Truth in Lending:

Updated 14 October 2009

If all Mortgage, bank loan and credit card agreements had truthful warning labels they would read as follows.

“Warning!  The entity lending you this money may potentially lend so much of its product to so many borrowers that the inability of many to pay back their loans could trigger events that would cause you to lose your job or business income and become unable to pay this debt.”

Well they didn’t, of course, so where might the responsibility lie for those who now are unable to pay their mortgage or credit card debt because their job or business income has diminished or vanished due to the reckless lending of their creditors?

(The lenders product, of course, is not THEIR money; it’s the funds of savers, investors and bond holders. The defaults cause distress on both sides of the equation; lost earning ability for the producers and defaulted yields for the investor/savers.)

The two driving forces behind the lending policies that caused this debacle were the desire for more business and the ability to earn money on loan origination fees and then pass on the risk to others.

In ‘Atlas’ Francisco says:” Some day my friend you will learn that words have exact meanings.” Corollary: Actions have exact words to properly describe them

There is always talk of debt bubbles and credit bubbles but what transpired was actually a lending bubble. Giving credit is the act of lending money for profit. The definitive action that caused the economic debacle was lending entities investing more funds into the credit market than the quantitative economy could service. This was exacerbated by so much of the lending being given for consumptive activities in relation to that which was lent to facilitate production.

A normal economy sees lending investors getting their returns on income and the gross available capital for lending is consistently being replenished. When substantial lending capital is defaulted on, then the economy contracts and businesses earn less and jobs are lost.

Today, at http://www.globalresearch.ca/PrintArticle.php?articleId=15657        an article by Mike Whitney said in part:

<<<”Consumer credit is falling fast. In July, consumer credit plunged by $19 billion, followed by an August drop of $12 billion, a 5.8 percent annual rate. Credit card spending decreased by nearly $10 billion in August, while non-revolving debt, including auto loans, fell by $2 billion. Credit has shrunk for 7 consecutive months, the longest period of decline since 1991. The banks have shrugged off their commitment under the TARP program to increase lending to consumers and businesses. They’ve either deposited their excess reserves with the Fed, where they earn interest,or invested them in the equities markets for better returns.The bottom line: Credit is shrinking and the economy is slipping further into deflation.”>>>>

Any lender who has lent to unworthy borrowers, having debtors whose incomes have diminished due to events resulting from those reckless lending practices. has contributed to the debtor’s loss of income. It therefore follows that, if those debtors had been fully able to service there debt before their earnings suffered from their creditor’s actions, then those creditors could logically be required to reduce or eliminate the debt.

If, say, twenty million people, suffered an average loss of $50,000 dollars, there could then be a one trillion dollar class action lawsuit!