See DeLong's post of a couple of weeks ago on how lower rates could work.
S***'s like you might be allowed less restrictive credit terms. We've already seen one form of this in the 100% or more mortgage loans that have sprouted up. More to the point, however, those with no credit could still benefit if the boost to demand raises employment and, by extension, wages. Note that the claim here is not that more demand will necessarily help the poor much or at all, only that it can be helpful in resisting downward pressure on employment.
> In a neighboorhood like the Mission in SF, my old neighboorhood, one
> finds a racial concentration intersecting an income bracket: lower
> incomed blacks and hispanics. One also finds many check cashing stores,
> where those with bad credit and bad banking records must go to cash
> checks (and pay for it). Just as there are many bail bond stores around
> a jail, there are these check cashing stores in lower income
> neighboorhoods. . . .
The labor market has improved in the past two years sufficiently to reach into the most benighted neighborhoods and provide *some* benefits. This speaks to the virtues of tight labor markets, though it also points up their limits from the standpoint of the poor and those who face the greatest obstacles to consistent employment. More targeted policies are needed to finish the job.
The higher cost faced in poor neighborhoods, in the finance area among others, speaks to the problem of financial reform, not interest rate policy in the large. A progressive outfit in Virginia called the Financial Market Center deals with this issue.
MBS