Question about the mortgage crisis and bank lending practices?
I keep hearing that banks are responding to the mortgage mess they helped create with “loose lending” by tightening up credit standards to the point where you practically have to be Warren Buffet to qualify for a loan these days… First of all, is this true?
And secondly, if indeed the pendulum has swung to the opposite extreme, isn’t this yet ANOTHER example of self-defeating behavior on the part of the banks? Seems to me that NEITHER extreme (loose lending standards vs. overly strict lending standards) is terribly sustainable or healthy; and is in fact producing an artificial barrier to eventual recovery in the housing sector. Am I wrong? Why are the banks acting this way, and what can be done to convince them to let the pendulum come back to a happy middle ground?