US almost foisted subprime-esque loans on Iraq?
I’ve been reading the report that was leaked to ProPublica and the New York Times a few weeks ago entitled, Hard Lessons: The Iraq Reconstruction Experience (pdf). I noticed this today:
With these orders, McPherson had tried to effect two major economic changes simultaneously: modernize the banking system and change the credit system to give more Iraqis access to money for mortgages and capital investments. Under Saddam, Iraqi banks required hard collateral—houses, jewelry, gold, or property—to secure a loan. The CPA wanted the banks to make credit more available to Iraqis—including those who had jobs and cash flow— hoping that access to capital to purchase homes or establish businesses would give them a greater stake in the future of their country.
By the fall of 2007, some Treasury officials, as well as Iraqi bankers, were concerned that the CPA’s drive to make quick loans was jeopardizing the long-term health of the banks. One of Treasury’s senior advisors to the banking sector refused to pressure banks to make risky loans and left. The CPA’s economic office so alienated the Treasury team that many others also left.
McPherson said that not much happened with CPA’s banking reforms because the bank branches continued to require the traditional 100 percent of collateral for loans.
While 100% collateral is ridiculous, I wonder how risky the loans the Coalition Provisional Authority was pressuring Iraqi banks to make were.