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What incentive does bank have to actually do due diligence, when the loans are all guaranteed by government?
by stri8ed 6y ago
What incentive does bank have to actually do due diligence, when the loans are all guaranteed by government?
- deleted 6y ago[deleted]
- _curious_ 6y agoBecause they are giving the corporate handouts to customers who are at the greatest risk of defaulting on loans to their own bank - that's their incentive.
- MiroF 6y agoI don't follow, this seems like even less of an incentive to do due diligence.
- kingaillas 6y agoAgain, since the loans are guaranteed by the government, what risk are the banks taking, exactly?
- agilebyte 6y agoThe loans are guaranteed but you can still pay $ sanctions for not doing the work right. From Matt Levine: > Big banks that paid billions of dollars in sanctions after the 2008 financial crisis for flaws or omissions in loan applications -- in that case, mortgages -- assumed paperwork submitted to the SBA would need to meet high standards, or they would risk getting in trouble again. Wells Fargo has been under particular pressure to show that it overhauled its internal controls. Now that wasn't in the end the case as: > Some were floored when the SBA posted a notice on its website on Tuesday, confirming that’s necessary but saying that “lenders who did not understand that these steps are required” didn’t need to withdraw applications already submitted. That essentially gave an edge to lenders that had skipped that time-intensive step to get their customers’ applications in first. But that was (some of the) banks' view.