The solution actually wasn’t THAT bad- the community banks actually regulated by the community reinvestment act had/have lower rates of foreclosure then the national average, and lower rates of foreclosure on their loans to minorities.
That doesn’t necessarily address my point: if there were unjust discrimination, discrimination which was not a rational reaction to the credit risk, then saying “well, they didn’t cause as many losses as some aggregate measure of loss during the greatest period of property-related losses in the history of America” isn’t proving that. To prove that, you need to show something like that the loans turned out to have been made profitably on net in the long-term after adjusting for risk and opportunity cost etc.
To prove that, you need to show something like that the loans turned out to have been made profitably on net in the long-term after adjusting for risk and opportunity cost etc.
I’m not sure thats true, I think what you would want to show is that the loans ‘forced’ on the community banks are at-least-as-profitable as the loans the banks voluntarily took on. Given the bizarre financial period we just lived through, the losses on loans is going to be markedly higher across all institutions.
Maybe the next decade of CRA type lending won’t be contaminated by massive changes in the financial sector and a large crash- in which case maybe the questions of discrimination will become easier to untangle. For the last decade, the housing market underwent major changes, and the community banks were such a negligible sliver of the overall market that the CRAs effects are on community banks are higher order corrections to higher order corrections.
I’m not sure thats true, I think what you would want to show is that the loans ‘forced’ on the community banks are at-least-as-profitable as the loans the banks voluntarily took on.
No, because you’re comparing apples and oranges. If the banks were forced to take on loans to the groups in question due to political pressure despite having been previously correct in demanding higher interest to compensate them for the loans, and also simultaneously engaged in an epic miscalculation about the safety of loans to other groups based on naive models, then you could produce this inversion. They made a mistake, and then made an even larger mistake; this doesn’t make the original mistake not a mistake.
No, because you’re comparing apples and oranges. If the banks were forced to take on loans to the groups in question due to political pressure despite having been previously correct in demanding higher interest to compensate them for the loans, and also simultaneously engaged in an epic miscalculation about the safety of loans to other groups based on naive models, then you could produce this inversion.
Only if the loans were in different asset classes. Because these are all housing loans, the underlying model of the housing market is an input to both group’s loans, with minority status as an additional adjustment.
Anyway, I don’t think looking at CRA and pre-CRA loans to minorities you can answer discrimination questions with any kind of precision. The data seems to lean in the direction of former discrimination, but massive structural changes to finance dwarf the tiny changes created by the CRA.
That doesn’t necessarily address my point: if there were unjust discrimination, discrimination which was not a rational reaction to the credit risk, then saying “well, they didn’t cause as many losses as some aggregate measure of loss during the greatest period of property-related losses in the history of America” isn’t proving that. To prove that, you need to show something like that the loans turned out to have been made profitably on net in the long-term after adjusting for risk and opportunity cost etc.
I’m not sure thats true, I think what you would want to show is that the loans ‘forced’ on the community banks are at-least-as-profitable as the loans the banks voluntarily took on. Given the bizarre financial period we just lived through, the losses on loans is going to be markedly higher across all institutions.
Maybe the next decade of CRA type lending won’t be contaminated by massive changes in the financial sector and a large crash- in which case maybe the questions of discrimination will become easier to untangle. For the last decade, the housing market underwent major changes, and the community banks were such a negligible sliver of the overall market that the CRAs effects are on community banks are higher order corrections to higher order corrections.
No, because you’re comparing apples and oranges. If the banks were forced to take on loans to the groups in question due to political pressure despite having been previously correct in demanding higher interest to compensate them for the loans, and also simultaneously engaged in an epic miscalculation about the safety of loans to other groups based on naive models, then you could produce this inversion. They made a mistake, and then made an even larger mistake; this doesn’t make the original mistake not a mistake.
Only if the loans were in different asset classes. Because these are all housing loans, the underlying model of the housing market is an input to both group’s loans, with minority status as an additional adjustment.
Anyway, I don’t think looking at CRA and pre-CRA loans to minorities you can answer discrimination questions with any kind of precision. The data seems to lean in the direction of former discrimination, but massive structural changes to finance dwarf the tiny changes created by the CRA.