Reply #15: They may not physically force you to borrow money. But 15 years ago, they didn't lend anyone [View All]

who asked for it money.

There used to be an assumption that, if your loan application was accepted, you met some bank metric for judging whether you had the capacity to pay back the loan.

I do think that a significant part of the blame shifts off the borrower if the bank made a loan to borrower the bank KNEW couldn't pay back the loand (which is similar to the way I think of the IMF -- if the IMF knew developing countries wouldn't be able to pay back the loans, and only made the loans because they wanted those countries to default so that they could force them to sell all their assets and give away political and economic control of their countries...).

I feel this even more acutely with mortgages. I don't believe for a second that mortgage lenders believed that housing prices were permanently up and that rising values would be adequate security for many of the mortgages they were issuing. I'm sure that they just wanted to increase prices as much as possible so that, before the bubble burst, they could pay out as much money as possible in salaries, christmas bonuses, and stock options to insiders.