Thursday, June 14, 2007

Subprime mortgages in America

Subprime mortgages are mortgages given to borrowers of lower credit standings during the boom days of the property market in America. Due to the downturn in property values, many of these borrowers have defaulted. They also have to suffer large financial losses.

There is a debate in America about the role of the regulator (ie the FED or Federal Reserve Board).

Some of the issues being debated are: should the FED have stepped in earlier to ban these mortgages as the borrowers were not aware about the implications of a rise in interest rate? Were there adequate consumer protection?

I find the debate to be important as it has to balance between:

* the need for free markets
* the need for consumer protection

I hope that these issues will lead to a proper balance between these two requirements. It will be relevant to Singapore.

No comments:

Blog Archive