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Because it's not right for the banks to lose money on a loan? If someone invests in a taxi medallion, why are they more worthy of aid than someone who invests

by xapata 10y ago

Because it's not right for the banks to lose money on a loan? If someone invests in a taxi medallion, why are they more worthy of aid than someone who invests in a restaurant?

wmf 10y ago
If someone invests in a restaurant that has a government-granted monopoly and then the government rescinds that monopoly they may have cause for complaint. Or maybe they should have just priced in the risk of a disruptive black swan event.
- bermanoid 10y ago
  Betting on a government-granted monopoly is still a bet. Just as if I bought stock in a company that thrives because it has a patent that may or may not be overturned on appeal, or a monopoly that might be smashed due to an anti-trust action. Investments often result in money lost, that's life - as someone that's been in the market for decades now, yes, I do think it's on you to be aware that black swan bubbles exist, and you'll get wiped out if you're all-in on one when it pops. If you can't handle the risk of your investment going to zero, hold low-yield bonds, cash, or gold.
- chillacy 10y ago
  I think all investments should have risk, and if the government bails people out then there's all upside and no downside, why wouldn't banks exploit that financially to the extreme? I think it might be desirable to take out insurance on the asset though as a buyer. It could be an interesting market too.
throwaw181ay 10y ago
Banks hardly lose money on loans, they have an infinite capacity to go after delinquents. Try to default on your loan and see what happens to you. You'll be a slave of the bank for the rest of your life. Of course, individuals bear no such power. So please don't use banks as an example.
- the_watcher 10y ago
  > Try to default on your loan and see what happens to you. You'll be a slave of the bank for the rest of your life. Bankruptcy exists almost entirely to offer protection against this exact scenario playing out.
  - Johnny555 10y ago
    As long as the debt in question is not a student loan, which usually survive the bankruptcy.
    - pmiller2 10y ago
      "Usually" is quite correct. You basically have to prove there would be no hope of being able to pay it back without severe financial hardship, and the bar for hardship is fairly high. Even when some student debt is discharged in bankruptcy, it's often a partial discharge.
- xapata 10y ago
  On the contrary, banks have departments dedicated to estimating the amount they will lose from bad loans. It's expected.

by xapata 10y ago

Because it's not right for the banks to lose money on a loan? If someone invests in a taxi medallion, why are they more worthy of aid than someone who invests in a restaurant?

wmf 10y ago

If someone invests in a restaurant that has a government-granted monopoly and then the government rescinds that monopoly they may have cause for complaint. Or maybe they should have just priced in the risk of a disruptive black swan event.

bermanoid 10y ago
Betting on a government-granted monopoly is still a bet. Just as if I bought stock in a company that thrives because it has a patent that may or may not be overturned on appeal, or a monopoly that might be smashed due to an anti-trust action. Investments often result in money lost, that's life - as someone that's been in the market for decades now, yes, I do think it's on you to be aware that black swan bubbles exist, and you'll get wiped out if you're all-in on one when it pops. If you can't handle the risk of your investment going to zero, hold low-yield bonds, cash, or gold.
chillacy 10y ago
I think all investments should have risk, and if the government bails people out then there's all upside and no downside, why wouldn't banks exploit that financially to the extreme? I think it might be desirable to take out insurance on the asset though as a buyer. It could be an interesting market too.

throwaw181ay 10y ago

Banks hardly lose money on loans, they have an infinite capacity to go after delinquents. Try to default on your loan and see what happens to you. You'll be a slave of the bank for the rest of your life. Of course, individuals bear no such power. So please don't use banks as an example.

the_watcher 10y ago
> Try to default on your loan and see what happens to you. You'll be a slave of the bank for the rest of your life. Bankruptcy exists almost entirely to offer protection against this exact scenario playing out.
- Johnny555 10y ago
  As long as the debt in question is not a student loan, which usually survive the bankruptcy.
  - pmiller2 10y ago
    "Usually" is quite correct. You basically have to prove there would be no hope of being able to pay it back without severe financial hardship, and the bar for hardship is fairly high. Even when some student debt is discharged in bankruptcy, it's often a partial discharge.
xapata 10y ago
On the contrary, banks have departments dedicated to estimating the amount they will lose from bad loans. It's expected.