patrick.net

@BAP

Here's a good site to learn about the CRA

http://www.ffiec.gov/cra/

excerpts:

"The Community Reinvestment Act (CRA), enacted by Congress in 1977 (12 U.S.C. 2901) and implemented by Regulations 12 CFR parts 25, 228, 345, and 563e, is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate"

or http://www.ffiec.gov/cra/pdf/cra_guide.pdf

Specifically, scroll to page 16 where it talks about MSAs(metropolitan statistical areas), CMSAs, PMSAs, etc. Lots of talk about geography. They even have a computer program that will help you determine if an area is covered by the CRA it looked like.

Hope that helps.

Honest Abe,

I see your diatribe fails to answer even the first question posed. You are hung up on "other profitable lines of business." A phrase that no one but you can put any meaning to since it is not in the CRA or its regulations. But, let me help you try to think about it. Can a bank begin to buy and sell mortgage backed securities (presumably a new line of profitable business) without opening up even one new deposit taking branch, without acquiring even one company, or merging with another bank? Hint: The answer is yes. It takes shifting existing resources from less profitable lines of business and beginning a new line of business. Sure it is not as quick to show paper profits as merging or acquiring, but it can be done and, it can be done while ignoring the rating under CRA. If you would like to explain what you mean by other lines of profitable business, I'll be more than happy to tell you if it can be done without worrying about the CRA rating. Of course, you may think being ubiquitous and vague works to prove your point. It doesn't, but I certainly don't begrudge people wanting to live in LaLa Land holding hands, singing Kumbaya and drinking Coca Cola.

Your first paragraph actually touches on the root of the problem. It was THE BANKS CREATING no-doc loans and sub-prime loans. The CRA did not require them to create these loans. CRA did allow them to be used in the government's evaluation and ranking, but then again Large Banks could use just about anything to influence the evaluation and ranking, including using credit loans that had absolutely squat to do with housing (rental or purchased). Again, try reading the law and it's regulations, they are available to the public. This brings us to the next point. Your continued focus on housing purchases shows that you simply do not want to acknowledge that banks, in providing for the credit needs of the low and moderate income did not have to make loans directly to the low and moderate income households. They could have made loans to big apartment complex investors so long as the housing included low to moderate income families. But, again greed, big bank greed, dictated there was more short term profit to be made in fees on loans directly to low and moderate households, especially when they could turn around and sell the mortgage to investors as an MBS.

But, the banking failure was not in making loans to low/moderate income households. It was in how they off set risk. Instead of off setting risk by balancing their portfolio of risky loans and less risk loans (prime), they transferred risk to investors. Realizing they could make even more in profits, they kept doing it.

Banks did not have to create this short sighted profit model. In fact, up until banks could simply dump their risk on to investors, they had every reason not to do this. And, this greed, which admittedly the government left unchecked, Honest Abe is the cause.

Oh yeah, free markets (as you know them) do not exist without government. There was a movie out a few years ago that came fairly close to capturing a snapshot of a free market. It was called Pirates of the Caribbean. The pirates, not the colonial government. Good luck to you if you think you can survive (and I mean not get killed) in a free market where there is no government. I'm a fairly good shot with .30-6 (30 yat 6), a bow, and even trained in Kendo and I wouldn't want to try to raise a family in a free market with no government intervention.

@Ryan,
what was the change that allowed/made banks lower borrower qualifications, in your opinion? And why did that change happen? Thanks.

@ bap

I know you asked Ryan, but I'll put in my two cents. Once mortgages were bundled into securities, then the craziness began. And greed took over

tatupu70 says

@ bap
I know you asked Ryan, but I’ll put in my two cents. Once mortgages were bundled into securities, then the craziness began. And greed took over

Precisely. As Ryan points out, securitization allowed lenders to transfer risk to investors, and get paid for it. This changed their fundamental incentive from making loans that would actually get paid back, to making as many loans as possible to sell to gullible investors.

The lenders knew how crappy the loans were, but the investors thought they were buying AAA rated securities.

iggyman says

The lenders knew how crappy the loans were, but the investors thought they were buying AAA rated securities.

This is the only thing I question because so many of the banks had so many bad loans on their books too. Was it just a timing issue that they couldn't unload them before the shoe dropped? Or did bankers also get swept up into the frenzy?

