to win converts.  When you mention
escaping from the killing fields, I simply have no idea what you are
talking about.  (I do not say this to be insulting.)

>>Also, you work hard to increase your earnings.  You show up at work on
>>time every time.  You develop a good work ethic.  You wear clean
>>professional clothing at work.  You treat your employer and coworkers
>>with respect.  etc. etc. etc.
>
>That's right.  I forgot.  Poor people dont come to work on time. They
>dont develop a work ethic.  They wear dirty clothes.  And they are
>disrespectful.  And when they dont do these things they are not
>passed up for promotion, never meet a glass ceiling and are never
>discriminated against.  Now I get it.  What was I thinking?

I can only tell you what I have seen.

>>Read "Your Money or Your Life" by Joe Dominguez and Vicki Robin.  It
>>outlines a workable program that all poor people - and quite a few
>>others - will be able to use to their benefit.
>
>I live in reality not theory.

If a theory does not work out in reality it is not of much use.

Next time you are in the bookstore, flip through the book.  It's not
what you think it is.  You'll like it.  Really.

>>But why isn't that good news?  If it's really market inefficiency,
>>why not exploit it?
>
>Because I personally carry to high a debt burden to qualify for the
>loan.

I outlined a plan which would not require you to put up any money of
your own.  As an attorney, you have a tremendous advantage because you
don't have to pay legal fees.

Your own debt burden doesn't matter much if the holding company
borrows the money.  You can give your investors control of the company
and just take commissions on every mortgage you create.

>I also suffer from doing something with my life that I both enjoy and
>feel makes a difference.

That's nice.  I mean that.  But, if the inefficiency you are pointing
at is as large as you say, there should be an opportunity to make many
millions of dollars.  Surely, you could do some good with all that
money.  And, imagine what effect you would have if you did make
yourself rich lending to poor people who are subjected to irrational
discrimination.  Maybe some other rich people would get the good idea.

>>But, even if it were possible to define precisely what racism is, I
>>would still believe it should be legal.  There is no accounting for
>>taste and it is wrong to dictate it to other people when they are
>>causing no harm to others.
>
>Try defining harm.  Try defining taste.  People like you have argued that
>slavery caused no harm.

Now who is making an ad hominem attack?

In this discussion I am arguing for greater human freedom and you are
not.  You have more in common with the slaver than I do, sir.

>Disallowing women to vote caused no harm.

What are you talking about?

>And of course that discrimination in the workplace causes no harm.

It causes harm if you believe people have an obligation to work with
everybody.  I don't believe this.  Let's say somebody likes only
Albanians and hates everybody else.  I would rather that person spent
his or her time with Albanians and not with me.  No harm done.  What
is more, I believe I have no moral right to demand that person spend
time with me if they don't want to do so, for whatever reason,
including discrimination.

>This just makes me glad that you are clearly in a minority, unable to
>withstand the wheels of change.

Change is not in and of itself a blessing or a curse.  Positive change
is a blessing.  Redlining laws are nothing new.  Cryptoanarchy is.

>>>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.
>>
>>Maybe there's something funny about the deal.
>
>That's it.  All those lawyers involved with putting together deals
>(something they succesfully do for a living) put together a funny deal.
>That's it.  It's a conspiracy.  Be careful everyone, the poor people are
>planning something.  Run, run.

The "funny" I had in mind was that it wasn't such a good investment,
not that lawyers are universally corrupt.  The fear that potential
investors have is not that the "poor people are planning something",
but that they are not planning anything and will be unable to pay back
the money they borrow.

>>>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?
>>
>>More to the point, why isn't Matthew J. Miszewski drooling in
>>anticipation of all the money he is going to make by recognizing this
>>glorious opportunity?  Giannini made a tremendous amount of money.
>
>Just because a market exists that is far from stating that barriers to
>entry arent enormous and that a market segment is sufficient to make
>'tremendous amounts of money'.

But the mortgage market is huge.  And, we have inner cities all over
the U.S.  If you there are large areas which are completely unserviced
by lending institutions, this is a huge opportunity.

I am prepared to hear that there are barriers to entry.  What are
they?

>This will be hard for you to understand, but apparently you have no
>interest in expanding your horizons.  

Could this be considered an ad hominem attack?

>>Hmmm?  Maybe it was lousy investment in spite of a good ROI number.
>>Nobody?  Not one person was willing to buy in?  Hardly an
>>endorsement.
>
>What are you talking about?  Good ROI, good investment.  How do you
>define 'lousy investment'?  Maybe you work for a bank?  What do you
>do?  Oh yeah, you are Red Rackham.

If you knew where Red Rackham got his name, you would find it amusing.

