The Greek crisis got me thinking along these lines again, about yet another one of those huge cultural shifts that has occurred in my lifetime and that a great number of people will frantically insist has never been any other way.
This one is back in the “old” days — say pre-2005 or so — if a bank made a bad loan, nearly all of the responsibility for taking such an ill-advised risk rested on the creditor — that is, the entity making the loan.
Since ~2005 however, the responsibility both actuarially and just as important morally has been shifted in the common discourse to the person or entity receiving the loan.
This is a huge shift, symptomatic of the now utterly dominant neoliberal mindset and benefiting no one but a very few rich and large institutions.
In other words, if TBTF, Inc. made a loan to Rianne in 1990 and Rianne could not pay back her loan, the question would have been, “Why would the bank have been so stupid to have loaned $500,000 to a waitress making $8,000 a year?”
Now this has shifted almost completely to, “Rianne is an evil scoundrel for taking a loan out from a bank with terms she didn’t understand, marketed at her ceaselessy, meanwhile she was assured that she’d later be able to refinance — and oh yeah the loan officer lied to her, changed her application without her knowledge to be fraudulent, and also signed her name for her after she had doubts. Obviously Rianne is the evildoer in this scenario!” says the neolib apologist.
The same with Greece. It’s all the Greeks’ fault, despite the fact that the EU and Germany knew that the loans given were extremely unlikely to be repaid.
I don’t intend to delve into the details here. Debate them elsewhere. The point is that the responsibility for making a bad loan used to lie 90% with the creditor. Now that has irrationally shifted to the receiver of the loan.
A huge shift that nearly everyone now takes for granted and many insist has never been any different. Very strange.
I think the previous status quo was a little more nuanced and people took into account both the circumstances of the person(s) getting the loans and those giving them. People would blame the bank in the example you gave while they might blame the person getting the loan in different circumstances, say the bank lent Leannethe businesswoman 500,000 for her business but she spent it all on a new house and cocaine.
Now, it’s anything goes on the part of the lenders who must be paid back no matter how stupid or reckless the loan was.
Also wasn’t around 2005 or so when bankruptcy laws were changed so that debts followed the person(s) declaring bankruptcy? I remember a lot of extremely self-righteous rhetoric from libertarians about how individuals should never be allowed to write off debts.
Agreed, I wasn’t being nuanced but the discourse has completely shifted to absolve the creditor of all blame.
Yeah, it was right before the financial crisis that the bankruptcy laws were made more severe, likely making it somewhat worse than it had to be.
I also remember libertarians crowing about it being wrong that an individual should ever be able to write off debts, even though businesses do it all the time. And businesses also refuse to pay debts all the time. Company I once worked for, Berkshire Hathaway basically stole $100 million from the company by refusing to pay it back to us due to an ambiguously-worded contract.
Imagine if an individual did that? They’d go to jail.
While here, it seems that IMF style austerity is the newest version of communism : an unworkable economic ideology whose repeated failures to live up to its stated goals are always explained in terms of not being applied thoroughly enough or with insufficient rigor while those in its grip are called upon to make ever greater sacrifices for a golden tomorrow that never manages to arrive.
Portugal in a sense is the antoi-Greece for all the good that’s done. It has done everything required of it and on paper is a success story while at ground level it’s economy remains in the crapper with no short or long term prospects for improvement.
I don’t know about a shift. My sister was 16 and a very recent immigrant when she got entrapped into a credit line on which she obviously defaulted. She was underage and did not even speak the language in which the paperwork was drafted. But it never occurred to anybody that the responsibility for the debt was anybody’s but hers, and she had to spend years restoring her credit.
This took place in 1998. I don’t have any earlier stories because I wasn’t on the continent but the ones I have from the late 1990s all show that nobody even considered freeing a debtor from a debt because the lender was irresponsible or dishonest.
How could she do this as a minor without signing some kind of contract and how could she sign a contract as a minor?
I was wondering about that too. My uncle signed up for some loan like this when he was 16 and the moment it was discovered that he was a minor when signed, it was automatically invalidated.
Not sure if that is a state by state thing or what — this happened in Florida.