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| The Loan Department / Кредитный отдел |
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| Read
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You are a director in the Loan Department of the First National Bank in Iowa (assets: $ 1 billion). Now the country is in the midst of economic recession and interest rate are high, but the number of loan applicants is increasing each month. It is your responsibility to decide which of the applicants are good risks and which are not.
Consider:
1. The main purpose of the bank is to make money, but it does try to maintain the image of a responsible community member.
2. The borrower must pay at least 10% of the principal a year. Standard interest rates are 12.5% per year.
3. You can loan part or all of the loan request.
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| Decide and Write
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Loan Applicant 1: Susan and John Jacobs, ages 47 and 48
The Jacobs are hard-working farmers who grow soybeans and cotton. Each year for over 10 years they have borrowed around $ 500,000 to plant their crops and then have repaid the bank at harvest time. Last year, because of a terrible drought, they lost all of their crops and were unable to repay their loan. As a result, they already owe the bank $ 600,000 and they want to borrow $ 750,000 more.
Advantages of providing loan:
________________________________
Risks of providing loan:
________________________________
Conclusion:
________________________________
Loan Applicant 2: Pi-Leng and Jimmy Chan, ages 53 and 55
The Chans have just immigrated to the US from Hong Kong. They have no credit record in the US, but they were successful restaurant owners in Hong Kong. Neither of them presently has a job. They have deposited $ 40,000 of their savings at your bank. They would like to borrow $ 50,000 to open a new Chinese restaurant in town.
Advantages of providing loan:
________________________________
Risks of providing loan:
________________________________
Conclusion:
________________________________
Loan Applicant 3: Walter Gordon, age 30
Mr. Gordon has been employed in various positions, but at present he is unemployed and on welfare. As a result of his chronic alcoholism, he has a liver illness that necessitates removing the organ. The operation will cost $12,000, but Mr. Gordon has no funds or insurance to cover the cost. Doctors have given him only six month to live if he does not have the operation.
Advantages of providing loan:
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Risks of providing loan:
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Conclusion:
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Loan Applicant 4: David Max, age 16
Mr. Max, a high school student, has a reputation as a mathematical genius, having won awards throughout the nation. He also has been an amateur inventor and has recently developed a solar-powered car! His invention has been tested by experts, who think it is workable. Max is applying for a $15,000 loan to build two prototypes of the car.
Advantages of providing loan:
________________________________
Risks of providing loan:
________________________________
Conclusion:
________________________________
Loan Applicant 5: Peter and Roberta Hayes, ages 41 and 39
The Hayes have one child. Since their marriage 16 years ago, they have been saving their money for a down payment on a house. During that time they have lived in a trailer and three different apartments. Recently, Peter was promoted to become assistant manager of the grocery store in which he works ($ 17,000 a year salary), and Roberta is an Registered Nurse at the local hospital ($ 22,000 a year salary). They want to borrow $ 60,000 for a $ 75,000 house ($ 15,000 down payment).
Advantages of providing loan:
________________________________
Risks of providing loan:
________________________________
Conclusion:
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Loan Applicant 6: John Harris, age 19
Mr. Harriss’s father is dead, and his mother works full time as a waitress to support the other five children in the family. Mr. Harris himself worked part time throughout high school to help his mother. Now he is requesting a $ 20,000 loan to finance his four years of undergraduate school.
Advantages of providing loan:
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Risks of providing loan:
________________________________
Conclusion:
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Loan Applicant 7: Jason Anders, age 45
Mr. Anders is a multi-millionaire real-estate developer in your area who has had numerous successful loans with your bank. At present he has two outstanding loans from the bank in the sum of $890,000. He has an excellent credit record and now wants to borrow $600,000 more to help finance his new shopping center.
Advantages of providing loan:
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Risks of providing loan:
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Conclusion:
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| Extend
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1. In general, what is your opinion of banks—trustworthy or not? helpful to
the community or not? necessary?
2. In some Arab countries, it is against the law for a bank to charge interest (or
for a customer to receive interest). What do you think of this system?
3. It seems as if cash is slowly being replaced by credit cards and computer
transactions. Will cash ever become obsolete?
4. Do you think that banks in developed countries should lend money to Third
World nations already deeply in debt?
5. At this moment, you probably have money in a bank. Why? How did you
choose your bank?
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