Now that the housing market is collapsing they're gone completely overboard and gone to the other extreme. Anecdotally I hear of friends and family who never missed a mortgage payment in their life, getting turned down because they're "too much of a credit risk." Forget it if you're self-employed, you'll never get a loan or a refi. Even if you were a savvy younger fellow thinking now would be the time to buy some rental property, such a smart move is impossible because you are too young to get a loan.
Sadly banks are shooting themselves in the foot. First the people that the easing of credit was intended for by the fed are not getting that help they needed. Two, banks are passing up on good loans that would actually be paid back. Third, in not refinancing the people who deserve it, they further risk prolonging a recession.
The banks must learn to strike a Goldilocks balance of credit. Not too stringent, yet not too loose. Of course, you're asking for competence on the part of banking executives.
Sadly, we're not asking for competence.
ReplyDeleteOnly a degree of prudence and the business-equivalent kind of risk calculation that most people make crossing the street everyday.
You know: "Whoa, there's a HUGE semi trailer barreling down the street, horns blaring, lights flashing, ya know I'll think I'll wait and let it pass. Heck, i'll even move back from the edge of the sidewalk."
Or " There comes Mr. Smith, who is a nice man, and who has seen me, is obviusly slowing down to a stop and is waving me forward. Gee, I think now would be a good time to cross."
You're asking for too much.
ReplyDeleteErgo...YOU ARE NOT A TEAM PLAYER!!!
You will be crucified tomorrow for your non-conformance.
;)
It's the one reason I dislike the trend to larger banks.
ReplyDeleteI suspect it is easier to shrug and not care, go with the flow, that it would be a smaller bank where the managers presumably more closely see the relatioship between what they lend and the return of, and on, capital.
I think a large part of the current problem was the commoditization of mortages. People could write any sort of crappy mortage and dump it into the market, if you are stuck holding the paper yourself I also suspect that you pay closer attention.
Ha, the smaller banks are more to blame for the housing collapse than any one entity. They fed off the feces that the larger banks passed up on. You want a good bank, go find a bank that isn't posting losses right now and is larger than $5 billion. Shows they are competent to make profits in the worst of times and are large enough they don't have to polish turds to find deals.
ReplyDeleteGood Points. I am naive.
ReplyDeleteI just had a post about this on my site.
ReplyDeletehttp://snarkolepsy.blogspot.com/2008/04/how-banks-continue-to-depress-real.html#links
Seems every week they change the rules. I'm told two weeks ago, they wouldn't lend money to any investors. At all. No matter what your credit worthyness.