No, good ROI does not mean good investment.  "Past performance does
not guarantee future results."  An investor cares about future
results.  What happens to mortgages in poor areas during the next
recession?

BTW, what reasons did your prospective investors give for declining?

>>>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.
>>
>>I'm hearing that cash register ringing.  Go for it!
>>
>
>Whenever a good point is made, you go to that nifty "ring, ring"
>crap.  Do you deny that the default rate on student loans is
>outrageous.  Do you deny that these people generally live out of the
>redlines?

This wouldn't surprise me much.  But, aren't student loans typically
cosigned, often by the government?  I hope the problem is obvious.

If people (e.g., banks) want to lend their money to high default rate
groups, I won't object unless it's my money.

>>That's easy.  Once a month get ten families together to go to the
>>nearest warehouse store in the suburbs and stock up on provisions.
>
>Have you carried that much home on a bus lately?  I mean, you were
>poor, no?  Or do we all forget little things like that?

Incidentally, I do see poor people taking their groceries on the bus.
Smart.

Usually, poor people know somebody with a car.  But, let's say they
don't.  There are all sorts of delivery and shipping services
available.  Taxi services, for instance, usually have a few vans
around for hauling things.  And, there are grocery delivery services.
You could probably find a store which would throw in delivery if
enough goods were moving.  Say it costs $20 (you take the bus there),
that's not much when spread over a thousand dollars of food.

>>Or, one poor family could buy a bunch of stuff every month and sell it
>>out of their house and save everybody the trip.
>
>Making the original capital in their basement of course.  How many
>microloan programs do you know of Red?

It doesn't require a microloan.  The other families could give their
friends the money and save the trip.

>>Discussions regarding "the cycle of poverty" are usually little more
>>than litanies of excuses.
>
>I keep forgetting that poor people want to remain poor.  When will I
>learn.  They use up all their energy thinking up excuses.  Oil
>Company execs never treat blacks differently.  Glass ceilings dont
>exist.  Hey if I keep saying it maybe I will learn.

I don't believe I have said anything about the management of oil
companies or glass ceilings.

The reason most people are poor is because they are not functioning
well in their environment.  I am prepared to hear otherwise, but this
has been my experience.

>>I challenge you to put your own money into this venture.  You don't
>>even have to quit your job to get into the microlending business until
>>you've built it up to the point where it can support you.
>
>This sounds like advice from someone who has never tried.  Not you, red.

Would it make a lot of sense for me to try this?  I'm the one arguing
that investors probably know what they are doing.

>>My point is not that there is a great opportunity so "somebody
>>somewhere" will solve the racism problem.  My point is that you
>>yourself do not believe there is a great opportunity if it involves
>>money you really care about, i.e. your own.
>
>Actually, my largest investment is in a minority owned business.  Funny
>thing.  My money.  How odd.

Well, good for you.  I mean that sincerely.  Doing well, I trust?

>>You are claiming that there are ZERO investors who will invest in this
>>great opportunity because they are racists.  Contrary to popular
>>belief, most African-Americans are not poor or even gang members.
>
>Where the hell did this come from?  I *never* asserted it.  Red must be
>watching too much TV.

Perhaps I misunderstood.  Didn't you say that you were involved with a
mortgage program for poor people and were unable to find any
investors?

>>If you are claiming that even African-American investors are
>>irrationally racist about lending to poor people, you should be
>>forewarned that I and many other people are going to find that a
>>little hard to believe.
>
>Racism is a dynamic of Power Red.  There are, unfortunately,
>successful Blacks that do not help out the neighborhoods they came
>from.  They do not credit Affirmative Action for its help.  Consider
>me 'forewarned'.

Please explain in greater detail how the dynamic of power works in
this situation.  I am truly interested, but your one line sentence
gives me little to go on.

I was not proposing that successful African-Americans "help out" their
old neighborhoods.  Rather, I was proposing that they would be able to
see the opportunity and exploit it to the benefit of all parties.
"Greed is good."

>>>>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.
>
>I never mentioned that blacks were the only poor in this country.
>That was one of Red's assumptions.  Much like the ones about poor
>people being lazy, dirty, blah, blah.

Yes, it appears I did make an assumption.  Every redlining discussion
I have seen in the past concerned African-Americans and this caused me
to make a careless statement.  My apologies.

Getting back to the point, you have failed to explain how banks get
away with their discriminatory practices.  I think the markets see
redlining as damage and route around it.  Why do you believe this is
not happening?

(Astute observers will notice that this thread really does concern the
cypherpunk list.  Summary: Cryptoanarchy will loosen or even eliminate
controls on the flow of capital.  This benefits anybody who is
otherwise shut out of the system, including poor people.)

