WHAT CAUSED THE CREDIT CRUNCH ?


The Smoking Gun of Predatory Lending

What really amazes me about this Worldwide Financial Catastrophe is how no one seems to really know exactly what caused it and what the solution actually is.

The cause seems blindingly obvious to me, as does the solution. But then I do have the huge advantage of not having studied economics or ever being employed in any capacity within any part of the dubious financial industry.

The cause of the Global Financial Crash is simply this.

Because banks create most of the money in existence by means of the ‘Fractional Reserve Banking’ system, it is completely essential banks act honestly, with probity and faultless morality as well as very great care about how they lend.

This would mean borrowers were treated honestly, fairly and with great consideration as they are the sole means of the banks being able to increase real economic prosperity by creating almost unlimited new money using Fractional Reserve Banking. Confidence is absolutely everything with money, so being very careful about how you treat borrowers is completely essential to safe, reliable and stable banking and prosperous economies.

But the banks didn’t act morally at all. They seemed to have no comprehension of morality, honesty, probity and certainly not fairness or care. Why ? Simply because they became increasingly greedy – and they got away with it for years as banking disintegrated into a farcical comedy of ostentatious wide boys and spivs who elbowed their way into the banking world to displace genuinely decent bankers.

Confidence eroded as morality, honesty, probity and fairness utterly disappeared – along with any concept of treating borrowers fairly. Deviousness in banking became so widespread banks even became frightened to lend to each other for fear of being fleeced by rival banks with unreliable, dodgy bits of paper pretending to be valuable financial instruments.

Lending became increasingly predatory and unfair in all sorts of ways – perhaps the most despicable being subprime mortgages, whereby banks realised they could get away with fleecing homeowners in a manner which is profoundly dishonest. To my mind it is clear the subprime lenders have a case to answer for the illegal ‘Conversion’ of homeowners equity.

For the uninitiated ‘Conversion’ is a legal term describing a “tort” or civil wrong whereby property is ‘converted’ away from the rightful owner to another person by means of undue influence, trickery and misrepresentation . It describes a kind of theft really, which is not quite criminal theft, but is just, only just, on the other side of the dividing line between criminality and non-criminal activity. It is illegal however – just not imprisonable – at least not until the culprit refuses to give back the property in question.

If the banks had remained doing business with the levels of morality that existed a few decades ago and taken the same care in recent times as they did then, we would not be in the middle of Global Financial Meltdown and a Depression screaming into being with astonishing speed.

So, the solution is to exert very tight control on the banks and all their activities to force them to abide by the obvious rules of morality. It is really that simple.

The banks have caused Worldwide financial disaster by very suddenly reducing lending to borrowers of any kind to a mere fraction of what it should be. This is the direct and the only cause of the Global financial meltdown and gathering recession.

The banks are simply destroying virtually the entire supply of money instead of doing their usual job of creating it. This prevents trading, which then causes job losses, which in turn causes even less money to exist, which in the downward spiral the banks have irresponsibly and wantonly manufactured utterly wrecks prosperity for us all across the Globe.

In a moral banking environment things like subprime mortgages wouldn’t exist. I mean, what on earth can be the justification for taking monstrous advantage of the of the poorer and least able members of society struggling at the bottom of the heap. Why should they be conned out of what little money they have and effectively have their very homes stolen from them by rapacious, dishonest banks; deliberately milking them with quite extortionate mortgage terms which are unreasonable, unfair and known by the bankers to be almost impossible to comply with without borrowers losing vast sums of money and even becoming homeless as they are evicted from their homes at the drop of a hat by ruthless, merciless mortgage lenders.

How could this possibly have been allowed to happen. Can anyone tell me ?

The whole of the really interesting research paper by authors Harold L. Bunce, Debbie Gruenstein, Christopher E. Herbert, and Randall M. Scheessele can be seen on the USA Policy Development and Research Information Service website here:

Subprime Foreclosures: The Smoking Gun of Predatory Lending

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