by OLD1953 » Sun May 23, 2010 1:45 am
Just MHO, but it's always down to the bankers as to whom to approve for a loan. The law may tell you that you can't take all the money deposited in a neighborhood and loan it elsewhere, that you must make some loans in that area, but it doesn't ever tell them they must approve some particular person. Laws of that nature were on the books for more than three decades before this housing mess hit, and that's all due to bankers abandoning responsibility for the security of deposits.
In the end, it all comes down to a race. One institution will ease the reins just a bit, and the profits jump and their stock soars. The next one does the same thing, and then the next. It's very much like a virus spreading, shortly even the "stable old well established" banks have eased the requirements for a loan just a bit. Then all the stocks are at the same level, so somebody eases up just a bit more (after all, nothing terrible happened the last time) to jazz the stock before the options come due. Then it goes around again. It's a positive feedback loop with no retarding impulse, it stops when the machine breaks.
Just MHO, but it's always down to the bankers as to whom to approve for a loan. The law may tell you that you can't take all the money deposited in a neighborhood and loan it elsewhere, that you must make some loans in that area, but it doesn't ever tell them they must approve some particular person. Laws of that nature were on the books for more than three decades before this housing mess hit, and that's all due to bankers abandoning responsibility for the security of deposits.
In the end, it all comes down to a race. One institution will ease the reins just a bit, and the profits jump and their stock soars. The next one does the same thing, and then the next. It's very much like a virus spreading, shortly even the "stable old well established" banks have eased the requirements for a loan just a bit. Then all the stocks are at the same level, so somebody eases up just a bit more (after all, nothing terrible happened the last time) to jazz the stock before the options come due. Then it goes around again. It's a positive feedback loop with no retarding impulse, it stops when the machine breaks.