What Part Did Leadership Play In The Bubble Of Secured Loans?

A contentious issue of late during the sub prime loan crisis is whether the leadership at lending firms such as secured loan specialist Royal Bank of Scotland, have directly or indirectly lead to the ridiculous bubble in the secured loan credit market.

To just quickly fill readers in – secured loans are those taken out by customers who also offer collateral to the bank. Collateral is something that they own, such as a house, that the bank is able to take ownership of if the person receiving the secured loan defaults on their payments.

This made banks become greedy, because they were in a win win situation. Due to rising house prices – banks could ALWAYS claim their money back through the sale of the property. Due to this greed, banks began offering secured loans with incredibly attractive short term rates, to borrowers who simply couldn’t afford the repayments. But of course, banks didn’t care whether owners could pay or not.

This is a disgraceful failure on the part of managers involved, and one has to wonder whether it was in part induced by their leadership style. Autocratic leaders tend to be more self focused and tend to control employees to a higher degree. This suggests that even though it was the fault of the salesman and ‘lowly staff’ selling these secured loans – it was actually the fault of the senior staff in the bank.

Whats your view on the secured loans bubble?

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