Starting at the Top

Joseph Breeden

As far back as 2005, there were storm clouds gathering over the financial services industry. Some of the more experienced managers were shaking their heads and a few of the models were heading into the red. And yet newspaper headlines still proclaimed that this was the golden age of consumer lending.

The incongruity between these two views is a clear statement of why retail lending analytics must change.


Economies go through cycles, as do many things in human experience. Every winter we are reminded just how cold it can feel, but we are somewhat prepared; the winter clothes come out of storage and the house is made ready for winter.

With economic cycles the time span is longer, often five to ten years, so we humans forget. During the intervening years, we become so focused on current needs that we forget to prepare for the winters that will come again.

Worse yet, economic downturns can come from many different sources. Winter has the same cause every time, as our part of the Earth tilts away from the Sun and the days become shorter. With economic downturns, we have triggers from over-investment in new technology, over-building in commercial real estate,

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