Dr Boyce speaks on the Rushcard, Predatory Lending in the New York Times

18 Apr

In a speech today, the Federal Reserve chairman Ben S. Bernanke talked about the need to “strike the right balance: to strive for the highest standards of consumer protection without eliminating the beneficial effects of responsible innovation on consumer choice and access to credit.”

Where exactly regulators think that “balance” lies has varied greatly over time. Throughout American history, politicians and their constituents have viewed access to credit as alternatively empowering and exploitative. We can’t seem to decide: Is making credit available to “subprime” borrowers helping them, or taking advantage of their ignorance?

In the 1970s, efforts to deregulate the financial industry began in earnest. Regulators began repealing or amending laws that restricted banks’ activities (such as the rates of interest they could charge on a loan or pay on a bank deposit). With more freedom to tailor their financial products to the risks potential borrowers presented, banks experimented with new credit terms for different types of customers. This led to much greater access to credit across the board.

Click to read.

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