This editorial appeared in The (Raleigh) News & Observer.
Earth to banks: A new day has dawned, in case you haven't heard. You're on the hook to taxpayers for billions upon billions of dollars, and the era of business as usual has come to a thunderous end. Part of that business has been the loaning of money, sometimes huge sums, by banks to those who run them either in executive positions or as directors.
While the practice is indeed regulated (those taking loans aren't supposed to be given better terms than other customers and must meet credit-worthy measures), it also is shrouded in secrecy. Banks don't have to explain it to anyone, and terms and individual amounts of loans don't have to be disclosed.
Yes, if the loans are "good" loans, then the banks presumably make money on them. That's sound business. And it figures that if a director had a business deal cooking, he or she might want to throw the loan to a bank with which they were associated.
But this notion that banks don't have to say much about individual loans under those circumstances is at best outdated, if it was ever a good idea in the first place. The banking industry is no longer a free-wheeling thrill ride of American commerce. It's profoundly weakened by failed mortgages and bad investments. Business practices once called "daring" are now called reckless, and the American public is paying the price. Literally.
To read the complete editorial, visit The (Raleigh) News & Observer.
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