History is full of lies and omissions. Seems like the ink is already drying in the history books on the housing "crisis". The right wing has been very successful in injecting the poor as one of the culprits for taking sub-prime loans for homes they could not afford. In fact, the Left has also accepted and parrotted this line.

But let me add a page to the archive before the book is closed on the matter. First, the idea on it's surface is ludacrous. For all the talk about the subprime market, let's look at the numbers, and for good reason. Statistics have it that the total sub-prime loans total between 16 and 50 billion dollars. So let's assume the highe end. So, out of a 55 trillion dollar market, this accounts for a tenth of one percent of the loans Fannie and Freddie hold. Well of that 50 billion, how many were actually lent to the working poor? No stats ever offerred on this conveniently, because the facts may get in the way of good scapegoating. Blaming a lose money policy by the Fed and a deregulated financial instruments offends the powerful, it is much more American to blame the minorties and the poor.

Now there is indeed a big part of the housing bubble that involves the poor, but I have yet to hear anyone mention, even by those self-titled progressives. In the last two decades there has been a great shift in removing public housing projects and giving the Section 8 housing vouchers to pay for rent in the private market. The effect of this shift on real estate prices has not been studied and must.

During the nineties, cities all over the country were being lauded for doing away with horrible, run-down housing projects. This was particularly pushed by the Clinton Administration. As housing projects were torn down, families went into the private market with vouchers for rent. A few problems with the program immediately could be foreseen. Understandably, the program does not require landlords to accept the vouchers. Afterall, the political reprecussions of forcing landloards and communities to accept poor minorities as tenants and neighbors is too great for anyone to even consider. So the former tenants of mostly hellish projects were left with the options to rent in bad neighborhoods sometimes equally hellish.

So this is where the housing bubble intesects with the poor. The vouchers paid substantially more in rent than the average rent in the poor neighboorhoods that became "section 8" areas. Real estate speculators always keen to getting in on a free lunch, began buying up properties in these communities and turning them into section 8 rentals. This went into hyper-drive as Greenspan fueled the Housing bubble to recover from the DotCom bust. This had two affects. First, it raised the price of the housing in these areas. Secondly, it led to more speculators buying houses to rent as section 8 properties. The standards for a home to be section 8 eligible are so low that buying a multi-unit property, renting it out without much investment, and selling in a couple years at a profit made many people quite a lot of money.

I saw this happen on the West Side of Chicago. Home prices this millenium skyrocketed. I saw the west side become the section 8 area of Chicago as project after project was torn down. Very few of the people in my west side neighborhood own homes. They are mostly section 8 renters. Many friends of mine in the real estate business got in on the act. They bought homes of adjustable mortgages and sub-prime loans in order to rent them section 8. If you bought a two-unit building, collected between 800 to 1200 per unit, get a loan with favorbale terms on the front end, you can really cash in for a couple years, and as the real estate market heated up make a nice piece of change two years later.

The irony is that this speculation drove prices up so high that a working poor family was easily priced out of buying in that neighborhood. I watched in amazement as the speculative orgy drove the price of broken down single family homes in the $250k and above range. And as the market in general became over-priced, the worst areas being over-priced only pushed the prices in other areas up further.

As the bubble continues to let air out, those in the 'hood have had a double assault. As speculators bail out on rising mortgages as rates adjust and lower home values on properties no one wants to buy in the first place, renters are kicked out when the home is foreclosed on. I know of several investors personally who have lost several properties at a time. One who is in the process of losing seven at once because the adjusted mortgages now exceed the section 8 rental incomes and he couldnt sell the buildings ar half what he paid for them. Now not only do the poor get kicked out of homes, they are cynically blamed for causing the problem. Despite all the nonsense I have yet to meet a single one of the greedy poor people who somehow got one of these sub-prime loans and now cant make the payments and brought the world financial system to it's knees. I guess the bigger the lie the easier it is swallowed.