State Of The Union

[DuncanONeil]

Banks had a procedure of evaluating the risk of loans. They also conducted this assessment along a geographic area. Certain areas were seen to be at a very high level of risk. Hence banks were reluctant to loan into properties in those areas. The process came to have the term redlining attached to it. (Hey maybe we ought to attach that term to FICO scores! Then all of could qualify for loans!) Specific groups attacked this process of the business of banking, to limit its risk, as unfair and biased. One of the lawyers that took this issue to court, just happens to be, The current President of the USA. Anyway Congress became involved, and with court rulings, passed legislation to require banks to eliminate all such analysis and loan no matter the risk to anyone that asked. It took some 30 to 35 years for the result of this Congressional intervention in business to become known. It was clear to everyone by the end of 2008. But by then it had been forgotten was the catalytic event had been. And the banks took the heat for doing what they were told to do.

Please feel free to include your evidence on the government requiring the banks to give loans they did not desire to give. My recollection seems to be banks actively lobbying to be able to extend further credit, not complaining about the government forcing them to. See various exemptions that were the result of direct appeals to the Bush administration, most notably Bear Stearns.

See the above paragraph.

What do you have to say about the Government forcing banks that did not need or want TARP to take the money?