Predatory Lending Issue Puts Subprime Lenders in a Bind

By Julavits, Robert | American Banker, April 19, 2000 | Go to article overview
Save to active project

Predatory Lending Issue Puts Subprime Lenders in a Bind


Julavits, Robert, American Banker


Subprime lenders and their lawyers and lobbyists are in an awkward position. They worry that the current uproar over reports of alleged abusive lending practices will lead to onerous legislation. But they also worry that advocating caution will make them look like apologists for exploitative lending.

"Predatory lending is this year's privacy issue," said Larry Platt, a law partner at Kirkpatrick & Lockhart in Washington. "It's the issue that's hard to oppose, and all the federal and state agencies want to be seen as the protectors of the consumers."

Predatory lending has become the focus of three bills in Congress, a joint task force between the Departments of the Treasury and Housing and Urban Development, and numerous investigative articles in the media. Observers like Mr. Platt fear that regulation passed in the current environment will result in bad public policy.

"These are complex issues and it's important that we not create a regulatory posse that wants to hang private enterprise before a well-thought-out review of the issue," he said.

The predatory-lending debate is a classic example of the collision between public and private goals. Few would disagree that homeownership should be available to every American, but lenders say that their attempts to realize that goal while still delivering profits to their shareholders can hurt their public image.

While bringing capital to people who cannot get it represents a public good, banks and lending institutions, as businesses, must be allowed to price for risk, said David O. Beim, a professor at Columbia Business School.

Mr. Beim said mortgage lending represents a "morally ambiguous" area where government and private enterprise have come together for similar yet disparate goals.

"It's hard to distinguish between the bank that lends to foreclose and the bank that is simply trying to make more credit available under the Community Reinvestment Act," Mr. Beim said.

"Can government on one hand force banks to lend to riskier borrowers but then say they can't do it in predatory ways? Are Junk Bonds predatory?

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Predatory Lending Issue Puts Subprime Lenders in a Bind
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?