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Is the Treasurer destroying the village to save it?

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No-one likes regulation.

Well, except when it keeps the rivers and streams clean.

But no-one likes financial regulation.

Well, except when it ensures dodgy financial advisers are sternly — appropriately — dealt with.

Okay, but no-one likes banking regulation.

Well, except when the Royal Commission uncovers such disgraceful behaviour that, frankly, we’ve stopped being shocked.

Okay, but the Treasurer doesn’t like banking regulation…

At least, not the regulation that requires banks to meet ‘responsible lending’ rules, if today’s media reports are right.

According to the Nine/Fairfax news sites today:

“The objective is to replace a philosophy of “lender beware” with a “borrower responsibility” principle to make sure credit is available.”

Oh, and:

“In a win for mortgage brokers, they will no longer be subject to responsible lending obligations…”

Right.

I guess that was what Royal Commissioner Hayne recommended?

Nope.

Commissioner Hayne wrote:

“My conclusions about issues relating to the NCCP Act can be summed up as ‘apply the law as it stands’.”

So who wants these changes?

Well, the Banking Association and the Master Builders were happy.

Oh. I see.

To be fair, the idea of letting credit flow more freely is a worthwhile goal.

As long as the credit goes to the right people.

You know, responsible people.

Who can responsibly meet their obligations.

So, responsible lending rules should be completely appropriate, shouldn’t they?

Apparently not.

Let me leave you with this thought:

Think about the logic here.

The government wants banks to make loans they can’t currently make because they’re obligated to lend responsibly.

In other words, the extra credit will flow to loans that are currently deemed irresponsible.

Let that sink in…

Fool on!

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Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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