Why, in an unregulated market, would bankers make loans to people they know
will probably not be able to keep up the payments? The answer is, they
wouldn't. It's only because the taxpayer stood behind the bad loans that banks
were eager to make them.
I don't know about the situation in Brazil, but in the US in the 1990s the
Clinton administration undertook to make home-mortgage loans more available to
minority and low-income borrowers, first by lowering Fannie Mae's requirements
for down payments, and, when that didn't work well enough to be politically
correct, by lowering the lending standards (in 1999). Andrew Cuomo was
Secretary of HUD at the time, and he was a cheerleader for sub-standard loans.
He is now the Attorney General of New York.
They even arranged to penalize banks that did not make an adequate number of
politically correct (i.e., sub-standard) loans, but I don't know what the
mechanism was.
You can't blame relaxed regulations. Why would relaxed regulations cause a
lender to do business with someone who will default on a loan? How does a bank
make money by making loans they know are bad? Answer the question.
--- On Thu, 9/25/08, Cory Nott <[EMAIL PROTECTED]> wrote:
You forget that Brazil was once a superpower like the United States
is now,
where the average person had access to more wealth than an average person
anywhere else in the world and they had a largely unregulated free market
economy. But, like the United States has done now, they relaxed regulations
on investments banking and the bankers went hog wild with subprime loans to
undeserving borrowers. Now the whole country of a Brazil is a mess, and we
are soon to follow. That's why the comparison is valid.,_._,___
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