Fed to curb shady home-lending practices by Radka Konkolova

Unites States are facing the worst crisis since a very long time. I think the situation has become desperate during the last year. So government and FED have already started with doing some restrictions and other steps that should help the ill US economy.

Very important for citizens and politicians is to solve the problems with housing, what is one of the reasons which have led to the crisis. FED is prepared to disclose their much-awaited rules which should stabilize very shaky US financial system. I think these troubles are because of American banks behaviour. They haven't got such strict requests as European banks. So it is relatively very often that they haven't got straight and personal contact with all of their clients and loans and mortgages can be interposed by external bank employees. And this is very dangerous, because almost every American has got money borrowed from some state institution, but not all of them are able to repay it. In my opinion is such an approach of banks very irresponsible. Bank should at first check its client before lending him money. It is important to know whether client is able to repay the loan, whether he has some property and stable income. And when bank doesn't have to be sure in all of these, there will be many people who will want to take advantage of the “blind confidence” of given bank and its clerks. So many people are used not to pay installments because of very low or not stable income or because they are not reliable nor responsible. Maybe they think nothing will happen when not pay it. But banks are still able to take lenders' property away and purchase it for lower price. This is very unpleasant, I think. Very favourite thing recently is personal bankruptcy. Many Americans preferred to make the possibility of their own bankruptcy till the more strict regulations in 2005. But for almost three fifth of Americans it is still advantageous. For people who aren't able to pay because of low or none income the solution is to sell their property by bank and so they will repay a part of their liability and the second part will be canceled. People who have got stable income have to pay such amount which would cover part of their debts so they can keep their property.

Another reason why people recently have asked for much money from banks and similar institutions during the last season, is the fact that it has been advantageous for them because of low interest rates. They have been motivated to borrow and spend money to buy new house, flat, car or spending them for an exotic holiday. Because fees haven't been at high level. And this has helped to activate the wave of strong inflation, because there has been still more and more money in the circulation.

So thanks to this crisis banks observed great losses and some of them are even of the brink of the bankruptcy. So is 85 years old bank named Bear Stearns. I am quite curious about the new rules prepared by FED and how they will help get over this slump.

related story: http://news.yahoo.com/s/ap/20080708/ap_on_go_ot/fed_credit_crisis;_ylt=AtNEgN6Mccw7Gh7pG.bLArys0NUE

by Radka Konkolova for PocketNews (http://pocketnews.tv)

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posted by Lucia Adamova