Now the credit crunch is here, everyone has hindsight and is lamenting, "How on earth could lenders be so risky in extending credit more and more to those who present a poor risk?"
If everyone knew the problem, that we were extending credit to those who could not afford it, then why did the problem occur? Why didn’t those undertaking the lending just stay with their previous, more conservative lending limits? I am sure many could justify the position with extravagant economic arguments, but I suspect the truth is far more to do with a) chasing revenue and b) following the herd. Quarterly reporting cycles and the pressure to report increasing growth keep driving our financial institutions to increase their long term risk for short term gain, and there will be many ...
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