Credit crunch stuff

You'll be seeing the phrase "credit crunch" where ever you look for months to come. It's a phrase carefully coined to make a sudden infusion of common sense in lending look like a bad thing.

The crunch just means lenders are going to stop handing out credit to people who haven't demonstrated that they can handle it. Call it a "crunch" if you want, but it's the way the lending business should have been run all along.

It used to be, until activists stepped in and convinced the government to intervene, forcing lenders to extend credit more broadly.

This is analogous to the biofuel mess Mark Steyn writes about (and linked to by Tom Blumer of BizzyBlog). Environmentalists pressured government to require more use of biofuels, which is backfiring in a big way.

Ditto lending. When you require lenders to engage in subprime lending, don't be surprised when the whole thing backfires. Here's Caroline Baum with more on this.

Comments

[Bob from Online Debt Collection Review]

Yep - It would appear that the lending pendulum is swinging to the other extreme. But as Jeff notes in his article, credit lending should be based on the ability to pay it back anyway. Lending a bunch of money to people who don't have the means to pay it back was a terrible idea from the start, and today's conditions are illustrating why.

[Richard Nikoley]

Jeff:

Thought you might be interested in Provanta's new website, which we've essentially turned into a blog.

www.provanta.com