Have Banking Tactics Run Amok?

Great Debates
1

Should the banking industry be better regulated? They pass out credit cards like candy. They lure you in with appealing (appalling) low rates. You even got an ARM, I bet. They’ve buried America 10x over in debt. So, why is the banking industry allowed to run amok? Shouldn’t the banking industry be watched as (allegedly) carefully as the SEC to Wall Street shenanigans? And, now we’re in a royal stew because of the Banking industry whose theiving, (or, very shrewd) CEOs are laughing…all the way to the bank!

Shouldn’t the banking industry be legally accountable for executing more discression? This isn’t just about foreclosing on an occasional “Mr. Hardluck Homeowner”. It’s about the health of the US economy! (Personally, I think many average Americans simply don’t care. It’s the modern version of the 1960s “live for today” philosophy.)

“…At least we’re enjoying the ride!” :cool:

  • Jinx
2

Did you mean to post this about four weeks ago?

I tend to feel the banking industry self-regulated its credit policy rather spectacularly.

3

Well, one thing is very clear: It’s the damn banks trying to make money. It’s not me demanding a mortgage I can’t afford. It’s not me demanding cheap credit. It’s not me demanding banks loan into neighborhoods with sketchy prospects. It’s not me trying to make money flipping houses on cheap credit. It’s not me living above my means. It’s not me eating the credit card candy. It’s not me investing in companies so I can retire earlier and demanding a rising stock price so I can sell at a profit.

It’s those thieving banks with laughing CEOs.

If a creditor lends me money too freely, we definitely have to find ways to blame them if I can’t repay. Bastards. They shoulda known I was a poor risk. They should not have listened to me when I complained they were only lending to the rich.

4

[QUOTE=Chief Pedant]
If a creditor lends me money too freely, we definitely have to find ways to blame them if I can’t repay. Bastards. They shoulda known I was a poor risk. They should not have listened to me when I complained they were only lending to the rich.
[/QUOTE]

I realize you are trying to be sarcastic. The issue at the heart of the ongoing debate, however, is that people who are expert in a subject are generally held to a higher level of accountability than those that are laymen. For example, if a surgeon says you need an operation when you really don’t, it is a criminal offense. If I said you needed an operation when you really don’t, its just a stupid comment. Likewise, when a mortgage professional says “joe average” is good with a particular kind of loan and he isn’t, that should be a bigger problem than if “joe average” says he wants it despite advice to the contrary.

It’s easy to blame the preyed upon for being ignorant of a topic that they are not expert in. The predatory lenders deserve to shoulder a good chunk of this mess, though. If not, then I think you need an operation. :wink:

5

Well the banks efforts make the economy look good, if they were put under control there would be a reduction in consumer spending and there would be a downturn. So the power that be seem to be encouraging the banks to have people be 11x over in debt instead of the 10x you stated.

6

[QUOTE=ASAKMOTSD]
I realize you are trying to be sarcastic. The issue at the heart of the ongoing debate, however, is that people who are expert in a subject are generally held to a higher level of accountability than those that are laymen. For example, if a surgeon says you need an operation when you really don’t, it is a criminal offense. If I said you needed an operation when you really don’t, its just a stupid comment. Likewise, when a mortgage professional says “joe average” is good with a particular kind of loan and he isn’t, that should be a bigger problem than if “joe average” says he wants it despite advice to the contrary.

It’s easy to blame the preyed upon for being ignorant of a topic that they are not expert in. The predatory lenders deserve to shoulder a good chunk of this mess, though. If not, then I think you need an operation. :wink:
[/QUOTE]

Sarcastic? Moi? I don’t think anyone should be robbed of their chance at victimhood. I’m pretty sure that’s in the bill of rights, is it not? We just need more oversight, more laws and more bureaucracy. I am positive that will solve the problem. With loans in particular, let’s make it so I have to pass a financial course, establish and execute a budget, prove that I made good decisions around my jobs and education, and pass a variety of litmus tests before I can take out any money. Let’s create Department of Homeland Financial Security to defend victims of predatory lending practices.

If I borrow money I cannot repay, it is definitely the predation which is the problem–not me.

We need more regulation. I didn’t sign nearly enough disclosure and Truth in Lending documents at my last loan closing, and there is not nearly enough fine print for me to peruse already. I cannot possibly be held accountable for taking on a bad loan; I am just “joe average.”

