Equal opportunity Quote by Danielle DiMartino Booth
““The Fed’s fingerprints were all over this boom, and not just because of Greenspan’s low interest rates. In 1993, in response to initiatives by the Clinton administration to make housing more affordable for minorities and the poor, the Boston Fed produced a widely circulated paper called “Closing the Gap: A Guide to Equal Opportunity Lending.” “Lack of credit history should not be seen as a negative factor” in obtaining a mortgage, the Boston Fed guide noted. As an effort to counter “unintentional” racism in lending markets, the guide sanctioned lowering traditional mortgage-lending standards. Not enough saved for a down payment? No problem. The Boston Fed’s PhDs encouraged banks to allow loans from nonprofits or government assistance agencies to go toward a borrower’s down payment, though such borrowers are more likely to default on their mortgages. The Boston Fed distributed more than ninety thousand copies of this remarkably naïve guide. The mortgage industry, anxious to extend its reach and generate fees, embraced its suggestions.””
About This Quote
Source Report: Boston Fed “Closing the Gap” guide, 1993
The Fed encouraged lax mortgage standards to aid minorities, but this risked higher defaults and exploited borrowers.
In simple terms: Easier loans for the underserved can increase financial risk.
Key Takeaway
Weigh equity goals against long‑term stability.
Themes
housing
economics
inequality
policy
Mood
critical
analytical
Type
policy
economic
When to use this quote
- home buying
- bank lending
- government programs
Key Concepts
financial inclusion
risk management
Questions to Reflect On
- Is short‑term assistance worth potential default costs?
- How can policy protect borrowers without encouraging risk?
A Different Perspective
Critics argue it may perpetuate systemic bias.
