[thechat] Hiding from Elections Now

erik mattheis zero at gozz.com
Mon Oct 27 13:00:32 CDT 2008


Why did the banks have these maps? The maps of areas to arbitrarily
discriminate made underwriting loans cheaper. So yeah, it's wrong to claim
the reason behind them was to reduce exposure to risk.

I think you're looking at things as either "this" (what you believe) or "not
this" (the opposite of what you believe): just because one or half a dozen
banks first sent applications through an address filter doesn't mean that no
banks were willing to lend in the areas discriminated against by other banks
- just that loans were less available and more expensive in those areas.
There was never an untapped market on which you're in part basing your
argument - er, disagreement, contrariness, whatever here.

Similarly, looking at it as "increased risk" vs "no increased risk" is the
wrong dichotomy to be thinking about. The banks who had to change their
policies due to CRA saw their underwriting costs become more expensive. They
were no more exposed tom risk than before - they just had to put more effort
into approving or disapproving the loans they made.

- Erik

On Mon, Oct 27, 2008 at 12:05 PM, Matt Warden <mwarden at gmail.com> wrote:

> Ok, we're getting somewhere. Why did the banks have these maps? Do you
> disagree that it's related to risk? Then, if the CRA ended this
> practice, how can you possibly say that the CRA did not result in
> increased risk? Whether these maps are "right" or "wrong" is not the
> question; the question is whether the CRA and other regulation
> increased the risk taken on by banks. I don't see how I could conclude
> that the answer is "no."
>
> Again, unless the bank industry was just ignorant, it is not possible
> that both of these are true:
> 1) loans encouraged by the CRA are safe and profitable
> 2) the CRA was necessary for banks to take on these loans
>
> I have a hard time believing that there was a profitable untapped
> market that escaped the eyes of hundreds of highly paid bank employees
> and consultants who do such market analysis for a living, but a few
> hundred politicians in Washington recognized it and decided to push
> the banks in that direction by passing the CRA.




-- 
Erik Mattheis

Politics, hydroponics, poison frogs and elephant rampages
http://fearofclowns.com/
612 377 21272



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