Please help me by helping the government help me not to borrow. Also I am having an eating problem. Can you join me in my crusade against predatory food distributors? Plus my sorry fat ass tends to sit around on the couch and watch TV. Predatory companies showcase their anti-fat-ass products on TV and I become a victim of their get-thin-quick schemes. I buy their ass-busters with my credit card and then I am set up even more for predation from credit card companies. I also got predatoried up my same fat ass for more car than I needed, more expensive shoes than I needed, and a big-screen TV. I got scammed into nicer furniture; I ate out when I could have stuck to my food budget and I got a 4 gig MP3 instead of the $15 dollar one.

It’s those laughing, scheming, thieving CEOs I tell you.

I am only the victim. The fault never never never lies in ourselves. It is definitely those money industry CEOs who made me take out my loans. Jerks.

(a tiny tiny piece culled out of the “Consumer Protection” section of FDIC law as an example of what we need more of): FDIC Law, Regulations, Related Acts | FDIC.gov
(a) The annual percentage rate applicable to any extension of consumer credit shall be determined, in accordance with the regulations of the Board,
(1) in the case of any extension of credit other than under an open end credit plan, as
(A) that nominal annual percentage rate which will yield a sum equal to the amount of the finance charge when it is applied to the unpaid balances of the amount financed, calculated according to the actuarial method of allocating payments made on a debt between the amount financed and the amount of the finance charge, pursuant to which a payment is applied first to the accumulated finance charge and the balance is applied to the unpaid amount financed; or
(B) the rate determined by any method prescribed by the Board as a method which materially simplifies computation while retaining reasonable accuracy as compared with the rate determined under subparagraph (A).
(2) in the case of any extension of credit under an open end credit plan, as the quotient (expressed as a percentage) of the total finance charge for the period to which it relates divided by the amount upon which the finance charge for that period is based, multiplied by the number of such periods in a year.
(b) Where a creditor imposes the same finance charge for balances within a specified range, the annual percentage rate shall be computed on the median balance within the range, except that if the Board determines that a rate so computed would not be meaningful, or would be materially misleading, the annual percentage rate shall be computed on such other basis as the Board may by regulation require.
(c) The disclosure of an annual percentage rate is accurate for the purpose of this title if the rate disclosed is within a tolerance not greater than one-eighth of 1 per centum more or less than the actual rate or rounded to the nearest one-fourth of 1 per centum. The Board may allow a greater tolerance to simplify compliance where irregular payments are involved.
(d) The Board may authorize the use of rate tables or charts which may provide for the disclosure of annual percentage rates which vary from the rate determined in accordance with subsection (a)(1)(A) by not more than such tolerances as the Board may allow. The
{{2-28-93 p.6571}}Board may not allow a tolerance greater than 8 per centum of that rate except to simplify compliance where irregular payments are involved.
(e) In the case of creditors determining the annual percentage rate in a manner other than as described in subsection (d), the Board may authorize other reasonable tolerances.
(f) Prior to January 1, 1971, any rate under this title to be disclosed as a percentage rate may, at the option of the creditor, be expressed in the form of the corresponding ratio of dollars per hundred dollars.

7

And one thing more: if there is one group that knows borrowing, it’s the government. I can’t think of who else would be more expert in helping me borrow more prudently.

8

[QUOTE=ASAKMOTSD]
I realize you are trying to be sarcastic. The issue at the heart of the ongoing debate, however, is that people who are expert in a subject are generally held to a higher level of accountability than those that are laymen.
[/quote]

When it comes to my financial situation and my needs, I’m the expert, not the banker. A banker offers a product and he is knowledgeable about that product. I, however, know my financial situation much better than the banker. I know whether or not I can afford this product and the chances I’ll be able to repay any line of credit the banker gives.

Ah, yes, we all need enlightened people to tell us what we really need and want, right? Some people are just too stupid to run their own lives, I guess.

Personally, I’m fine with giving people the freedom to make their own financial choices. If you take out a loan you can’t repay, then you suffer the consequences. What’s wrong with that system? Those who are responsible are fine, those who are irresponsible are punished.

9

[QUOTE=Chief Pedant]
And one thing more: if there is one group that knows borrowing, it’s the government. I can’t think of who else would be more expert in helping me borrow more prudently.
[/QUOTE]

snrk :smiley:

10

Its like shooting fish in a barrel to hate on the borrowers who contributed to the mess. That’s the easy way out.

How about the guy in Florida that paid his property taxes on time so the teachers could get paid. Now not only is the teacher not getting a check on time, he’s going to be paying higher taxes. Now how about thousands of families in Florida? How about hundreds of thousands of families in Maine, Wyoming, Oregon California? Oh, well now thats different.

How about the pensioner whose money was supposed to be in ultra safe MMs and sweeps but the banks just couldn’t leave it at that. They had to get just a little more juice. Just that little extra .0022% and put all grandmas shit at risk. Well how could they have known it would go bad?

