You persist in only looking at the effect on the banker. As I said, the regulation won’t make much if any sense from that point of view alone. Your pointing this out once more doesn’t really change anything.
That said, considering that the regulated banks had a low default rate until everything went screwy because of the (non-regulated) predatory lenders, I think I’ll stick with the theory that there was a market inefficiency.
Now, it wasn’t a simple barrier-free market inefficiency. If only one bank had moved, it could well have lost its shirt. Being the sole investor in a dead area is rough. It’s a bit like a many-player game with ‘staying out’ having a positive payoff from being able to invest elsewhere, and ‘going in’ having a payoff that starts out negative with no other cooperators, increases with cooperators for a while, peaks above ‘staying out’, then declines down to the ‘staying out’ level once the market is fully competitive (then below if it becomes saturated). When no one is there, you’d be crazy to move first.
Changing the rules so the banks had to serve their localities guaranteed a minimum level of going in, which made it no longer a bad move to go in.
You persist in only looking at the effect on the banker. As I said, the regulation won’t make much if any sense from that point of view alone. Your pointing this out once more doesn’t really change anything.
That said, considering that the regulated banks had a low default rate until everything went screwy because of the (non-regulated) predatory lenders, I think I’ll stick with the theory that there was a market inefficiency.
Now, it wasn’t a simple barrier-free market inefficiency. If only one bank had moved, it could well have lost its shirt. Being the sole investor in a dead area is rough. It’s a bit like a many-player game with ‘staying out’ having a positive payoff from being able to invest elsewhere, and ‘going in’ having a payoff that starts out negative with no other cooperators, increases with cooperators for a while, peaks above ‘staying out’, then declines down to the ‘staying out’ level once the market is fully competitive (then below if it becomes saturated). When no one is there, you’d be crazy to move first.
Changing the rules so the banks had to serve their localities guaranteed a minimum level of going in, which made it no longer a bad move to go in.