= 27d567bc2d48d9f40e9ccc20ea370b15)
gwern comments on A Parable On Obsolete Ideologies - Less Wrong
You are viewing a comment permalink. View the original post to see all comments and the full post content.
= 783df68a0f980790206b9ea87794c5b6)
Loading…= b715d02e85f7b3b4ae65ca3d3e450868)
Subscribe to RSS Feed
Powered by Reddit
= f037147d6e6c911a85753b9abdedda8d)
You are viewing a comment permalink. View the original post to see all comments and the full post content.
Comments (272)
If the solution didn't work, maybe one should consider the possibility that whatever problem there was, it wasn't what one thought it was.
The solution DID work. It just came with a bunch of other problems. Unforeseen consequences do not negate the original problem.
Actually, they sorta do. ("The operation was a complete success! Unfortunately, the patient died.")
It is possible to construct examples where they are connected like that.
The topic at hand is not one of them.
I disagree. The claim is that they were discriminated against unfairly and this can be proven by your anecdote that someone didn't fail to repay a loan. Yet in aggregate, there was a lot of non-repayment going on.
The question is much less about whether he actually did repay the loan. It's about the decision process.
Everything looked great until they realized they were about to lend to a black man.
That is fucked up. And it doesn't happen in isolation.
Whether he actually managed to pay the loan off or not is almost aside from the point, though his success is indeed frosting (from the argument's PoV - obviously rather more important to us personally).
No, it's not. It's useful information. What you're emoting about is like saying
Whatever rates they estimated as just barely covering the risk of nonpayment and allowing them to eke out a profit based on their estimate from his personal wealth and existing track record is not the rate they would have estimated after learning additional stuff. Being black is some of that additional stuff.
I think we should both slow down. I've slipped up, and you're slipping up. You're saying I'm emoting and then tripping up in two dramatic ways that you really should have caught.
A) Going bankrupt would be part of that existing track record.
B) He could have dealt with a slightly higher rate. He wasn't offered a slightly higher rate. He wasn't offered any rate at all.
Okay. Taking some more time to think.
Being black may provide some information, but it is almost entirely screened by the information from the admissible parts of the track record. The banks were screwing up this calculation, and in doing so were not only hurting themselves but causing extreme damage to the world around them.
Adding a bunch of unbiased actors with relevant expertise, guts, and enormous amounts of capital would have solved the problem, but so would unicorns, and we had just as many of those. Regulation brought problems, but they were different problems.
And why can't being part of a minority group be part of a track record? In both cases, the party thinking of giving the loan has learned new and material information.
So? If they had offered a loan at 100% interest, people would be bitching anyway about discrimination. Maybe it is a calculated PR move that people will complain less about not getting a loan than about getting a loan at +2% interest; maybe it has to do with the fixed overhead of servicing loans; maybe they only had so much appetite for risk even if the interest rate were raised to make the loan +EV again; maybe this is an unexpected consequence of the millions of words of regulation governing banks.
I doubt that and I suspect you have no good reason to believe that.
Maybe for people with a really thin track record. Not for people who've run a profitable business for a decade, have a solid business case, etc.. Just what independent information does being black provide, here? (No need to respond to this point here - you can put it in response to TheOtherDave's parallel comment)
Now, I freely grant that if you only look at the bankers' side of things, regulation doesn't make sense. They should be perfectly informed and make the ideal decisions as to who will succeed or not! And if they can't make perfect use of that information, that's their problem!
But of course, it's not only their problem, and the purpose of the law is not solely to help the bankers get money.
A 'being black' penalty even of only 2% on loans would be colossal. Think how much debt a growing business has to incur, and compound that over the years. Apply it to choices of housing, of auto financing. Everyone in the community has less money, so they can't buy as much, so businesses have a harder time growing, so people earn less. It's self-perpetuating.
But it wasn't that mild. Instead, the loans were simply turned down. The near-total absence of capital was crippling.
Do you think this is a problem? What might you do about it?
In the scales of values, where does "equal opportunity" rank up against "allowing each individual to make the best choices available to them personally without regard to the impact that choice has on what choices other individuals get"?
Just so I understand that last part... are you claiming:
1) ...there is no factor or set of factors X such that X screens off skin color for purposes of calculating loan EV,
2) ...there may be such an X, but we don't know what it is and/or have no way of measuring it,
3) ...we know what X is, but the admissible parts of the track record don't include it,
...or something else?
#1 seems really unlikely to me, so if you think it likely I'm interested in your reasons.
#2 seems plausible.
#3 also seems plausible, but if true, suggests that talking about the admissability of skin color is a herring of unspecified hue; as a bank, I should be trying to get X admitted instead.
The solution actually wasn't THAT bad- the community banks actually regulated by the community reinvestment act had/have lower rates of foreclosure then the national average, and lower rates of foreclosure on their loans to minorities.
Edit: this is because they are generally required to keep more skin-in-the-game, not BECAUSE they were regulated by the CRA (most fall under various patches of the regulations put in place after the S&L crisis). My point being, community banks were able to responsibly lend to a diverse population, and certainly the CRA wasn't causal in the foreclosure crisis.
That doesn't necessarily address my point: if there were unjust discrimination, discrimination which was not a rational reaction to the credit risk, then saying "well, they didn't cause as many losses as some aggregate measure of loss during the greatest period of property-related losses in the history of America" isn't proving that. To prove that, you need to show something like that the loans turned out to have been made profitably on net in the long-term after adjusting for risk and opportunity cost etc.
I'm not sure thats true, I think what you would want to show is that the loans 'forced' on the community banks are at-least-as-profitable as the loans the banks voluntarily took on. Given the bizarre financial period we just lived through, the losses on loans is going to be markedly higher across all institutions.
Maybe the next decade of CRA type lending won't be contaminated by massive changes in the financial sector and a large crash- in which case maybe the questions of discrimination will become easier to untangle. For the last decade, the housing market underwent major changes, and the community banks were such a negligible sliver of the overall market that the CRAs effects are on community banks are higher order corrections to higher order corrections.
No, because you're comparing apples and oranges. If the banks were forced to take on loans to the groups in question due to political pressure despite having been previously correct in demanding higher interest to compensate them for the loans, and also simultaneously engaged in an epic miscalculation about the safety of loans to other groups based on naive models, then you could produce this inversion. They made a mistake, and then made an even larger mistake; this doesn't make the original mistake not a mistake.
Only if the loans were in different asset classes. Because these are all housing loans, the underlying model of the housing market is an input to both group's loans, with minority status as an additional adjustment.
Anyway, I don't think looking at CRA and pre-CRA loans to minorities you can answer discrimination questions with any kind of precision. The data seems to lean in the direction of former discrimination, but massive structural changes to finance dwarf the tiny changes created by the CRA.