@ tatupu70
I think it was both, but mostly timing. When the music stopped lenders were stuck holding a bunch of bad loans. Remember how suddenly things came screeching to a halt. In Feb 07 New Century - then the biggest of the sub prime lenders - went under. From there it was a domino effect. Investors started to look more closely at the mortgage backed securities and realized they had absolutely no idea what it was they bought. They literally did not understand the business they had bought in to.

They caught cautious (smart) in a hurry, and lenders no longer had anyone to unload their paper to. By the end of 07, nearly all of the sub prime lenders were gone (hundreds of them) and the Alt A guys weren't far behind.

@tatupu,
I clicked, and I read. I also read your point about bundles. So far though, you have not pointed to something and said, "THIS right here is what allowed the loan makers to increase exposure of depositors without fear of legal action for reckless lending." You see, in my little mind, I can't help but see the connection between the gov (I say "forcing", you say "allowing") banks to expose depositor's funds to be handed out to less-than-qualified home debtors and the explosion in the number of how-much-a-month buyers .... and other bubble causers.

Tatupu (and anyone else who would like to) please, finish this sentence: The Bank's commonly expected loan standards were reduced from 20% down and 30% DTI ratio in the approx year (1)________ by way of (2) ______________ and this (allowed, incouraged, resulted in) more bad loans to be made. Before (2's answer) had happened, the banks did not give out bad loans because (3)__________________.

Please tatupu (and everyone else who wants), I would like your opinion by filling in the blanks of that plain, simple, sentence. Numbered 1,2,3. Thanks.

@ Bap33
First, many lenders, especially sub-prime lenders, were not banks. They didn't have depositors, only borrowers and investors. Second, there isn't really a single, easy answer. Part of it was 'financial engineering'. FANNIE & FREDDIE in particular started to rely on computerized underwriting and statistical modeling of risk instead of commonsense, tried and true underwriting practices. Investors were sold on 'collateralized debt obligations', another innovation by the financial engineers who thought they could make 2+2 equal 6, then 10, then whatever they wanted it to. People bought into it because they didn't want to admit they had no idea what the brilliant young Harvard (or Yale, or whatever) grads were talking about. But to answer your question in general terms:

1) 1998ish
2) secuitization and the ability to pass risk down the line
3) They didn't have the ability to pass risk along. They made their profit from interest earned from loans that they made. If the loans didn't get paid, they lost money.

@BAP--

It's not the government's job to check on bank's loans to make sure that they good. Banks are a private business and can be run however they like--within certain basic rules such as reserve requirement, etc. If a bank wants to make a reckless loan, then it is their perogative. Obviously the bank owners would prefer this not happen as they will stand to lose all of their investment.

I'm surprised you can't follow the scenario--Mortgages were securitized and sold to investors. This created huge demand. The lending standards were slowly eroded to try and meet the demand. It wasn't like there was a memo put out by all banks saying from this day forward lending standards are reduced. It happened over a period of time. As the crappy loans were bundled and able to be sold, more were made and lending standards were further reduced. etc, etc.

To answer your questions--1. probably standards kept getting looser from 2002 - 2006 ish. No data to back that up, just my guess. 2. securitization of mortgages 3. they couldn't sell them to investors.

I see your point. And Iggyman's differentiating banks and lenders is helpful too. And the date's can be argued, but they are pretty close ... I guessed about '98 something had to change in the loan creation world. So, the walstreet outlet removed the risk for returns based on re-paid loans to a "futures" based return based on walstreet style / junk bond games? I see what you are saying. But the ability to remove risk went father than just off the bank/loan creators backs to investors. B. Frank let the banks/lenders know that Fanny (ran by his lover at the time) would back everything they were writing in subprime loans, and this moved the risk unto taxpayers, leaving investors sitting pretty. Right?

Well, I have no problem with your position. I can easily say that CRA did not do the function it was intended to do, and thereby avoided being the catalyst for the bubble that it would have been, had it been more effective. But, I still have it in my hard head that gov fingers in the pie were hooked to left-hands, not right-hands, when it came to manipulating loan qualification guidlines. I agree, right-hand fingers went hunting the easy money too, but the first finger was on a left hand. lol. Does that make sense?

