你不愿给咱们上课，只好咱来上了。
假设一个学生向政府贷款$100k student loan. And it gets "securitized" and sold to some "smart" money manager, so Fed agency no longer hold it.
Queston: if the student default, let say 15% default rate (just throwing a number), does it matter to economy if Fed agency no longer holds the bag?
To 花街达人, it does NOT matter since it no longer in Fed agency's hand, and the money manager supposes to be "smart".
Let me try to debunk it.
case 1, if the money manager is smart, he will never buy the securitized bond at face value (100K) due to 15% default risk, for simplicity, let say, he is only willing to pay 85K and take some residual risk. In this case, the Fed agency (Sallie Mae, etc) will lose 15K to begin with. Who will pay the cost? of course, tax payer;
case 2, assuming the money manager is dummy enough to buy the bond at face value (100K). Later the student defaults by 15%, now the bond is only worth 85K. So who pays the cost? The fund the money manager manages, of course. But who owns those funds to the end? most likely, pension funds, 401Ks, etc. In another words, some tax payers.
so it does NOT matter which case (1 or 2), as long as the student defaults, somebody gets to pick the cost. The portion he defaults is called capital destroyed. And destroying capital hurts economy badly, thinking about bleeding ...
some may say, but by law the student cannot default. It does not matter. If he cannot pay (no income, etc), you are not going to get the loan (capital) back. Law cannot create/preserve capital, law may apply punishment if he defaults.
