From: nobody@huge.cajones.com (Huge Cajones Remailer)
Date: Wed, 11 Dec 1996 18:28:00 -0800 (PST)
To: cypherpunks@toad.com
Subject: Re: Redlining
Message-ID: <199612120227.SAA21192@mailmasher.com>
MIME-Version: 1.0
Content-Type: text/plain



At 6:24 PM 12/11/1996, E. Allen Smith wrote:
>From:   IN%"mjmiski@execpc.com"  "Matthew J. Miszewski" 11-DEC-1996
>16:21:56.21
>>Actually, my assertion was that the basic motivation was racism and
>>ignorance.  My example of student loan default rates should clear
>>that up.  College graduates generally live outside of redlines and
>>yet are regularly offered credit.  And yet default rates on student
>>loans are outrageous (the government backing of these loans is
>>irrelevant to individual creditworthiness).
>
>That some groups not within redlines have high default rates is not
>an argument against groups within redlines having high default rates.
>The market distortion caused by government sponsorship is certainly
>relevant to whether individuals are offered credit; I would suggest
>that in many cases the students in question would not be offered
>credit, as per their high default rates, if it were not for
>government sponsorship removing the risk from the lender.

I have personal experience with cases where the lender (actually the
company which bought the loan) misrepresented a loan default
apparently in order to get reimbursed by the government.  The
government requires the lenders to make a certain number of contacts
with the borrower before declaring a default.  In this case, the
lender simply lied about the contacts.  Payments had been interrupted
as a consequence of confusion relating to the change in procedure when
the loan was sold.  One presumes that this was not accidental and that
somebody had a roaring little business going.

I have no trouble believing that the student loan market would quickly
dry up were the government to get out of the business.

Red Rackham