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what bank would finance this? this is such insane risk. as soon as the stock market hits a recession, the bank will call the loan, and the borrower will be bank
by rohan_ 2y ago
what bank would finance this? this is such insane risk. as soon as the stock market hits a recession, the bank will call the loan, and the borrower will be bankrupt.
- tschwimmer 2y agoThe banks are likely not holding the loans. They're likely selling the right to the cashflows to an investment firm in exchange for a lump sum of cash more than the value of the loan but less than the total interest collected over the life of the loan. Depending on the composition of the portfolio, various funds may want exposure to the underlying assets and so may be willing to take on the concentrated risk. While not about these loans specifically, the principles described in [0] apply. Check the section "who buys mortgages?" [0]https://www.bitsaboutmoney.com/archive/mortgages-are-a-manufactured-product/ https://www.bitsaboutmoney.com/archive/mortgages-are-a-manuf...
- don_neufeld 2y agoLots of private banks will do this. You live in “consumer finance” land, and understand its rules. In that world, the banks have most of the power. In “private banking” land, especially at the high end, the client can have a lot of power. I’m not saying that Tesla, SpaceX, etc might choose their banking relationships, who underwrites their IPOs, etc based on who gave their CEO the best personal deal on the private banking side. Because that would be wrong.
- deleted 2y ago[deleted]