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Mmmhmm. Several problems: 1) Is that the most money they could have made with these loans? Are they getting a market return on investment? If not, then they're
by nirnira 13y ago
Mmmhmm. Several problems:
1) Is that the most money they could have made with these loans? Are they getting a market return on investment? If not, then they're wasting the country's money. It doesn't matter if it's still "profitable." A lot of shit investments still make money - just less than they could have if they were better invested.
2) Are the loans profitable at market rates? Then why have students taken on seemingly such high debtloads? Ah, because everyone knows that with governments, unlike private lendors, you get this:
>"I think they should break even, but it's just wrong that they are making money on it."
>"This is obscene. The government should not be making $66 billion in profits off the backs of our students,"
>Warren and eight other U.S. senators committed to wring government profits out of student loans and address the $1.2 trillion in outstanding student loan debt they say is crushing families and putting a strain on the economy.
>"It's time to end the practice of profiting from young people who are trying to get an education and refinance existing loans."
Great, look forward to any at-market performance of your loans being shredded through political pressure. Another way of saying that your government just threw away your money.
- dasil003 13y agoWow, talk about moving the goalposts.
- nirnira 13y agoIf you think that, I think you didn't read both of my posts carefully enough. First I argued that the government was making bad loans. The respondent replied that they were making profit (implying they were good loans.) Then I noted that that doesn't necessarily mean the government made the most profit possible with the loans - I didn't say that was definite, just possible. And then I showed how political pressure is mounting for even this meagre profit to be slashed to cost price. Because that's the great thing about borrowing from the government. If enough people do it, you can bank on political pressure to hamstring any honest attempt to get a market return. So you wind up with a distorted allocation of capital to this market (student loans.) PS. If anyone remembers, this is exact same mistake which drove the 2008 recession - the American government's junk home loan program. Exact same high ideals - help people get into homes! - exact same result - people went for bigger homes than they would have otherwise - savvy hedge fund managers smelled the free money and pounced. And we all know how that turned out. PPS. If you're interested, check out: http://mises.org/books/economics_in_one_lesson_hazlitt.pdf http://mises.org/books/economics_in_one_lesson_hazlitt.pdf (pages 25-32).
- dlp211 13y agoThat is not at all what drove what happened in 2007-2008. I suggest you read The Big Short by Michael Lewis.