[quote=briansd1]I think that people with lower economic wherewithal are more likely to default. But it doesn’t mean that they can’t be profitable customers.
I think that the CAR has merit because if a bank has a branch in East San Diego they should lend some money within that community to develop it.
It wouldn’t be right for the bank to take the deposits from residents of East San Diego to lend only to folks in La Jolla or Rancho Santa Fe, simply because those more affluent folks are less likely to default or more profitable.[/quote]
Brian: This is what I mean by tortured logic. You’re attempting to argue several different points, all in the same breath.
Let’s start off with the notion that you cannot legislate good behavior, nor is it the gubment’s job to do so. CRA is clearly in the business of legislating so-called good behavior.
Second point: Its not the gubment’s job to tell businesses how to operate. If a business is conducting its affairs according to the law, then how it runs its operations is its own affair.
Third point: If a bank decides to take in deposits from one area, but lend to another, they are well within their rights to do so, and they should be able to do so without government interference.
How on earth can you make the argument that the bank should violate good underwriting principles in order to help minority borrowers, then turn around and castigate lenders for doing the same thing during the subprime crisis? Again, you’re arguing contradictory points. On one hand, you’re saying that banks should violate good underwriting principles and lend to minorities, but, on the other hand, you’re saying that banks and lenders (such as Countrywide, New Century, etc) were clearly wrong to do so with subprime clients.
You’re trying to eat your cake and have it, too. While I understand you enjoy a certain moral elasticity, I’d love to hear your explanation for this one.
On a somewhat related point: Banks take deposits from certain areas and turn around lend to others all the time. Its what banks do. In the case of CRA, you have a well meaning piece of legislation that flies in the face of both common sense and sound business practices. I work with SBA 8(a) and HUBZone contractors and I will tell you that similar well meaning programs like these are gamed on a daily basis, with completely undeserving recipients making millions.
Of course, this is what happens when you bring in do-gooder pols with no real world experience and put them in charge. You know, like community organizers from one of the most corrupt cities in America.
