what is predatory lending and what should be done about it?
Revisiting the propaganda piece I got in the mail, did predatory lenders bring us to foreclosure, only to be bailed out? The answer to the first question is buried in the answer to the second. So-called predatory lending practices cannot bring the market to foreclosure. Economically, this is specious, nearing idiotic, political rhetoric. If a bank preys on people who cannot pay by, for instance, originating loans to them at higher-than-reasonable rates or with unfavorable terms, only one of two outcomes is possible. One, those people will pay that interest, making the bank a healthy profit. Two, those people will not be able to pay and the bank will lose money. In the case of outcome one, other banks will seek to woo those customers to them, and (you guessed it) competition will drive the loan rates, and the related components of the loan packages in a direction that benefits the people seeking the loans. In the case of outcome two, the bank will eventually have to modify its practices
