Due Diligence

Just got a note from my broker on the Greek situation. While the note was intended to damp down the (so-far, mild) market hysteria over default, the content was borderline moronic, repeating all the stupid cliches I have railed against here. (It's all about socialism, blah, blah, blah).

Whatever happened to the idea that bankers ought to exercise due diligence before loaning out the money entrusted to them? I'm pretty sure my local banks do some checks before they loan somebody $20 k to buy a car. So how the heck do banks get off the hook for lending out tens of billions to a country (or Commonwealth, or City) that rather transparently is quite likely to have difficulty paying up? Well, says Commentator hist, the politicians told everybody it would be OK. Cause politicians are famous not only for probity but prophecy, I guess. They do know you can't repossess a country (city or Commonwealth) right?

It's a story as old as Sumer (at least). When times get good everybody gets greedy, and every foolish borrower can find an equally foolish lender. In ancient Sumer, lenders who got stiffed were allowed to enslave the unlucky borrowers. Germans seem to really hate the fact that that went out of fashion, but it turned out to be rather catastrophic for Sumer too. In bad times, the broke farmers grabbed their herds and set out across the desert, and then it was the bankers who were broke.


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