The decision to write or reject a loan should lie with the lender, who should carefully consider the qualifications of the borrower. Many smaller community banks have come through the credit and housing crises relatively unscathed due to their more conservative model when writing loans (“Bay State bankers wary of reform plan,” July 8). Unfortunately, even these successful banks are coming under greater scrutiny from banking regulators.
If banks were being fraudulent, then they can and should be prosecuted under existing laws. No new regulations are needed. But most banks were not deliberately fraudulent or misleading — they were acting in good faith and the market simply went wrong, as will happen in any free economic system. To overreact and bind the hands of banks, telling them how and when to lend, is an intrusion into the rights of lenders and borrowers.
How trustworthy has the government itself been with its stewardship of the financial system? The federal government’s role as an instigator of the housing market bubble cannot be overstated; its manipulation of interest rates and promotion of easy credit played a key role in creating the housing boom that now cripples the economy.