Self-Identity Recognition Not Segmentation: Relationship between Mortgage Backed Securities Market and Segmented Assimilation Theory (My Response)

The United States of America was founded upon the principles of individual freedoms and collective interests to escape historical oppressions. On census data and most other documentation, citizens and fellow countrymen (and women) self-identify for purposes of monitoring equality, fairness, and non-discriminatory practices guaranteed in the Constitution with Amendments and the evolved, supportive constitutional laws. Given such, it is important to gather the information not for separation but for inclusion.

Segmented Assimilation Theory, in my opinion, assumes that generational success can be achieved through a self-identified community pooled interest outside the collective US society. Aside from the contradiction of terms (segmented and assimilation), my position is that humanity and citizenship are not successfully segmental. Differences such as opinions, generational origins, race, and religion at this level can coexist. It is the original vision of the United States of America and its continued progress toward collective individual constitutional freedoms. History has shown that increased integration reduces discrimination, society trends toward greater equality, and provides a check on fairness provided that constitutional freedoms are upheld. Additionally, most successful socioeconomic development requires investment and capital levels which exceed the resources of a segmented community to provide benefits for the entire country.

Pooled risk and prosperity have been essential to the development of the U.S. economy and society. Inclusion has always increased overall prosperity. This concept is found in the insurance industry, mutual fund investing, and social security. The mortgage backed securities (MBS) market initially operated on this basis and the separation-dilution of pooled risk and return created the financial crisis. Mortgages from properties across America were pooled into large securities (bonds) sold by banks onto the global market. To increase the value of the securities, the collateralized mortgages were separated into tranches (risk and return segments) thereby increasing the sales price of the MBS and providing more income to the banks. The increased return expectation (higher mortgage interest rates) attracted more buyers from around the world which increased the supply of funds available for mortgages. More mortgage backed securities (MBS) were created as more banks offered the products. The tranches increased bank financial performance without an adequate impact assessment of the proportional separation of the risk profile.

Banks and investors with the ability to properly assess the riskier securities and market conditions bought insurance (credit default swaps) with an improperly, low priced premium. When mortgages began defaulting, holders of the MBS began losing value as default rates exceeded projections. As the value of the securities fell due to excessive defaults, there were no additional buyers for securities of assured risk of loss (out of the money call option of a deflating asset). Banks with purchased insurance began calling in claims that exceeded the “assessed risk pool value” and total premiums paid. This collective call on the credit default insurance policies caused liquidity issues for the insurer(s) along with the potential reputation damage to the U.S. financial industry for investment losses of workers' savings from around the world.

Essentially, banks around the world purchased American mortgages (using, in some cases, retirement funds from their country's workers) fueling the accelerated growth and excessive investment of the housing market. The securities were segmented which diluted “risk sharing” to increase value (bank income and cash flow). This financial strategy can be effectively executed provided that necessary control evaluations and diligence are in place to properly identify the risks. The bailout of banks and insurance provider was essential due to the source of some funds used to purchase the mortgage backed securities.

The separation of pooled risk and return evidenced in the MBS segmentation crisis is similar to the issues I associate with the social science Segmented Assimilation Theory referenced in a previous post: Gatekeepers and Modes of Incorporation. Following a social philosophy of Segmented Assimilation Theory, in my opinion, will lead back to the failed separate but equal policy of the past. The common issues between the social theory and financial segmentation include:

• Equal access to development resources (capital allocation problem);
• Improper assessment of risk due to the lack of pooled interest;
• Imbalance in capital accumulation to certain investments creating market "bubbles";
• Improper capital investment decisions due to underestimated risk and return.


An economic agenda for Shared prosperity is essential for healthy societal development.

Judgments and Character

What was your first impression upon seeing the photo?


Are you uncomfortable seeing this?


Is it considered art or an expression of a taboo worthy of an art museum?


A threat to cultural heritage?


Would it matter if the ethnicities were opposite?


How about two women? Two men?


What do you think about me for posting this?


Would this photo make you more or less inclined to purchase the music?


The photo is of Joss Stone from her CD Introducing Joss Stone.

Many are probably already familiar with her and her work, but for those that are not, do you know who the executive producers on the album are? The world renowned songwriter of one of my favorite songs on the CD? The guitarist on many of the songs?


The answers to any of these questions provide insight into how we see and understand the world around us. The CD was released in 2007 and I am upset that I only just recently purchasing it because, in my opinion, it is her best release yet.

Pictures create powerful images in the brain and can promote powerful symbols. The fact that we now have a bi-racial President of the U.S. strongly identified by the African-American community has impact. Would it have made a difference if the president was not married to another African-American? Much of the perspective on this momentous American occasion is built upon the struggle for inclusion as is the history of the country. It is evidenced in the social and religious structures of the society. Most of all the social organizations of which people spend a big portion of their lives affiliated, particularly Fraternities and Sororities, are based upon ethnicity and self-identification.

Within the African-American community, the election of a Black President has been profoundly inspiring and encouraging for unlimited aspirations. It has also been the rallying point to strengthen the black family to improve the poverty conditions experienced by many. This means the acceptance of responsibility by the black man as the precursor for community improvement. This, however, does not recognize other condition variables impacting outcome nor that adjusting for such other factors, outcomes can be explained across many communities in the U.S.

In the book Before the Mayflower, Lerone Bennett, Jr. states that during slavery in the South, the plantation owners would not allow “poor whites” to be seen by the slaves. They were relocated out of the site of the plantation allowing the psychological indoctrination of the dominance and supremacy of the class of plantation owners. Given this beginning, it is not inconceivable that this structure of separation and exclusion is reinforced through the use of the evolved social organizations. These types of organizational structures also make communication very efficient and secretive. With today’s GPS satellite and telecommunication technologies, messages can be sent to the entire group and supporters with lightning speed identifying those not keeping with the group norms. There is historical evidence of how far some in power will go to reinforce or confirm a belief (The Tuskegee Experiment).

I have no intention to belittle the social and racial progress that has been made in this country. In fact, I intend to promote its continuation in the face of  to contradict those who will use this historical achievement as political fodder to end policies beneficial to the excluded and underrepresented. Some may use the historical event as confirmation of the separate group structure and as a basis for career success. However, until we can see the photo and think of it as history and it reflects images of representative government, corporate structure, and a global society, we are not there yet.