[thechat] Hiding from Elections Now

Matt Warden mwarden at gmail.com
Mon Oct 27 12:05:48 CDT 2008

On Mon, Oct 27, 2008 at 12:29 PM, erik mattheis <zero at gozz.com> wrote:
> On Mon, Oct 27, 2008 at 11:00 AM, Matt Warden <mwarden at gmail.com> wrote:
>> The claim by the Fed and some members of Congress is that these loans
>> were both safe and profitable. If that were true, why did we need the
>> legislation?
> Before the CRA, it was legal for banks to not consider issuing loans to
> people who lived in certain geographic areas. Banks would have maps
> (literally) with "no loans here" areas marked off on them. If someone same
> in asking for a loan with a "wrong" address, tough luck.
> The CRA stopped this practice of arbitrary discrimination.

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.

Matt Warden
Cincinnati, OH, USA

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