There are no other words that go better together than banks, government, and regulation. They form the trinity of one of the core essences of government. But that essence ban be broken down even further, and that’s the conceit of the bureaucrats who think that they know how to run a bank better than the people that spent years learning the know-how. Yeah right.
The only way bureaucrats can make banks do what they want them to do is by writing up dozens, no, thousands of regulations that control how the banks can breathe and eat. One of those regulations is called 12 CFR 202. More comprehensibly, it’s also known as Equal Credit Opportunity regulation.
Basically, this regulation forces banks to extend credit to more unworthy customers. This, the government and bureaucrats call “credit discrimination.” They say, on the Federal Reserve website, that this regulation “Prohibits lenders from discriminating against credit applicants, establishes guidelines for gathering and evaluating credit information, and requires written notification when credit is denied.”
I believe that all of this is a huge, big pile of bureaucratic blundering. There are no other words that I can use to describe it.
First things first. It’s the right of the bank to either take the risk and give an applicant a loan, or not take the risk and give the applicant no loan. It’s a regular old business venture like any other.
But when they say that the credit applicant, who, under normal circumstances, would be rejected, is supposed to be given that money, well, you just created an infrastructure based on very flawed banking practices that’s probably going to collapse.
This isn’t the only result that this has on interest rates. Banks, now having to extend credit to riskier candidates, now have to raise their interest rates, to compensate for the fact that their less credit-worthy customers are probably not going to repay their loan.
The final thing that I want to say is how do the bureaucrats in Washington know what qualifies as credit-worthy applicants? The answer is, they don’t. So the guidelines that they set up are probably the opposite of what should be done, or at least incorrect.
This entire regulation should be scrapped, so that the banks themselves, who are risking their money, should be allowed to make correct decisions, or bad decisions. That’s how they operated before this regulation, right?
The Blogger 
Leave a comment