A Proposed Rule That Could Cause Another Mortgage Crisis
Every small business owner takes on risk when it extends credit to a client or customer, through either performing services or providing goods with the expectation of future payment. Small businesses have to first vet a client or customer and then get to know that customer to build the trust needed to leverage against risk.
There should be no reason why a reputable lender should not be able to take on at least a minimal portion of the risk of lending to people in its community. These are people and other small businesses that the bank knows. Add anonymity by allowing all risk to be sold to third parties with no ear to the ground in the community, and the result is both sides of the bargain lose trust and care less about the relationship, thereby increasing the potential for default by either side.