But borrowing is a special case. Because if the responsibility were entirely on the borrower, then it would be advantageous to the bank that you lie on the application. Then they could take all your material possessions as soon as you fail to make a payment and send you to prison to boot. (Which is not far from what happened with the mortgage crisis.)
This is how loan sharking works, and why it is illegal.
If someone issues you a loan that you cannot repay, it is the issuer's loss, it's as simple as that. If the issuer knew you couldn't repay it, it's not just their loss, but they're also committing a crime.
You are either trolling or grossly misinformed about a number of things.
Your belief is that by intentionally misrepresenting yourself to a bank and obtaining a loan you otherwise would not have been able to obtain, that is, willfully and knowingly entering into a contract in bad faith -- you are the victim of a crime. That is ludicrous at its face.
If someone issues you a loan in good faith, and you cannot repay, it is indeed their loss. They have not committed crime however.
In the case of a personal loan if you fail to repay, the bank can go to court and get a judgement against you. With that judgement they might be able to make a claim on such assets as to make themselves whole. They cannot "take all of your material possessions" let alone send you to prison. This is very far from what happened...
In the case of a mortgage, the can foreclose on the property, liquidate it and use the proceeds to make themselves whole. Note that anything collected in excess of the loan must be passed back to the borrower. (This rarely happens, because if the property were worth more than the loan, the borrower would just sell or refinance.) After a foreclosure and sale, if the bank is still not whole, in many states they may not come after the borrower for the balance (this is called "no-recourse") in other states they can ("recourse"). In the industry so called "subprime" loans were often referred to a "home equity", because there was an acknowledgement that these were borrowers were greater risk, but the loan was guaranteed by the value of the home, and as long as home prices did not drop significantly they were of little risk.
It is almost never advantageous for the bank for the not to repay a loan, as the most the bank can do is be made whole by recovery, and almost never is.
If someone issues you a loan in good faith, and you cannot repay, it is indeed their loss. They have not committed crime however.
What I said is that it is a crime if at the time of issuance the lender has reasons to believe you cannot repay the loan. That is a crime, and that is a form of extortion (or loan sharking).
People who misrepresented themselves engaged in fraud. There is no requirement for the bank to assume bad faith on the part of the lender.
If a bank made a loan to someone who could not repay it, they are likely to take a loss. The fraud, where it happened, was when the bank sold this loan. At that point, the idea of 'willful blindness' and 'prudent man' came into play, when banks materially misrepresented the loans they were selling as having been prudently underwritten. But the victim was the buyer of the loan, not the borrower.
But borrowing is a special case. Because if the responsibility were entirely on the borrower, then it would be advantageous to the bank that you lie on the application. Then they could take all your material possessions as soon as you fail to make a payment and send you to prison to boot. (Which is not far from what happened with the mortgage crisis.)
This is how loan sharking works, and why it is illegal.
If someone issues you a loan that you cannot repay, it is the issuer's loss, it's as simple as that. If the issuer knew you couldn't repay it, it's not just their loss, but they're also committing a crime.