From: dlv@bwalk.dm.com (Dr.Dimitri Vulis KOTM)
Date: Tue, 10 Dec 1996 08:59:18 -0800 (PST)
To: cypherpunks@toad.com
Subject: Re: Redlining
In-Reply-To: <199612100815.AAA09236@mailmasher.com>
Message-ID: <DRaqyD102w165w@bwalk.dm.com>
MIME-Version: 1.0
Content-Type: text/plain


This has no crypto-relevance...

nobody@huge.cajones.com (Huge Cajones Remailer) writes:
>
> I believe that five friends should be able to get together, pool their
> resources, and lend their money to whomever they like.
>
> I believe that ten, or a hundred, or a thousand people should be able
> to pool their money and lend it to whomever they please for whatever
> reason they like.
>
> That, essentially, is what a bank is.  I do not believe the government
> should dictate which people you, or your bank, are allowed to lend to.

Without government regulation, a bank would charge higher interest rates for
(e.g.) residential mortgages in neighborhoods where the bank thinks they have
more likelyhood of default and eventual foreclosure. This is no different from
life insurance companies charging smokers higher premiums because they think
that smokers die younger. A bank would not flatly refuse to lend money in a
certain neighborhood if they could charge an interest rate at which they would
still make money (with appropriate reserves for defaults). But because they
can't discriminate freely in setting the interest rate, the banks try to avoid
high-risk loans altogether.

---

Dr.Dimitri Vulis KOTM
Brighton Beach Boardwalk BBS, Forest Hills, N.Y.: +1-718-261-2013, 14.4Kbps