Banking Group Doesn’t Think It’s Fair That Banks Who Gave Bad Loans Get Special Treatment

The American Bankers Association is upset by a move in Congress to restructure bankruptcy laws so that lender like Citigroup who are suffering the consequences of their decisions to make bad loans can stay afloat.

WASHINGTON (Reuters) – A top bank industry group said on Friday that it opposes an agreement between financial giant Citigroup Inc and Democratic senators that would rewrite U.S. bankruptcy law to help troubled mortgage borrowers avoid foreclosure.
The American Bankers Association said in a statement that it did not participate in Citigroup’s agreement with lawmakers and has consistently opposed giving bankruptcy judges broad authority to unilaterally modify mortgage terms.
“ABA is opposed to the agreement because it will leave in place overly broad mortgage cram-down authority and other provisions that will harm thousands of banks across the country that have made, and continue to make, good loans,” said Floyd Stoner, ABA’s executive director for public policy.

This makes sense for a lot of reasons. Free market economies like ours thrive on competition. Businesses that aren’t efficient, that aren’t profitable and creating wealth for everyone else, go under. Those that are efficient, and that do create profit and wealth, thrive. But with the government protecting businesses that aren’t succeeding from failure, at the expense of taxes paid by businesses that are succeeding (not to mention the public at large), our economy no longer thrives.
Often people bemoan the rise of mega-corporations in this country, but I think few of the people doing the complaining realize how much big-government policies play a part if creating these monolithic companies. Think about it. If we let Citigroup fail, would smaller banks not benefit from taking over that company’s market share?
They would. But it seems as though our political leaders are sold on this idea that some companies are “too big to fail.”