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Unlike a home a publicly traded stock is supposed to be immediately liquid. I really don’t think the banks should be giving rich people loans against publicly
by throwawaycities 4y ago
Unlike a home a publicly traded stock is supposed to be immediately liquid. I really don’t think the banks should be giving rich people loans against publicly traded stock to facilitate a tax avoidance scheme, these billions of dollars would have been better of being loaned to home buyers.
- kjksf 4y agoYou know how you only work for companies who pay you salary instead of companies who don't? Aligned self interest is the engine of capitalism. You don't care if society would be better of if you donate your time and skill to company X for free. You care that company Y will pay your for your time and skill and that's why you work company Y. The good of society doesn't enter your calculus. Only the good of throwawaycities Similarly the banks don't care what is optimal way to allocate capital for the good of society (apparently as decided by you). They care about their self interest. Their business is providing loans so they provide loans to people most likely to repay those loans. From the perspective of the bank, margin loans are the safest loans they can give because the collateral is fully liquid and under the control of the bank i.e. the moment the borrower crosses margin loan threshold, he gets margin call and the bank sells his stock to ensure the loan gets repaid. Study the wildly successful economies of communist countries to see what happens when people think they know better that free market what should or should not be allowed in the economy. So far good intentions have vastly inferior economical results than lightly regulated free market where, for example, participants decide what kind of loans they want to make.