@ elvis

Actually, I said that most sub-prime borrowers were qualified with full income documentation. I didn't say anything at all about CRA. I will say this though, if you had asked 10 CEOs of the biggest sub-prime lenders in 2005 what they thought about CRA, 8 of them would have told you they had no idea what CRA was.

They lent to sub prime borrowers because there was profit in it. They used 2 year teaser rates because it increased their profit. They knew that after the two year teaser period was up, most borrowers would have to refi into another sub-prime loan. Lenders had borrowers on a tread mill, and they liked it that way. CRA had nothing to do with it.

@elvis--

That's the point. CRA loans weren't nothing down and artificially low teaser rates. Those loans were made primarily on new construction in wealthier areas.

elvis says

With CRA, banks were lending to people who normally would be rejected as poor credit risks.

Really--do you have any evidence to back that up? Because that's not what I've read.

elvis says

I heard today that blacks and latino’s were three times more likely to loose their homes. These are specifically the people that the government wanted to help (by creating the CRA).

You heard wrong.

elvis says

What will you say when one of them asks you “Grampa, did you try to stop the financial burden from falling on us?” “What did you do to help?”

I'll say I voted for the candidate who promised to stop the war in Iraq. And cut out the waste in the military industrial complex.

I think a huge factor is being missed here; and that is that the lenders and all involved thought their liberal underwriting, appraisals, etc. would be covered by a continuing appreciation in housing. Loans that were marginal would have equity infused IF properties continued to appreciate. Also, Fannie and Freddie KNEW the Federal Gov't would bail them out if things turned sour, and guess what? .... they did. Fannie & Freddie were processing an unbelievable 85% of all loans bundled and sold on the secondary market. The whole bubble burst when the appreciation ended and exposed the entire system for what it was, a system being fueled by hope and air. I still contend that Obama, et all are doing the very thing they shouldn't do, which is pumping more air into the bubble (via tax credits) which will only bring another huge phase of collapsing prices along with more foreclosures.

They don't see it that way. They see themselves as pilots gliding a dead aircraft down, and if they are clever about it the plane will land in the water without breaking up and everyone will get off. Seriously I think that's how they think. There's a large helping of "we are just doing this to make things stable for now, later we will FIX the system." Of course we will NEVER get around to fixing it, because the broken parts benefit people who don't want it fixed.

@ RayAmerica

They certainly behaved as though values would appreciate forever, and maybe some of them (lenders) actually believed that. But there were certainly people in lending that knew it couldn't last. The end result was just too obvious when you looked at the types of loans that were being made.

@ Vicente

I see it about like you do. But did you happen to catch any of Bernanke's speech today? He said - twice - that recovery is slow in part because securitization isn't coming back quickly enough.

Bap33 says

iggyman says

There were some “liar loans” (stated income) made to self-employed subprime borrowers. But the vast majority (non self-employed) had to fully document their income. The abuses in the Alt-A (No Doc Loans) took place among prime borrowers, not low income sub-prime borrowers.

wouldn’t it be great if the IRS looked at the stated incomes of those now defaulting due to fibbing on thier loan docs and jailed all those that commited fraud? Or, made them pay the income tax that matched their stated income? That would be cool!!

Yes it would, but that would only add to the negative outlook of the program now wouldnt it?

Honest Abe says

BAP -please don’t try to use common sense to make any point here. Many simply can’t handle it.
kRuGmAns OPINION is just that - an opinion. Government mandated loose lending policies like CRA were at the root of our financial meltdown no matter how much liberal spin is put on the issue.
Social, feel good, programs are designed to help the poor, pander for votes and warm the hearts of the gullible…but what they really do is put more power in the hands of sociopathic bureaucrats.

I think JUST ME gave you all the facts you need, I find it quite silly how conservatives want to blame poor people then want to put in place a puppet name Michael Steele to gain their following. You will have to do more than that to gain the votes of the poor, impoverished minorities...

You will have to stop blaming them for your problems. It is easy to decipher between conservatives and liberals on these threads....Conservatives always display ill will and intent toward any legislation that targets poor communities.

You should take a close look in the mirror and realize we are all poor when compared to the board members of the company you work for...unless you maek over 250K.

