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Loose credit fuels bubbles, who'd have thought? State backed credit guarantees are a conditional obligation, meaning they don't affect the state balance sheet
by sooheon 3y ago
Loose credit fuels bubbles, who'd have thought?
State backed credit guarantees are a conditional obligation, meaning they don't affect the state balance sheet (until they do, all at once). It's like crack for central governments.
- riku_iki 3y agowhen those guarantees are executed? When person dies or flees the country?..
- sooheon 3y agoWhen we get another 2008. When enough people default on their debt, the government (i.e. the taxpayers) is now on the hook to guarantee these loans (i.e. bail out the banks).
- riku_iki 3y agoyou can not default on student debt, if default means filing for bankruptcy. Not paying means that some people will just track income and it will be garnished.
- sooheon 3y agoOk, call it delinquency. You can't legally default on student debt, but functionally, those who have not and will never make their repayments have defaulted, you're just not calling it that.
- riku_iki 3y agosome collection agency will go after them and collect payments through court order from their wages.
- sooheon 3y agoYes, and? If the underwriting on the loan is bad (which it is), they won't recover enough. The root problem is those making the loans don't actually have skin in the game because of government guarantees.
- terminalcommand 3y agoI imagine also applies when a person declares bankruptcy. Bank will repossess the home, resell it, if it incurred any damages after charging hefty interest it will get the money from taxpayers (ie from the government).
- riku_iki 3y agobankruptcy discharges eligible debts (student loan is not eligible).