The government has changed the responsible lending laws. Does that mean more irresponsible lending at taxpayer's expense?
Do you remember the last time the world was going to end and governments scrambled to save us?
The 2008 Global Financial Crisis ushered in the era of irresponsible government, perpetual deficits and reckless spending. It gave us the pink batts and school hall rorts and a revolving door of Prime Ministers.
The effective cause of the GFC was irresponsible home loans by US banks to the unemployed and the unemployable under the guise of ‘fairness and equity’.
These sub-prime mortgages were packaged up and on sold to investors. When they collapsed, many institutional investors, like the investment banks, were then bailed out by taxpayers.
The failures of the credit system prompted our then PM Kevin Rudd to introduce responsible lending laws. These were principally targeted to protect consumers from themselves, forcing the banks to take all the responsibility for their clients ability to repay their borrowings.
If they didn’t, the banks could be help liable for the borrowers default.
Naturally this led to a slowdown in credit approval while the bank assessed how many latte’s and smashed avocado breakfasts you consumed each month.
The government has now abandoned the Rudd era responsible lending laws in a bid to inject a shot of credit adrenaline into our economy.
Now I am for more deregulation and don’t have a problem with what the government is doing…as long as the two parties to the transaction are the only one’s held responsible for any negative outcomes.
If banks lend irresponsibly then they (and their shareholders), not taxpayers, need to pick up the tab.
If borrowers can’t pay their credit accounts then don’t whine about how the banks shouldn’t have lent you the money in the first place. If you lie on your loan application, there is no-one to blame anyone except yourself.
The credit victim mentality has to stop.
There is enough information freely available about the dangers of excessive credit that there can be no excuse for individual ignorance.
The time has come to finally make a principled decision. If you want less regulation and more freedom, there also needs to be more responsibility.
That goes for consumers and businesses alike.