The debate over whether the CRA led to risky lending rages on. I remain perplexed that this is even a question.
I get that a lot of people want the answer to this to be No. But the only valid way to actually get a No answer is by saying that the government regulation did nothing at all. If it did something, then it did the thing that it did. People are basically asking whether a regulation did the thing that it did. Let me back up by rephrasing the question in the context of the CRA:
Did a regulation saying ‘in certain cases you must lend more money than, left to your own devices, you otherwise would (i.e., $0, perhaps)’ lead to riskier lending?
Or, since ‘lending’ is buying (i.e. the lender is buying a loan from the borrower), and the ‘purchase price’ is a compensation/proxy/equivalent for risk, we could rephrase it like this:
Did a regulation saying ‘in a certain minimum of cases you must pay above market price for a thing’ increase the market price of that thing?
Or, more generally,
Did a regulation saying ‘do X’ make more X happen?
Which is why, stepping back further, the question really sounds like this to my ears:
Did a regulation do the thing that it did?
Why do we need a ‘study’ with regression analyses and peer reviewers to prove this? Why is this even a question?
Now to be fair, I guess I am pretty open to the idea that this or that government policy is ineffective, if that’s what people are saying (I don’t think it is). But it’s odd indeed that a regulation’s cheerleaders are so wedded to a position that – logically – amounts to asserting that said regulation doesn’t do anything at all. If the CRA doesn’t do anything, let’s repeal it, no harm no foul and no one should object. But if the CRA did anything at all, then it did what it did, i.e., increased risky lending. Period.
Of course, if the ‘No’ crowd is feeling like phrasing things more carefully and honestly, they’ll probably back off the ‘No’ position: ‘Oh, come on’, they’ll say, ‘you know what we mean. We’re not saying it had no effect whatsoever, just that the effect that it did have was small’. Or negligible, immaterial, marginal, tolerable, etc. (all of which of course beg the question – ‘compared to what? by what standard?). I mean, I assume this is what an intellectually honest ‘No’ person would say, because at least it would be a defensible position.
So why doesn’t anyone just say that then? Why do we keep seeing this question treated like a Yes/No question rather than a How Much question? I guess it’s because the political costs of acknowledging even the tiniest effect of the CRA are just deemed to be too politically damaging. So Nope, they aren’t giving an inch. NO EFFECT!
Not coincidentally, we see this same tactic (artificially treating a How Much question as a Yes/No question, in order to insist upon a No answer) in the realm of affirmative action. Supporters typically make sweeping binary claims like, ‘No, affirmative action doesn’t lead to less-qualified nonwhites being hired over more-qualified whites, so shut up.’ Once again, simple logic dictates that if affirmative action does anything at all, then this is precisely what it does. But once again, its supporters appear hell-bent on not admitting it so they can get a No answer – and hide the fact that inside that ‘No’ is smuggled a host of value judgments, because by ‘No’ they really mean ‘Yes, but not an intolerable amount’…’intolerable’ being secretly defined by them.
In short, treating these as Yes/No questions allows the side wishing to deny known and highly predictable economic effects of their policy to disguise that effect and smuggle their value-judgment (that the effect is worth it) inside a sweeping and binary ‘it’s fine, so shut up’ verdict. It just so happens that in both cases it’s the left that wishes to do this. I’m sure that’s just a coincidence.