A few comments on this piece by Alyssa Katz, made less charitable by their brevity.

Her thesis comes through more or less here

We now know that it’s possible to lend to high-risk, low-income borrowers with minimal chance of default. Yet the kinds of loans that help those borrowers succeed are precisely those that are now most endangered. The North Carolina team found that just three perverse loan features overwhelmingly determined whether a borrower would default: a loan is sold by a mortgage broker; has adjustable interest rates; or imposes pre-payment penalties on borrowers who seek to sell or refinance.

It sort of depends on what you mean by high risk but if what you mean is that it is theoretically possible to lend to an unemployed black man in a string vest, while enjoying low levels of default, then we have sort of always known that.

Indeed, not only that but some folks were wildly successful at it for a time. We called them subprime brokers.

It was not for rank stupidity that people got into this business. It was not for obsessive greed that they lost 100 year-old financial empires.

Lets check the tape.

Notice that not only are delinquency rates falling but foreclosure rates are collapsing.


I obviously have much much more to say about this entire issue but the core fallacy is that bad consequences proceeded from bad actions.

If only we had done the “right” thing, things would have been different.

I have found basically no level from the man on the street to the most sophisticated analyst were some form of this thinking is not driving his or her conclusions.

Yet, the world just is what it is. Shit happens. We can talk about why shit happens, and if – and I mean if – anything can be done to mediate that. We can and should have longer conversations about what to do to help people after shit has happened to them. 

Yet, there should be no presumption that awfulness is avoidable and certainly avoidable by individuals behaving in a “good way.”