I recently viewed the article titled, “Fair Game: You Thought You Had an Equity Line” written by Gretchen Morgenson on April 13, 2008. This article argued through cause and effect that “banks are shutting off credit on good customers” (Morgenson, 2008). This article stated that in the last month, more than a couple hundred thousand letters were sent to customers to advise them that the line of credit they had secured was being frozen. The basic reasoning for this was, to simply state it, that loan-to-value ratios have decreased due to lower property values.
This article implies deceptiveness or lack of trust on the lender’s behalf because the processes that resulted in freezing the lines of credit were not disclosed to customers in the letters they received advising that these lines were frozen. This is implied through a quotation of a Washington Mutual spokeswoman that states, “We have a process in place for customers who wish to appeal a credit line decrease decision” (Morgenson, 2008). This spokeswoman’s quote does not go on to identify any of the processes, for appeal or otherwise.
The implications mentioned above leads to the author’s inferences within the article that “blanket values” are being applied to extended geographic areas (Morgenson, 2008). This inference is supported in the article by the author stating that lines have been frozen in 11 areas that had property value increases during 2007 based on figures from the National Association of Realtors (Morgenson, 2008). The article also illustrates the story of a specific couple who had excellent credit, had never been late, and had an available balance whose line of credit had been frozen.
This article assumes that new appraisals are not being done when determining line closure because it is not disclosed in the letter that customers received. This is a fallacy of ad ignorantium because the author is arguing that he has no proof that new appraisals were done, therefore no new appraisals could have been done to make this determination.
Also, the first statement in the article, “It was the nation’s lending institutions and mortgage originators that got us into this credit mess” (Morgenson, 2008) is a fallacy of assumption. This is an implication of an overgeneralization that lenders were not honest; therefore the credit debacle is these lenders fault. Consumers have a responsibility to educate themselves in any manner necessary before signing into any agreement, especially a financial agreement. Therefore fault cannot be set solely on the lenders for the credit mess that our society is in today.
I felt that this article accurately represented that many lines of credit are being frozen in areas where property values do not warrant the line closure. This article also conveyed its argument that banks are shutting down good customers through the illustration of the couple from California who had never been late, had excellent credit, and had not used any of the line.
One way that this argument could have been presented in a stronger manner would have been to research the numbers further. For example, other than one reference to the National Association of Realtors to show increased property values, this article does not show any research on the numbers of people with excellent credit who had their lines frozen. Also, the only lender that this article received a response from was Washington Mutual and this information sounded like PR beat around the bush talk. So another suggestion would be that further research be done into the lenders that are freezing these lines of credit and their viewpoints on the subject.
Works Cited
Morgenson, Gretchen. “Fair Game: You Thought you had an Equity Line.” New York Times. (2008): 1. Web. 12 Feb. 2012. .