The fundamental difference is in incentives. If your incentive is to generate profits, you don't want to lend to the high-risk needy because you'll lose money.

The fundamental difference is in incentives. If your incentive is to generate profits, you don't want to lend to the high-risk needy because you'll lose money. If your incentive is to provide another form of social security, you're willing to subsidize. The problem comes when you force a business that really wants to align to the profit incentive (banks) to provide social subsidy by effectively charging their profit-generating customer base a premium. 1. They're incentivized to do the bare minimum necessary. 2. They're incentivized to stick to the letter and not the spirit of the law. 3. The transfer of wealth from paying to subsidized customers is opaque and nobody can do proper accounting. This is a major source of corruption and inefficiency. It's the sort of problem that's all over the place whenever the private sector is forced into providing this sort of opaque cross-subsidy. If I were to re-do this from scratch I'd privatize all the banks and let them do just the profit-making part, and have social programs solely as a function of the government, with a set yearly budget.