Now where are the incentives

Reader comment on: Wait for the Faces of 'Victims'

Submitted by ben (United States), Apr 19, 2010 13:43

The incentives currently in the marketplace are also perverse. Banks don't want to take losses on their loans which they would have to report, so they refuse to reduce the principal on loans. People continue to accrue interest on their debts which they will not be able to repay, often at usurious rates. At some point, people walk away or get foreclosed on leaving the bank with a property it doesn't want and is worth far less than the loan. The bank ends up worse off than if had reset the loans at a lower rate and for less principal. Once again, short term thinking is making a mess larger than it should be (see: avoiding entitlement reform).

Note: Comments are moderated by the editor and are subject to editing.

Other reader comments on this item

Comment on this item