Predatory Lending

I don't think a politician can get elected on what a friend called an "eat your vegetables" economic platform. So although bankers may be pushing policy friendly to bankers, I don't think that's the only (or even the main) factor. For example, who is benefiting from ignoring the Social Security/Medicare debacle? No one, as far as I can see. We just don't want to hear it.

If poor people are a bad risk for loans, there wouldn't seem to be many answers:

1. Don't loan them money -- this is the traditional approach, and led to pawn shops and loan sharks.

2. Loan them money at high interest rates, to cover the large number of defaults. Pass laws to keep them from declaring bankruptcy, or shedding their debts when they do.

3. (the new answer) Loan them money and securitize the debt, so that sucker investors take the hit, not the lender.

Got any other answers?

As for currency manipulation, I think the whole thing is bizarre. It would be one thing if the currency were continually dropping, to make Chinese exports cheaper and cheaper. But the yuan has been linked to the dollar for decades. So I don't see how you can even say the Chinese are manipulating the currency, when it never changes with respect to the dollar. They are taking a certain number of dollars for their product. Congress would like them to charge more, so they are easier to compete with (and screw WalMart shoppers who see a price increase.) It's Congress that wants to manipulate the currency, to force Chinese producers to raise their prices, regardless of where they think the market is.

As you point out, they can't shift the currency enough to make the economy respond. But more fundamentally, once the currency stabilizes again, I don't see why the Chinese would not just adjust their prices in dollars back to where they think the best price is. This is what happened with Japan. The dollar dropped against the yen in the 90's (Japanese real estate investors lost their shirts), but the price of Japanese cars in dollars didn't change at all.

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