Banks' Irresponsible Lending Rates As Entrapment

Sydney Morning Herald

Monday July 16, 2007

The pity of the economic boom has been the lack of due diligence by banks in lending money to people who can ill afford a small increase in interest rates ("Bankruptcy soars as city feasts on easy credit", July 14-15). Their risk management has been nothing less than appalling, with low-doc and no-doc loans. Knowingly lending to an individual or a couple who cannot afford a 1 per cent increase in rates should be considered entrapment. After all, they sell the property on default and then saddle the debtor with paying off the remainder, effectively enslaving them financially. The banks have effectively off-loaded the entire risk of the loan to the lender and future generations.

W. Brown Queanbeyan

Increases in bankruptcies are linked to slack lending practices where the lender, rather than looking at the borrower's capacity to repay, looks at the resale value of the security to determine whether it is likely to recoup its money in a default. As a lawyer in the 1980s I had to advise a finance company in connection with loans gone bad. The security for one had been the hind quarters of a horse. Valuable, but not discontiguous from the front quarters.

Fred Jansohn Rose Bay

It is too easy to blame rising mortgagee sales on easy credit. Many would have been caused by families who can't meet mortgage repayments because dad's job has gone from full-time to a casual 15 hours a week and mum can't work due to family responsibilities. This is the future under the Howard Government, which declares it's never been better for families. Well, for wealthy families anyway.

Tony Snellgrove Uki

Was John Howard having another senior moment, or was he being honest about the depth of his hypocrisy when, in relation to soaring bankruptcies, he said: "You have got to make a judgment as a government as to whether you intervene paternalistically and stop everybody, including people who can handle it, as well as people who can't"? Why the different approach between the mortgage belt and remote indigenous communities?

Jennie Morris Wollongong

Mr Howard, you were quick to make judgments on behalf of the Aboriginal children of the Northern Territory. Why not do the same for city-dwelling children with parents drunk on easy money and credit cards?

Deborah Hurst Lindfield

© 2007 Sydney Morning Herald

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