I was speaking to a banker this past weekend who put the blame on the subprime problem squarely on the campaign against "red lining" and the Community Reinvestment Act enforcement, which forced banks to give super risky loans to people without savings or credit history — i.e. the poor. The very thought hit me like a ton of bricks (did I miss this theory in the press?) but I haven't really thought it through, though I've done research on so-called loan discrimination in the past. The Manhattan Institute sees this, e.g., as nothing but the market biting back against affirmative-action lending, and thus may subprime reform leading to a new form of redlining. And here is a link that says subprime lending is really an attempt to turn anti-redlining legislation into predatory lending (oh sure).
Thoughts anyone? How much of a factor is regulation in this meltdown?
