Yahoo! Finance, January 24, 2020: Low-income Americans need more wealth — not more debt
It’s been said of academia that the fights are so vicious because the stakes are so small. The same could be said of fights over bank regulation. Take the current heated debate over banks’ obligations to lend to low- and moderate-income (LMI) communities under the Community Reinvestment Act (CRA). Regulators are arguing over the right metrics to use in crediting banks with CRA lending. But they are failing to ask the more fundamental question of whether increased debt is really the right way to help financially vulnerable families.
I do not discount the importance of these disagreements. The CRA has provided tremendous benefits to LMI neighborhoods. But the problem it was designed to address is not the problem that confronts these communities today. In 1977, the problem was a credit shortage for lower-income families. Now, it is the existence of too much credit, often high-cost and aggressively marketed to financially distressed households. With consumer debt once again at historic highs and disproportionately falling on low-income families, the government’s focus should be on helping those families build wealth and reduce reliance on debt. True modernization would focus on this reality.