RayAmerica says

I think a huge factor is being missed here; and that is that the lenders and all involved thought their liberal underwriting, appraisals, etc. would be covered by a continuing appreciation in housing. Loans that were marginal would have equity infused IF properties continued to appreciate. Also, Fannie and Freddie KNEW the Federal Gov’t would bail them out if things turned sour, and guess what? …. they did. Fannie & Freddie were processing an unbelievable 85% of all loans bundled and sold on the secondary market. The whole bubble burst when the appreciation ended and exposed the entire system for what it was, a system being fueled by hope and air. I still contend that Obama, et all are doing the very thing they shouldn’t do, which is pumping more air into the bubble (via tax credits) which will only bring another huge phase of collapsing prices along with more foreclosures.

Agreed, it will wind up being money lost on people who simply buy homes using emotion and not on the basis of good business sense.

justme says

justme

I agree, none of these programs had anything to do with GLB which opened the floodgates for ALT-A loans. There are a bunch of false conservatives on the thread attempting to blame poor people...

These are the bunch of bitter individuals that Obama was speaking of, I truly do not believe they have any concern for the conservative movement. What matters most to them is that as long as poor people and minorities are on the other side...they will vote the exact opposite and oppose any common sense ideas.

4X,
what amount is "poor"?

Attempting to blame poor people? They, and many others, suffered as a result of the housing meltdown. They wern't to blame - government intervention was to blame. Thats the point of this whole thread.

In case no one noticed, where is it written that its the governments job to raise the percentage of housing ownership in America??? In case no one noticed, look at the disaster that was caused by governments intervention in the housing market. Virtually every government agency and program ultimately causes prices to increase. Fanny Mae, Freddy Mac, FHA, CRA (the ignition source) etc. Its a toxic cocktail that caused housing prices to skyrocket, a housing bubble and its resulting collapse. If that isn't bad enough, add the total cost to the taxpayer to maintain the army of employees, the rent's, the retirement costs, etc, etc, etc.

Big "helpful" government is a costly mistake...and we're all paying the price. I like the idea of voting for a candidate who would stop the war - but only if that same candidate wouldn't promise a whole list of other socialsitic goodies to the voters. Financially America can't stand more debt.
Google: IOUSA.

Honest Abe says

Attempting to blame poor people? They, and many others, suffered as a result of the housing meltdown. They wern’t to blame - government intervention was to blame. Thats the point of this whole thread.
In case no one noticed, where is it written that its the governments job to raise the percentage of housing ownership in America??? In case no one noticed, look at the disaster that was caused by governments intervention in the housing market. Virtually every government agency and program ultimately causes prices to increase. Fanny Mae, Freddy Mac, FHA, CRA (the ignition source) etc. Its a toxic cocktail that caused housing prices to skyrocket, a housing bubble and its resulting collapse. If that isn’t bad enough, add the total cost to the taxpayer to maintain the army of employees, the rent’s, the retirement costs, etc, etc, etc.
Big “helpful” government is a costly mistake…and we’re all paying the price. I like the idea of voting for a candidate who would stop the war - but only if that same candidate wouldn’t promise a whole list of other socialsitic goodies to the voters. Financially America can’t stand more debt.
Google: IOUSA.

So where is it written only the elite rich should be afforded home ownership?...just because you and I are priveleged enough to own doesnt mean we should exclude others from the American Dream.

how much is rich? poor?

slow people should run the 100 at the olympics in your world too, right 13X?

Bap33 says

how much is rich? poor?
slow people should run the 100 at the olympics in your world too, right 13X?

I would refer to the rich corporations that run our nation using greedy methods. Poor people would be anyone that cannot put a roof over their head, food on the table and love in their hearts. Even the slow people as you call them, have an open playing field in which they can attempt to compete at the Olympics. With hard work, slow people can learn to run fast. If I were to correlate this for you, this means that poor people should be afforded the opportunity to purchase within their means in areas where their incomes meet the price ranges.

In comparison to my recent purchases of 1.5 million, 2.3 million, anyone that would buy a home for 170K would be poor....

This is one of the few blogs I've seen do a FPP on georgism, which IMO is the only answer to the above questions about wealth and poverty.

Henry George's book, Progress & Poverty, was a runaway bestseller in the late 19th century, and was written to describe the serial nature of land booms and poverty among those who do not own land.

