The perennial challenge in the realm of banking regulation is to strike the proper balance between two worthy goals. Those of us on the left and center-left want to make financing more readily available to working-class applicants looking to earn their way up the socio-economic ladder. To that end, we want to give banks and other lending institutions greater security in knowing that they can responsibly take risks on those who might not otherwise qualify for a loan. At the same time, we don’t want to undermine those same potential working-class borrowers by steering lenders into the ditch known to insiders as a “moral hazard”—that is, by inducing lenders to make bad loans. Washington’s job is to help financial firms strike the right balance.
