Thursday, 17 June 2010

Did political correctness cause the latest economic crisis?

The recent economic collapse has produced several theories as to its cause. I have listened to several BBC debates on Newsnight where speculation abounds on this issue and sometimes more besides. Some say the cause of the current economic crisis was caused by greed; the less attractive side of our human nature.

By this I assume that the inference is that greedy capitalists have bitten off rather more than they can chew by lending to those who did not have the ability to repay on debts incurred. This is the landscape of mortgage lending in America or, Sub Prime, as they say over there in the States.

As we all know the Sub Prime market collapsed last year. Those responsible were a collection of culprits; individuals, lenders and/or financial institutions. Or were they?

What I did not know is that in America lenders had a quota of Sub Prime that had to be sold to ethnic minorities. And, if lenders failed to lend an appropriate quota of funds then the financier or Sub Prime lender would be fined. In other words financiers were forced to lend money to those who might not have the funds available to repay on a loan.

So, or so it would appear, money was lent according to politically correct doctrine; not according to sound financial common sense which ought to be more concerned with the ability and likelihood to repay on loans received.

Can it be true? Is my information correct? Did political correctness cause the latest economic crisis?

If this synopsis is without foundation in fact or truth please convince me otherwise and I will join you in condemning the greedy capitalists.

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