Monday, March 28, 2011

The New Guys PowerPoint on Credit Markets

Here is the link to the PowerPoint presentation for Wednesday's class session. One of the questions you should ask yourself when reading facts about cost differences in loans across different types of consumers is: what is the underlying explanation? One explanation is that this is out and out discrimination by predatory lenders. A different explanation is this is a compensating differential for increased default risk that lenders take on. (There is also a question with the latter whether it should be in the up front fees or in a spread in the interest rates borrowers get.) With that, you can ask whether a nudge is needed or not.

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