Who is to Blame for identification Crunch?
Who is to Blame for Credit Crunch?
Banks for Making Poor Loans
In the boom years, banks make an increasing number of loans with little regard to ability to repay. Banks run aground ways to increase the number of owe loans through strategies such(prenominal) as interest only mortgages, 100% mortgages and lending to mountain with poor credit histories. The result is that more homeowners are at risk of mortgage defaults. It is this rise in mortgage defaults that take to bank losses and reduced their willingness to lend.
UK and European banks could argue that they hand over been positively responsible compared to their American counterparts. UK banks will argue that without the US Subprime debacle, the mortgage constancy wouldnt have collapsed like it has. owe repossessions in the UK, although increasing by 40% in last 12 months, are still a small % of the total mortgage market.
The American subprime mortgage firms who made a rash of mischievous loans to people with poor credit, can find little to plea their behaviour.
The whole banking system for selling and buying the sub-prime mortgage debts as Triple A star safe loans. Certainly the mortgage companies who sold irresponsible loans can be blamed.
But, virtually(a)how these violent loans were absorbed into the whole financial system. There was a world-wide failing in evaluating the riskiness of loans. Over confidence and self-complacency seeped into the whole financial system and was not just uncaring in a section of the US mortgage industry. This is why the problems in a section of the US mortgage industry affected the global capital markets.
Consumers
Surely consumers should take some responsibility for taking out mortgages they couldnt pay back. However, whilst this is true to some extent, I think it is disingenuous to blame consumers too much. Mortgage companies actively targeted people with aggressive sales pitches. The real represent of mortgages were often hidden,...If you want to get a full essay, give it on our website: Orderessay
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