>>>We agree.  But I feel that a legal elimination of redlining would
>>>decrease costs to the industry.
>>
>>Wrong.  Redlining is devilishly difficult to define.
>
>What's so difficult.  God, I hope you arent an attorney.

Let's consider some laws we could make to stop redlining.  "You will
not draw red lines on maps around neighborhoods where you will not
make loans."  In practice, you will not find the maps and it will be
hard to prove the case.  The banks will make a few loans in the areas
they have redlined just to comply with the law.

The next law will be more complicated.  The government has to dictate
how many loans in what amounts are to be made where.  This is known in
other countries as "central planning".  It has a poor track record.

You may counter, "But you said it would be hard to define and then you
said it could be defined."  I believe that this sort of "law"
stretches the meaning of the phrase the "rule of law" because the
government is not constrained in any way.  It dictates the bank's
actions.

In practice, I think the way it works is that a bank has to make loans
to the same area where it received deposits.  It is unclear whether
this benefits poor people who are good credit risks, but it definitely
punishes poor people who want to deposit money because it makes it a
less attractive market in which to offer banking services.  The
consequence is that many poor people keep their cash around the house.
Naturally, this leads to increased theft and greater difficulty in
saving.

The law has the effect of saying "Poor people can only lend their
money to other poor people."  I find it hard to believe that his
benefits the poor or was intended to do so.

>>That hurts a small bank more than any other because they have to
>>figure out how to comply with the law and defend themselves against
>>the regulators instead of just borrowing and lending money.  It
>>raises the costs of banking.  That means it is harder for people to
>>borrow and lend money.  And that, if you care about efficiency, is
>>inefficient.
>
>It costs money *to practice* redlining.  Not to eliminate the
>practice.  If decisions are based on merit alone, where do costs
>increase.  Redlining adds a layer of investigation to a loan
>analysis.  Eliminating it eliminates one.

It's a pretty easy investigation.  I doubt it costs much.  You've
already heard what I have to say about opportunities.

>>>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.
>>
>>I hate to admit it, but you do have a point here.
>
>And yet you assert that the government should not tell you what to do.
>Make up your mind Red.  

Maybe you can help me with some history.  Didn't the government have
something to do with enforcing slavery laws?  Perhaps I missed
something.

Usually, we want the government to tell other people what to do and to
leave ourselves alone.  Since I respect the desire other people have
to make decisions about their lives, I oppose most governmental
interference.

>>However, the way privacy will be permanently eroded is through laws
>>called "The Privacy Protection Act" which have clauses allowing the
>>government to do whatever it wants.  It is disconcerting to have the
>>government dictating what information you may or may not keep on your
>>computer or who you may give it to.
>
>While this is totally of the point of the post, at least we can agree on
>something.

You did not give the appearance of agreeing with me.  For instance:

At 10:50 AM 12/3/1996, Matthew J. Miszewski wrote:
>(snip)
>>(Just for the record, what the hypothetical insurance companies and
>>employers are doing by using data they have obtained should not, in
>>a free society, be illegal in any way. All information contributes
>>to decision-making, about loans, credit, insurance, employment, etc.
>>In a free society, it is up to people to not disclose that which
>>they do not wish remembered.)
>
>While the libertarians on the list have affected my way of looking at
>regulation I, and others, do not subscribe (suscribe ;)) to Tim's
>absolute theory.  Unless, of course, by free society Tim is refering
>to one where corporations hold themselves to a level of "personal"
>responsibility, which in many realms is part of any definition of
>"free".
>
>Take, for example, the practice of redlining.  How are people who live in
>"bad" neighborhoods supposed to not reveal that information.

While you did not state it explicitly, in the context above I
interpreted this to mean that you supported laws which restricted the
use banks make of information they obtain from their clients.

In other words, people are not allowed to tell each other what they
know.  That does not seem like a good idea.

>[Excuse the tone of the post.  Dealing daily with some of the effects of
>racism, one gets sick of the same arguments and assumptions made by most.
>I thought you were interested in differing points of view, but the tone of
>your post suggested otherwise.]

What you discovered was that I strongly disagree with your point of
view.  That does not mean that I am not interested in what you have to
say.

But let's assume the worst: I am terrible person and I am only using
you to disseminate my own political ideas.  You may find that
patiently demonstrating the flaws in my thinking or how my beliefs are
unfounded in reality is more effective at persuading other people.  As
it is, it appears that you are evading the questions I raise.  The
views I hold are not uncommon in the United States.  I have to think
that you would do the world a service by exposing their flaws, if
there are any.

Red Rackham