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Re: Why emoney? Why not a web of debt?
Sallie Mae's commercial paper is NOT backed by the full
faith and credit of the US government. They carry a specific disclaimer
to that effect. It is true that many personal student loans (GSLs) from
banks are guaranteed by the government. The system was recently reformed
to remove the riskless subsidy to Sallie Mae, which is 100% privately
owned, and very profitable.
Similarly Fannie Mae and all other priavetly held GSE's are only backed
by an "implicit" federal guarantee. Although the only time one of these
got into trouble the feds did bail it out.
See my forthcoming article "Reinventing Government Corporations" in the
Illinois Law Review. Due out in about three months.
OBCrypto: How big a risk premium would YOU want to lend to an anonymous
borrower? In practice, for the forseeable future any such lending will
almost certainly be intermediated through a very small number (near zero)
of specialists ready, willing and able to measure and minimize the risks.
Or there will be ferocious requirements for collateral.
A.Michael Froomkin | +1 (305) 284-4285; +1 (305) 284-6506 (fax)
U.Miami Law School | [email protected]
PO Box 248087 |
Coral Gables, FL 33146 USA | It's warmish here.
On Mon, 23 Jan 1995, Rick Busdiecker wrote:
[...]
> Student Loans (at least GSLs) and GNMA loans are backed by ``the full
> faith and credit'' of the US federal government. As far as an
> investor is concerned, loan default looks the same as if the loanee
> paid their debt off early. The `web of debt' suggestion posted here
> doesn't seem to follow the same model unless you count virtually every
> form of financial transaction -- including buying a cup of coffe with
> a dollar bill -- as fitting the model.
>
> As a side note, GNMA (Ginnie Mae) is not for `general loans', but
> rather VA and FHA primary residence mortgages with various
> restrictions. GNMA, FNMA (Fannie Mae), and FHLMC (Freddie Mac) all
> exist to provide secondary markets for various kinds of real estate
> debt.
[...]