Before discovering it in late 2003 I was living in the Bay Area and was befuddled by LLs raising the rents on everyone during the dotcom rush, most of them profiting on fully depreciated property. Without the three-factor analysis of George -- that Land, Labor, and Capital are separate and distinct, I lacked the critical element to see the fundamental flaw of our post-Prop 13 system, and that there was a third way between it and the non-optimal if not outright disastrous "Socialist" central-planned economies. Henry George was no friend of the Socialists of his day.

I have no moral problem with wealth accreting to wealth via capital risk. I do have a problem with wealth accretion due to profiting from outright ownership of natural resources, that which was not produced by labor.

So much of today's economy is outright rentierism. That the british banks even had a term for this, "buy to let", sickened me when I heard it but now brings nothing but schadenfreude.

Financially America can’t stand more debt.

Google GINI.

The whole bubble burst when the appreciation ended and exposed the entire system for what it was, a system being fueled by hope and air.

And increasing wages from the 90s, the 2001-2003 tax cuts, lower interest rates, de-facto increased leverage via SISA/NINJA, and the rise of IO, negative amortization up to 120%. All those got the ball rolling 2002-2004, and the speculative element kept it going into overshoot 2005-2007.

It only hit me a couple of years ago that land values put all of us on a treadmill. Given that land is fixed in supply and demand is unbounded if not infinite, the cost to acquire the land ownership privilege will always be maximally expensive relative to area incomes/purchasing power.

It has always been this way. The richest private landowner in the US -- Robert Morris -- was thrown into debtors prison in the late 18th century due to massive failure in land speculation (he had the right idea but was a bit too early), and every generation since then has seen a boom/bust cycle rip through the economy like the SE Asian tsunamis.

Conservatives bemoan the very low if nonexistant Federal income taxes that poor people are subjected to, without realizing that these low taxes function nearly entirely as rent subsidies to the LLs. Raise taxes on the poor, eg. via mandated health insurance, and rents will HAVE to come down. Can't get blood out of a stone.

They used 2 year teaser rates because it increased their profit. They knew that after the two year teaser period was up, most borrowers would have to refi into another sub-prime loan. Lenders had borrowers on a tread mill, and they liked it that way. CRA had nothing to do with it.

yup, the parallel is revolving credit card debt. Fixed mortgages suck, the real action was hooking people on more leverage at floating rates.

Troy says

The whole bubble burst when the appreciation ended and exposed the entire system for what it was, a system being fueled by hope and air.
And increasing wages from the 90s, the 2001-2003 tax cuts, lower interest rates, de-facto increased leverage via SISA/NINJA, and the rise of IO, negative amortization up to 120%. All those got the ball rolling 2002-2004, and the speculative element kept it going into overshoot 2005-2007.
It only hit me a couple of years ago that land values put all of us on a treadmill. Given that land is fixed in supply and demand is unbounded if not infinite, the cost to acquire the land ownership privilege will always be maximally expensive relative to area incomes/purchasing power.
It has always been this way. The richest private landowner in the US — Robert Morris — was thrown into debtors prison in the late 18th century due to massive failure in land speculation (he had the right idea but was a bit too early), and every generation since then has seen a boom/bust cycle rip through the economy like the SE Asian tsunamis.
Conservatives bemoan the very low if nonexistant Federal income taxes that poor people are subjected to, without realizing that these low taxes function nearly entirely as rent subsidies to the LLs. Raise taxes on the poor, eg. via mandated health insurance, and rents will HAVE to come down. Can’t get blood out of a stone.

Check out this site: http://www.housingbubblebust.com/Fed/GDPvsHSG.html

You are one deep thinker.

Bap33 says

4X,
what amount is “poor”?

My definition would be households making under 12K per year whose head of households cannot afford the basic necessities (Food, Water and Shelter) and/or are living in substandard conditions. The Democratic party has been known as poverty pimps because they seem to prey on this voter base where as the Republican party seems to show no remorse for the conditions these people live under.

Clarence - no one has excluded others from the American dream. If you mean people are excluded from buying a home, thats simply not true. ALL buyers, however, do need: (1) good credit (2) down payment, closing costs and cash reserves, and (3) the ability to repay. It is not a requirement that a persons ethnicity even be disclosed on a loan application.

That is precisely why the government interfered with the CRA...to force banks to make loans to those who did not meet normal, prudent lending guidelines by having the three items I mentioned above. How safe would you feel getting on an airplane when you knew for a fact that normal, prudent safety standards had been eliminated (MEANING YOUR LIFE WAS ON THE LINE)?

