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by vkou
2264 days ago
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Why would nobody buy loans that missed/deferred a few monthly payments during a government-ordered pandemic shutdown? Lenders charge interest on these loans. This interest is earned, because not all loans are expected to pay back in full. If this were applied across the board, lenders would probably find it far preferable to a complete collapse, where instead of loans that missed/deferred some payments, they found themselves owning a pile of distressed assets, all at once, in the middle of an economic catastrophe. |
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Because it won't be a few monthly payments, it will be a lot of them, and where are the buyers going to borrow the money from? The banks that have no money because of the defaults?
> The lenders get interest on these loans. This interest is earned, because not all loans are expected to pay back in full.
Sure, but it is also not expected that so many will not be paid back either. You can make an argument that the system needs more buffers for black swan events (which have their own costs), and that is totally fair, but we don't have them and now we have to decide what to do.
I say all of this as someone that was "laid off" last week as part of a contingent workforce for a travel industry business that is likely to get a significant bailout from the federal government. Despite that, they will be unlikely to bring back contract labor for a year or more until their feet are under them again. The whole system is connected and is currently failing, the notion that we're going to come back to anything close to normal in the short term is absurd.