Why are so many so determined to remain so ignorant?

If you have been watching the news at all lately I'm sure you have heard the words "sub prime meltdown" or "credit crunch". Essentially the problem is that over the last several years, as housing prices have increased substantially in a low interest rate environment, many lenders have made loans to people with little or no financial ability to repay. The loans were, for the most part, based on the assumption that the housing market would continue rising indefinitely. This has been compounded by a large percentage of these loans having terms that could only be met as long as the housing market was rising.

Known as "predatory loans" these loans are characterised by prepayment penalties, (IE a charge or fee making it more costly to repay said loan early than to hold the loan for the full term even at high interest rates)which make it far harder to refinance a mortgage in which the interest rate has risen, teaser rates that give the borrower a small monthly payment for a fixed period of time before increasing substantially, and and other similar clauses.

While it is easy to place the blame at the feet of non-bank mortgage brokers; (who in many cases were compensated based on how high of an interest rate they were able to charge) to characterise the current difficulties as being solely or even predominantly the fault of "predatory practises" doesn't tell the whole story. Much of the blame lies on those who took such mortgages on homes they knew well they could not afford without even paying the most minimal attention to the terms of the loans they were signing.

Partially this can be explained by the overwhelming economic illiteracy of the average American (especially the poorer ones) and partially it can be explained by most peoples natural tendency not to "look a gift horse in the mouth". To put it simply the guy making 30 grand a year who got approved for a 0 down payment mortgage on a $500,000 home was so happy to be able to get approved he never thought to look into the terms deeper. After all, as long as prices keep increasing 10% or more a year he had nothing to worry about right?

Then the housing market slowed, and the whole house of cards began to tumble down.

None of what I am saying should be a surprise to you, as every major network has been devoting coverage to this subject and its consequences for quite some time now.


The problem really is two fold, on the one hand there were many unscrupulous brokers who misrepresented the terms of the financing they were offering, on the other most people simply don't have the financial sophistication to know better. Especially not those who needed sub prime loans in the first place, typically those with little income or bad credit.

But what if I told you that in one of the rare cases of government acting in a rational and efficient manner Illinois had a program that could have ended this problem before it began (or at least heavily mitigated the consequences) and it was rejected by people who would rather remain ignorant?


Would that surprise you?


It shouldn't. The fact is most people would rather remain ignorant than take the effort necessary to better themselves or their understanding of the world. Furthermore those who need education the most desperately, are also the most likely to actively oppose any attempts to educate them. The poor are, for the most part, poor for a reason after all, and its not because they are dedicated to self improvement. Those who are dedicated to self improvement rarely remain poor for long.

So it was with great sadness, yet little real surprise that I read yesterday's front page article in the WSJ entitled "Illinois tries new tack against predatory loans"


In late 2005 Illinois House speaker Michael Madigan introduced a HB 4050, a law which attempted to shift the emphasis of predatory lending laws from the lender to the borrower. Rather than using punitive measure to prevent lenders from offering predatory loans, HB 4050 attempted to give those most vulnerable to such the education necessary to ensure they were not preyed upon. It required any borrower who attempted to take out a mortgage with "non-traditional" terms (such as interest only loans, balloon repayments, or prepayment penalties) from a mortgage broker to undergo 1-2 hours of credit counseling with a certified counselor prior to signing those loans. (only those getting their loan from a broker were required to do so as banks and savings and loans are already regulated by the federal government and required to make clear all the terms of a loan in plain English) The idea was that by educating those most at risk on the traps and pitfalls built in to such loans, the borrower would be better able to determine the right loan for them and thus be less likely to default or to engage in a agreement they could not handle.

Now disregard for a moment that such a law was only necessary in the first place due to the massive failure of our education system to actually teach our children the skills they need to navigate our economy. Given the fact that our union/governmental/educational complex is a complete failure this was actually (and surprisingly) a quite rational, relatively non intrusive, and efficient way to ensure that people actually knew what they were signing.


So naturally the very people who stood to benefit the most from this law, did everything they could to get it repealed.

The reason?

The initial pilot project was centered on 10 zip codes in Chicago where incomes were the lowest and default rates on mortgages were the highest. After all it stands to reason that a program of this nature would have the most utility in areas with low income, low education levels, and high default rates, right?

Well you would think.

Problem was, as in most poor urban areas, a high percentage of the resident were either Black or Hispanic.

Can you see where this is headed?

Before the law even went into effect the mortgage brokers, in concert with "civil rights leaders" had whipped the poor and for the most part financially ignorant populace of these areas into a frenzy of racial demagoguery and self harming paranoia. The litany of complaints will be familiar to anyone who has seen similar trends in the past. The brokers claimed it would make it harder to sell homes, and that the market in the effected areas would dry up. Charges that the law constituted state endorsed red-lining on the supposition that it would make it harder for minorities to get credit (never mind that the whole point was to make it harder for them to get predatory credit) were made by self styled "civil rights activists" who told apocryphal stories of minorities being unable to sell their homes and armies of whites coming in to buy up their properties at pennies on the dollar. One woman sued the sate for making it harder for her to sell her home, as one of the interested buyers had refused to take the counseling and thus couldn't get approved. Local Reverends in the model of Sharpton and Jackson denounced the program as "the most blatantly racist legislation we have ever experienced in Illinois" and so on and so forth.

Naturally the program was suspended shortly afterwards and local "community groups" rejoiced.


In other words the ignorant fought to stay ignorant and they won, at least for a little while.

Mr. Madigan resubmitted the bill this spring, only this time covering all of Cook County in order to avoid the charges of racism, and it passed the state legislature August 7th. Though I rarely have anything good to say about any government initiative, I also rarely see one that is so obviously beneficial to those who need it most, without treating them like children who need "mommy gov" to think for them. From what I can tell this was a pretty damn good bill, and probably would have helped quite a few of the people who bought a house in the last 8 months.


But what I don't understand is what it is in the human animal that makes so many of us so determined to remain ignorant? Why do so many fight so hard against any attempt to improve their knowledge base? And why is it so damn easy to get so many minorities to support policies that any rational observer can see hurt minorities themselves the worst by playing the race card?

Let me put it another way, lets say the racism charges had been absolutely true. Lets say this had all been a plot to reduce the credit available to poor black buyers, and to reduce the market values of the homes of poor black sellers. Wouldn't it still have left every single prospective buyer in a better informed and educated place than before? Wouldn't that knowledge still have allowed them to prevent being victimised by the more unscrupulous in the industry? At the worst, wouldn't this have simply ensured every single prospective buyer knew they exactly what they were signing when they were signing it? Even if the law had been passed with racist intent, wouldn't its passage have ensured that less homes were foreclosed on, and thus that the neighborhoods would be in better shape? Even if you argue that it might have slowed the real estate market down in those areas(thus hurting sellers), given that a single foreclosure on your block reduces the value of your home by 3-5% wouldn't any slowdowns have been offset by less downward pressure on prices? Even if you assume it made rational sense for those who were, or thinking of, selling soon to protest this measure, unless everyone in the neighborhood was selling, shouldn't most residents have supported this?

Even if the KKK itself had sponsored this legislation, how could teaching people how to spot predatory loans and avoid them ever be considered a negative? Wouldn't the people who underwent counseling have been given knowledge that would continue to be useful for the rest of their lives?

I mean once you take the emotion out of it, was there anyone who protested this other than the mortgage brokers that actually were doping so out of self interest?

Once again I ask, why do so many people fight so damn hard to stay so fucking ignorant?