Troy. America can't stand more debt. Here is a quote from the Wall Street Journal, Oct 11, 2009: "The cost on the debt repayment on the national debt represents more than 40 cents of every dollar that came in from individual income taxes." And what do we get for that??? Absolutely NOTHING. Why should our government be allowed to continue to waste "zillions" of dollars on politicians pet projects, pork and bridges to no where? Why should our government be allowed to burden future generations for spending which took place before they were even born? Isn't that taxation without representation?

Many have forgotten that politicians WORK FOR US...NOT the other way around. It's long overdue to start supporting individuals who stand for freedom and liberty - like Ron Paul. He represents common sense, freedom, the rule of law, personal responsibility, sound money and a strong DEFENSIVE military.

The two party system is devisive, the politicians like it that way. It keeps people fighting with each other without concentrating on the REAL PROBLEM...which is out of control politicians from BOTH parties.

@Honest Abe.
I voted for RP. Ross Perot
I also voted for RP. Ron Paul
I guess I'm a rebel. lol

Isn’t that a clear example of TOO MUCH DEBT?

nah, debt is just deferred taxation.

Not that I think gov't spending is all that wealth-accreting. Much of it is just spent on sub-optimal crap.

I'm a left-libertarian so I find the current system offensive from many angles.

The problem isn't "politicians" it's we the people. The teabagger jazz is just blah-blah-blah to me; the dynamics of the situation we're in are complex and have no simple solutions.

You fill your posts with a lot of keywords like "liberty" and "grandkids" but your rants are really content-free. You are scared by words but apparently lack the capacity to understand the system as it is. Sure, interest is a crushing burden -- but one man's interest payment is another man's income.

The bottom line over half of the wealth of this country is controlled by a small minority. Until we address this -- via "socialism" -- we are just rearranging deck chairs.

Troy,
Please cite your example working anyplace, at any time, in history .... without a war or revolution. Ready, go.

BAP, you asked earlier why some people are so pro-government in the face of turmoil. Truth tellers are viciously attacked precisely because of the validity of their message. Or as Ron Paul says: "Truth is treason in the empire of lies."

And there are simple solutions, the rule of law is simple, yet disregarded by politicians who will not abide by the law of the land - the constitution. Sound money is a simple solution, but The Fed and the liberal government politicians want to spend us into a black hold with their pet projects and refuse to follow the constitution. Freedom is a simple solution but the government has a sociopathic aversion against it. Government wants, for the benefit of the government,to micromanage every aspect of peoples lives, you know - they want to create a total nanny-state.

It always strikes me as odd that some completly dismiss waste, fraud, mismanagement, debt, irresponsible spending as no big deal. "Sure, interest is a crushing burden - but one man's interest is another mans income". The trouble is WE have to pay it back. Some people dismiss others rants as content free yet they themselves offer NO SOLUTIONS AT ALL.

Is that your solution? Socialism is spreading poverty equally amongst everyone. Its been tried countless times and the result is always the same, a lower standard of living, reduced productivity, hunger and social unrest. The harder the politicians try to satisfy the UNLIMITED demands of tens of millions of government dependents the faster the money will run out.

How about some real solutions. Cut spending, lower taxes, sound money, less regulation. WERE HEADED IN THE WRONG DIRECTION - HAVENT' YOU NOTICED YET? Ugh.

BAP - my barbs were meant for Troy - not you. I'm on the side of anyone with common sense, like you. Abe.

=Ready, go.

Norway, Sweden, Finland, Denmark.

Socialism is spreading poverty equally amongst everyone.

Socialism is a tool. It can be used and abused.

FWIW, as a left-libertarian I only want socialism to the degree that it is necessary to ensure everyone access to that which is needed to become and remain a productive member of society.

Jeffersonian idealocracy can work when there's half a continent to settle and profit from, but once the land is taken independence and malthusian conservatism will not work over the long run.

I am a hyper capitalist and believe in entrepreneurialism and the profit motive. I also think that established, hereditary wealth is a present drag on progress, if and when it pursues rentierism, for rentierism -- speculating in land, profits from natural resource extraction, and abusive skill arbitrage among our professional caste -- is simply leeching on the truly productive members of society who are producing through their labor the wealth of the nation.