Did I say mandatory? I meant optional! You’re “free” to die in a cardboard box under a freeway as a market capitalist scarecrow warning to the other ants so they keep showing up to make us more!
Did I say mandatory? I meant optional! You’re “free” to die in a cardboard box under a freeway as a market capitalist scarecrow warning to the other ants so they keep showing up to make us more!
I don’t think this is accurate. I’ll break down what I mean.
Yes.
Yes.
No. Gains realized would be an unambiguous outcome with zero question to the providence or final outcome. That isn’t what a loan against assets are. There is a third step you’re skipping.
A lender is making a business decision to absorb the risk of giving you money where they may not get their money back even with the asset you gave them. The value of the assets can change both positively (which would be immaterial to the lender) or negatively (which would absolutely be material to the lender).
In today’s rules it means that the lender would lose out if the borrower defaults, and the collateral asset sells for less than the loan amount. The only loser is the lender, and they are choosing to take that risk. The worst case scenario to the lender is losing 100% of the loaned amount (plus whatever trivial costs of administrative overhead for servicing the loan) because the asset is worthless.
In the rules you’re proposing (the worst case scenario) if the borrower defaults, the lender loses 100% of the loaned amount, the borrower loses 25%-33% of the value of the loan, and the government would gain 25%-33% of taxes on money that never existed because the asset is worthless.