Lending to the 'poor'
I've had a few friends and associates tell me that the cause of the US mortgage and financial crisis was caused by "Bill Clinton" and lending to "risky" poor people.
I have consistently disagreed with this assessment (who's more qualified than me, with an undergraduate degree in economics to make this argument *facetiousness*). Under the category of selection bias, I found a great column on Slate that agrees with me: that greed, not lending to the poor is at the heart of the lending meltdown. While I don't think some of the inflammatory rhetoric used the column is needed, I think the points being made are valid.
Here are some highlights:
I have consistently disagreed with this assessment (who's more qualified than me, with an undergraduate degree in economics to make this argument *facetiousness*). Under the category of selection bias, I found a great column on Slate that agrees with me: that greed, not lending to the poor is at the heart of the lending meltdown. While I don't think some of the inflammatory rhetoric used the column is needed, I think the points being made are valid.
Here are some highlights:
- "The Community Reinvestment Act applies to depository banks. But many of the institutions that spurred the massive growth of the subprime market weren't regulated banks. They were outfits ... which were generally not regulated by the Federal Reserve or other entities that monitored compliance with CRA."
- "...the CRA didn't force mortgage companies to offer loans for no money down, or to throw underwriting standards out the window, or to encourage mortgage brokers to aggressively seek out new markets."
- "...lending money to poor people and minorities isn't inherently risky. There's plenty of evidence that in fact it's not that risky at all. "
- "On the other hand, lending money recklessly to obscenely rich [people] can be really risky. In fact, it's even more risky, since they have a lot more borrowing capacity. "
No comments:
Post a Comment