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View Diary: Closely-Watched Court Decision Breaks Bad for Wall St. Has A Day of Reckoning Arrived? (154 comments)

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  •  Risk-Recourse Loans (14+ / 0-)

    Gotta love the Golden Rule, eh?  Banks own the gold, thus, they get to make the rules.  

    For instance, recourse loans:

    Recourse loans get their name from the fact that lenders have power. They are allowed to go after you for amounts that you owe - even after they’ve taken collateral. If you default on a recourse loan, the lender can bring legal cases against you, garnish your wages, levy bank accounts, and try to collect the amount you owe.
    So where is the risk for the banks?  Where are the consequences for their business decisions.  

    This may be the way the game is played, but that doesn't make it right and not something we should just accept.

    Poor man wants to be rich. Rich man wants to king. And the king ain't satisifed until he rules everything. B.Springsteen

    by howd on Wed Feb 06, 2013 at 07:23:44 AM PST

    [ Parent ]

    •  No risk for banks (12+ / 0-)

      My bank kept themselves above the sub-prime market. They were proud of that. A friend of mine who worked in the bank told me a story in 2009: some younger MBA guys (including this friend) from the commercial side went into the execs and pitched them to run an 'agency' operation--instead of only accepting the 'quality' loan apps, offer loans to everyone, skim off the 'quality' loans for the bank to underwrite, while giving the young-gun team the crap to act as agents for Countrywide and Wells. The execs agreed, gave them a little office across the street, some phones, a few computers, and let them run.
      In one year during their operation, the profits for acting as sub-prime agents was fully half the bank's net earnings. It was a goldmine, and best of all (my friend explained to me with a huge smile) the bank held no risk; all the risk was sold by Countrywide and Wells down the pipe as bundled investments.
      It's a weird world we live in.

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