By Wes Ball. Wes is a strategic innovation consultant and author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success (Westlyn Publishing, 2008) and writes for Leadership turn every Tuesday. See all his posts here. Wes can be reached at www.ballgroup.com.
Is there really a lending problem? I know several people who doubt it.
One is a local car dealer. He was almost dazed as he related a story to me about selling a used car to a woman who had a bankruptcy five years ago. He sold her a nice car for $27,000. She did not have the first payment she needed to make the deal. Three banks (Bank of America, Citizens Bank, and one other I can’t recall) all offered her a loan for $32,000. That’s on a car that would only give her $22,000 on trade-in, if she sold it back one week after consummating the deal.
I also know another young couple who just purchased a $19,000 van. They had no problem getting a loan despite the fact that they have very low income. The rate was 18.5% – about three times what should be available. When an older and wiser friend challenged them that they could not afford the payments needed, they said, “Well, they must know what they are doing. They offered the loan to us.” The friend helped them sell the car, pay off the debt they still owed on the van, and get them into something they could afford.
So what’s wrong with these scenarios?
In the first case, at least one of those banks is in the midst of getting a getting an infusion of taxpayer cash from the U.S. Department of the Treasury, because they lost so much money on poor-quality loans. In the second case, the justification for making a really bad decision was that the blame was really on someone else. Worse yet, someone helped them get out from under the burden, but it is obvious from talking to them that they really don’t understand what was wrong with their decision.
We’ve just gone through the scariest financial event in my lifetime, but we aren’t through the consequences of banks, mortgage companies, investment companies, investors, consumers, and the U.S. government all thinking they can get away with making really stupid financial decisions because the blame can be cast upon someone else. It’s like watching three year olds pointing fingers at each other and expecting mom to “buy” it.
What is it going to take for us to finally understand that it doesn’t work to either expect someone else to make things right for us when things go bad or to do things that enable those persons making bad decisions to go on making bad decisions?
Isn’t it time that we let people take responsibility for their decisions?
If people want to have the freedom to make decisions for themselves, shouldn’t they also be required to take the consequences of those decisions?
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