Monday, September 22, 2008

Redlining Under Attack - New York Times

Just a reminder from the 90s:

Most of the analysts who are dubious about the assertion that redlining is a fact of life make their argument on the ground of economic efficiency.

George J. Bentson, a specialist in financial regulation at Emory University, finds it implausible that banks would pass up any chance to issue mortgages that could be sold for a quick profit in the securities markets. "There is no evidence of significant discrimination in mortgage lending," he said.

Others, including Lawrence J. White, a former Federal bank regulator who teaches economics at the Stern School of Business at New York University, worry that using statistical patterns to infer discrimination -- the general mode of proof in such matters -- will induce lenders to allocate funds by racial or neighborhood quotas rather than by creditworthiness.

"Such targeting is bad public policy because it wastes capital," Mr. White said. "If we are going to subsidize lending for social purposes, it ought to be done explicitly and with Government money."

And of course it now will be.


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