The other night on TV I saw a preacher giving a highly emotional sermon about the financial troubles of today. If I heard it correctly, he said he asked God about the reasons for the financial crisis and then was reminded that greedy bankers had taken advantage of poor people by making them home loans. They had no ability to pay them back, causing the disaster. I of course had heard that version many times but I had not heard anyone claim that he got that information from God. At the same time that I asked God if he really told the man that, the camera panned the congregation and I saw that it was obviously a group that was hearing exactly what they wanted to hear. They were all nodding their approval as he shouted out his revelation.
I have been immersed in this specific issue for my entire career. Much of my younger career was spent defending my profession against the charge that these greedy bankers simply would not lend money to poor people who needed houses. I never understood that charge because lending is all about income and credit, not about politics and race.
But now we are being blamed for just the opposite and yes, our motivation is that we are still greedy.
Now I am not going to defend all banks and all their decisions on how they lent. But I am a firm believer in things coming full circle when it comes to real estate lending. Real estate is technically a commodity. It is what they call a "hard asset". When you lend to a business, you are lending based on many intangibles (the business's reputation, its management philosophy, its brand recognition, etc). But hard assets are always about simply supply and demand. Politics can mess with supply and demand for a while, but the value of hard assets tends to self-correct over time. It is now in the self-correcting mode.
What happened between the time that greedy bankers shamefully refused to lend to poor people and the time when greedy bankers shamefully lent to poor people? A lot of politics happened. Gaining votes happened. Votes used to be worth a chiken in every pot. Then the value went up to a car in every driveway. Finally it became the driveway, itself.
How that equates to banker greed, I have no idea.
How that equates to banker greed, I have no idea.
2 comments:
You, as a banker, have the right to loan money to the people you see fit. Government intervention, or no government intervention. When you, stoop to their level, and get yourself in trouble, you whine like a little baby until you get a golden parachute.
I think what the bankers do not understand is that everyone sees that it was the government's policy of making sure that poor people had houses they could not afford is the root of the problem. On top of that is consumer debt. On top of that is the credit game that businesses play.
(warning: here come the six words that all bankers despise) Dave Ramsey is right! Pay Cash! If businesses as well as people adhered to this model, they would be far better off. But where would that leave the banks? Where would that leave the government?
Many banks would crash because they're no longer getting their 29% - 40% interest on their credit cards. There would be no auto loans. Mortgages would be much more rare. Student loans, the joint government-bank venture, would cease to be.
The Government would be in a world of hurt because the constituency would now understand delayed gratification. They'd understand that people must earn what they have. They'd also know that they have no need for a government bailout.
So yes, Truth Seeker, everyone knows that the Government instigated this thing. But equally as transparent is the fact that the banks, seeing in opportunity for immense quick profit, walked in lock step with them. Now that the "fit has hit the shan" the banks are pointing the finger with one hand, and begging for more handouts with the other.
Good write my friend.
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