4 ms·

Why can't the government just regulate the parameters of lending? Isn't that sufficient? Why does the government have to actually get into the business to help

• Litmus2336 7y ago
  Because, theoretically, these companies would not be profitable if their interest rates were regulated, and therefore nobody would offer loans. But I don't have statistics on default rate or anything of that sort.
  • streblo 7y ago
    These companies wouldn't be profitable, but other companies that are founded post-regulation could be. Companies have a remarkable ability to mold their business models around regulation.
    • rohit2412 7y ago
      It will be ugly, just like the venezuelan government setting prices of food items led to farmers abandoning agriculture.
    • sem000 7y ago
      There is regulation in many states. The problem is the default rate. Example: An investor issues loans for $100k at $1k each. He charges the legal 30% interest to make $30k profit / return on his money. However, 30-40% of the borrowers default and these are unsecured loans. He makes 0% return. He stops offering these loans and now these people don’t have the access to these credit facilities.