Las Vegas Sun

November 23, 2014

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letter to the editor:

Let banks enforce lending standards

The Saturday Heard Elsewhere column “Subprime auto loans on road to ruin,” from the Sacramento Bee, criticized the financial industry for offering subprime auto loans. The column, however, offered no solutions about how to serve the customers who take out these loans.

The subprime mortgage fiasco started with a Justice Department lawsuit in 1989 charging Fleet Financial of Boston with racial discrimination. Fleet was simply maintaining lending standards, and unfortunately, fewer minorities qualified for loans. The subprime market grew out of the need for banks to serve less-than-qualified customers or face Justice Department lawsuits.

The subprime auto loan market is an extension of this policy. These loans are higher risk because of the borrowers’ lower income and credit scores; therefore, higher interest rates are charged.

If the Bee wants the subprime market limited or eliminated altogether, it should petition the Justice Department to stop suing banks when they try to maintain lending standards.

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