Think a $70,000 home loan with $500 down is a good idea? Your government did.


Clusterstock managing editor John Carney turned up a real gem today, publishing a document from the Office of the Comptroller of the Currency called "Effective Strategies for Community Development Finance." The OCC, a part of the Treasury Department, oversees national banks; its website says that the banks it supervises hold two-thirds of all commercial banking assets.

The document is sure to add fuel to the debate about the propriety of the government pushing banks to take on risky low-income borrowers. Documenting "how public resources can mitigate the risk to the lender, benefit the home buyer, and achieve local development goals," the paper provides the example of leveraging a $500 down payment into a $70,000 purchase. How do you accomplish that feat of financial wizardry? By having government agencies engage in the shadiest of subprime lending practices.