> It's perhaps not a coincidence that the last few decades have seen ever increasing credit availability while the middle class shrinks.
I don't think so. I think it has much more to do with tax law.
The premise of TARP was that allowing large institutions to fail and trigger a cascade of bankruptcies would have resulted in too much collateral damage to innocent parties who reasonably assumed that large financial institutions and insurers would meet their obligations.
Putting restrictions on bank lending is very different than allowing them to default at scale.
> I don't think so. I think it has much more to do with tax law.
That is a widespread belief but it has no basis. The rich have never paid high taxes in the US, even at times with nominally high tax rates. During the period in the 20th century that the highest individual rates were >80%, there were also so many loopholes that rich families regularly paid no taxes. And if the taxes actually paid haven't gone down then it has to be something else.
But "the power to tax is the power to destroy" as I'm sure you know. What difference in result do you imagine between a law discouraging lending and a law taxing it heavily enough to prevent wealth concentration?
There are a lot of good reasons to think that they aren't, too.
If you model credit as something you give to one person then it looks like a win -- now that person can afford a home when they couldn't before. But if you make credit generally available then it causes price inflation. That not only means higher costs, you have to pay interest on the inflated price until you've paid off the principal. Which middle income people can generally never do, because if they could then the people in the percentile below them could have gotten an interest-only loan and outbid them for the house.
The result is that you get to claim a PR win because more people "own a home", except that the homes are really owned by the bank and the only difference from renting is that the payments are called interest instead of rent.
The number of people who own a home outright goes down because many middle income people could otherwise have bought a home without borrowing, but against the wildly inflated prices they have to take out a mortgage. Imagine the cost of a home was little more than a down payment currently is.
And this carries down through the generations because children who inherit a home now also inherit a loan in nearly the entire amount, the money used to pay inflated medical bills that are only so expensive because credit availability allows them to be.
It's perhaps not a coincidence that the last few decades have seen ever increasing credit availability while the middle class shrinks.