Interest in banking practices
Re “Fed looks to rein in lenders,” Dec. 19
Time was when banks earned whatever success they enjoyed through conservative investment of their assets to home buyers and others by way of mortgages and similar instruments. The key was the size of their assets. Now, in search of highly leveraged profits, banks are the borrowers, lending funds far in excess of what they have. And they borrow from sources that have borrowed from God-only-knows where, an endless chain across the world.
A stop could be put to this fiscal foolishness by restricting banks from borrowing outside of their own precincts. Make them again regulate themselves.
John Clark
Los Angeles
--
While shrunken-government and free-market fans continue to laud Ronald Reagan for braying that government isn’t the solution, it’s the problem, we’re again reaping the whirlwind of his and his party’s reckless policies. He got the government off the back of the savings and loan industry and caused the lingering debacle that foreshadowed the ominous one now staring us in the face. Now, our government’s feeble attempts to heal the damage done (again) have proven to be a Band-Aid for a gaping wound. Who but the Federal Reserve (a mostly behind-the-scenes consortium of mega-bankers) would come up with imaginative and potent strategies such as making sure that people borrowing hundreds of thousands of dollars actually have income they can verify?
John Argent
Los Angeles
--
The new Fed rules for home financing return to time-worn elements of good procedure that have always been used in the home mortgage business until recent times. When I was in the mortgage business 30 years ago, there were no such loans as prime or sub-prime. All loans were certified as either good or bad. Honest appraisal and honesty by applicants were a foregone conclusion. Any infraction by either borrowers or agents was harshly dealt with, sometimes in the criminal justice system. Such has not been the case in recent years, when demand for homes has driven builders, lenders and buyers to unabashed greed. To restore ethics, there should be no more prime or sub-prime categories. There should be just two requirements -- either pass or fail to meet the standards of honesty and integrity.
James Kerr
Laguna Beach
--
The Times highlights a fact often overlooked in the sub-prime debate, which is that sub-prime mortgages serve an important purpose. Regulating “predatory lending” may play well politically, but the effects of new lending rules can be far-reaching. Sub-prime mortgages exist to give families a second chance, an opportunity to own a home even when their credit isn’t perfect. Any new regulations should be careful not to destroy the rights of one homeowner while trying to protect another’s. Well-intended legislation, painted with too broad a stroke, could keep thousands from being able to finance a home.
Matthew Glans
Chicago
The writer is a legislative specialist for the Heartland Institute.