How about the ratings agencies giving AAA ratings to bond insurers that aren’t in any sense of the word anything but junk. Well the banks need that because the they have a lot of CDO counterparty risk, and we can’t afford to let them pay for a mistake. The monoline insurers aren’t even supposed to be f’ing around with CDOs. They’re monolines (meaning 1 line) that are purportedly in the business of insuring the bond for your town’s sewerage project. You and your neighbors are going to pay for this fiasco. But they needed just that little bit of extra juice. Just that extra .0022%

The banking system had the freedom to make their own financial choices. And now they have the freedom to make you pay for it. Financial bailouts, Regulatory bailouts, teams of lobbyists (some of whom are the people you elected and paid), and teams of lawyers make for a playing field thats all uphill for you and your family. When the banks directly and publicly threaten the Federal Reserve we got a problem. Because this shit is big enough that we can only hope it all lands at the feet of the taxpayer. You better god damn well pray it doesn’t get worse.

But with all the banking industry’s resources to privatise profits and socialise losses the main thing they rely on is people like Renob and Chief Pedant taking a superficial view and striking a pose of righteousness. Without them the scam doesn’t work.

11

[QUOTE=Mongo Ponton]
Its like shooting fish in a barrel to hate on the borrowers who contributed to the mess. That’s the easy way out.
[/quote]

No, it’s the right thing to do.

What scam is that? Nobody made you too stupid to look at the “fine print”. Nobody made you too stupid to ignore credit card offers. Of course, the banks want more customers, how could I forget? And yet, in spite of my proclivities toward saving being nearly nonexistent, somehow I have managed to avoid falling into the clutches of the evil banks who put the pen in my hand and their hand on my wrist in their effort to get me to sign my life away.

12

Let me just chime in with a bit ‘me to’ for those saying that the last thing we need is another nanny style regulation to protect us from ourselves. Bankers aren’t holding guns to peoples heads and forcing them to take loans.

This is like saying after the dot com bust that the market needs to be better regulated because stupid people kept investing in a bubble and then got burned when the market re-adjusted. What is happening now IS the system correcting itself. It’s a bummer that a lot of people bought houses they couldn’t really afford, or that a lot of people took on debt they couldn’t really afford.

I think this idea that every time there is a correction to the market (whatever market) that the gubberment needs to ‘fix’ the ‘problem’ by putting in more regulation (to protect us poor ignorant slobs from ourselves) is a VERY slippery slope leading to nerf world (and probably a nice melt down of the entire system into a stagnant pond somewhere in BFE).

YMMV…but count me out.

-XT

13

It’s very simple: Americans in general tend to live beyond their means, and as a consumer driven culture, we do. We buy, buy, buy when we should save, save, save.
It isn’t the bank’s fault that a mortage cottage industry sprouted up in lieu of record home values and sales in the years 1999-2005.
Now, there have certainly been “banks” that are more like check-cashing places that pushed mortgages for homes at adjustable rates that have fucked over many a family when the rates were adjusted upwards, but ultimately, that rate adjustment is delineated in your paperwork, and it’s incumbent upon YOU to read and understand it before you sign it.
You simply cannot expect that “too good to be true” is true, and then expect a government bailout when you find out it isn’t, when you should have known it all along.

14

No one person borrowed 50 billion from banks. The failure was systematic. It was caused by loans generated with very little oversight. If levels of income and ability to pay were upheld ,the mortgage disaster would not have happened. There was a time in this country when we joked about the conservative nature of bankers. Now they are riverboat gamblers. No regulation and no oversight. reasonable standards would have stopped this fiasco.

15

Ironic, isn’t it? When the bankers become (to paraphrase) ‘the banker with a heart’ suddenly now it’s a bad thing (well, IMHO it always was…but the people SAYING it’s a bad thing…well, there is the irony).

-XT

16

I do, however, think the government should air the following commercial as a public service announcement at regular intervals:

PSA

17

The scam is that some one like yourself is getting screwed by the banking system. YOU!

Your Mom and Dad, your kids.

I’m not Mr. Softee. I think homes should be getting foreclosed as fast as possible. Why? Because thats the way markets work. Prices will come down so those that were responsible can maybe afford a house. But that ain’t happening because the banks sure as shit don’t want it to happen. Countrywide doesn’t want 400,000 empty houses, they have quite enough, thank you very much. And if Airman Doors has to pay a little bit to make sure it doesn’t happen thats okay cause he won’t believe it when some one tells him he’s getting screwed.

The people that made dumbass mistakes with credit cards should be made to pay. They can go without cable and other psuedo luxuries for a while. I’ve got no friggen sympathy for them. And I don’t have cable either. But they’re not going to pay. You are.

No, the system is not correcting itself. The system is being manipulated to prevent the correction. This is going to just prolong the pain for regular people while the banks make the arrangements they need to get themselves clear. You think they’re sitting by waiting to share the pain with you?

I almost puked when I saw this.

Consider this. Our GDP is about 14 -15 trillion dollars. The derivatives that JP Morgan has are about 65 trillion. These are supposed to be offsetting bets but the FED figured out that no one really knew if they were offset properly and told all the banks to find out. JP happily reported that they were within 10% or 6.5 trillion they couldn’t be sure of. One bank. Subprime and credit cards is smoke and mirrors to get you to hate your neighbor and look the other way.

I don’t expect everyone to sit reading banking stuff because quite frankly its pretty dry, but the people on this board are of above average intelligence and I would expect them to at least be open to the possibility that there’s more going on than meets the eye. And that it could affect their families.

18

[QUOTE=Mongo Ponton]
Subprime and credit cards is smoke and mirrors to get you to hate your neighbor and look the other way.
[/QUOTE]

…and from reading the general tone of the thread so far, it seems to be working quite effectively!

19

[QUOTE=xtisme]
Let me just chime in with a bit ‘me to’ for those saying that the last thing we need is another nanny style regulation to protect us from ourselves. Bankers aren’t holding guns to peoples heads and forcing them to take loans.
[/QUOTE]
From my perspective, better regulations on lending isn’t to protect the little guy from himself but to protect MY economy from him. I could give a rat’s ass if some dimwit gets foreclosed on because he took on a loan he couldn’t afford. The problem is that he, and thousands of his dimwit friends, can dork up the real estate market, and screw with the economy at large.

The reality is that laymen can and do get pressured (by various forces) into making spectacularly bad financial decisions. I expect financial professionals to sign up people to loans they can afford to pay back, to at least do the due diligence, to check on the customer’s finances, income and other debt. Instead, they’ve been ignoring that and signing up tons of people to loans they could never afford to pay back, on the assumption that the eventual foreclosure would get them their money back.

Maybe that’s conceivably a good business strategy individually, but collectively (what the government is responsible for) it’s a really bad strategy. It sets up the bubble that’s bursting, where too many loans foreclose, the market crashes and ALL mortgages, even “responsible” ones, are potentially not covered by the home’s equity anymore.

In terms of regulation, there are two things I want to see. First, I think lenders should be required to include easy re-financing in all ARMs, to allow conversion to fixed rate. Prepayment penalties are out. All prepayment penalties do is give the illusion of a better rate, in a way that is remarkably difficult to unravel.

Second, I’d like to require that lenders own the loans they make, rather than immediately selling them on a secondary market. Keep them responsible for the quality of loans they make, at least for a substantial period of time.

20

[QUOTE=Chief Pedant]
Well, one thing is very clear: It’s the damn banks trying to make money. It’s not me demanding a mortgage I can’t afford. It’s not me demanding cheap credit. It’s not me demanding banks loan into neighborhoods with sketchy prospects. It’s not me trying to make money flipping houses on cheap credit. It’s not me living above my means. It’s not me eating the credit card candy. It’s not me investing in companies so I can retire earlier and demanding a rising stock price so I can sell at a profit.

It’s those thieving banks with laughing CEOs.

If a creditor lends me money too freely, we definitely have to find ways to blame them if I can’t repay. Bastards. They shoulda known I was a poor risk. They should not have listened to me when I complained they were only lending to the rich.
[/QUOTE]

Chief Pedant’s attitude is a big reason why banks and credit card companies have been able to get away with all that they have (well, that and all that money they have, in a time when politicians are routinely bought and sold). Chief Pedant thinks that all responsibility should rest on the individual, and none on the corporations or the governments. It’s the individual’s responsibility to negotiate the financial mine fields, and as far as he’s concerned, the corporations can go hog-wild laying out the mines, and the government should’t stop them. I can imagine him trying to beat up on Jesus when he was tossing the moneylenders out of the temple, because Chief Pedant is all in favor of the moneylenders.

My feeling is, yes, we should be held responsible for our financial decisions, and you know what, we are. A lot of the people who bought into ARMs have been EVICTED from their HOMES through foreclosure, their credit ruined as well. How’s that for some consequences, boyos? I don’t recall that happening to any BANKERS. That’s being HELD RESPONSIBLE big time.

Now, I think all the greedy bankers and real estate developers who were baying for the chance to shoehorn middle class wage earners into McMansions should lose a little something too. But that’s just my problem, I guess. I’m all about fairness, even for the rich. Unpopular here on the Dope, but there it is.