It’s because when banks make loans, they sell of the debt, but nobody has wanted to buy the debt for Musk’s loans. My understanding of this is essentially, if someone takes out a loan of $100 million, the bank will sell that debt to an investor for $101 million, and the investor will make back $102 million once the loan is paid off due to interest. But no investors are confident enough that Musk will pay back his loan so no one is ponying up the dough to buy it.
No one has ever explained how bankers are losing. They say they’ve lost money. Yet the only details are Musk has to make payments and put up Tesla stock as collateral. That a no lose for the banks. They don’t care if Tesla stock crashes, they are making money from selling it.
lone_faerie@lemmy.blahaj.zone 2 weeks ago
ThrowawayPermanente@sh.itjust.works 2 weeks ago
That’s easy, just give him a AAA credit rating and call it a bond, some pension fund will buy it.
Jakeroxs@sh.itjust.works 2 weeks ago
Take it a step further, bundle it with a bunch of other subprime loans and then pass it around like a hot potato.
walter_wiggles@lemmy.nz 3 weeks ago
I remember reading that the banks who loaned him the money haven’t been able to sell off the debt.
CaptainPedantic@lemmy.world 3 weeks ago
If Tesla’s stock crashes, then the value the banks could get from selling it is much lower.
If Twitter and Tesla go bankrupt, the banks will have loaned out billions to own something worthless.
At least I would assume that’s how it works.
Scipitie@lemmy.dbzer0.com 3 weeks ago
The bankruptcy scenario is correct but the first part isn’t: you don’t have X shares as collateral that you can liquidate. Instead, you have collateral to cover sum Y.
As long as the collateral contract covers enough stock positions the bank won’t lose.
That said all of this is assuming standard contracts. If y bank wrote “0% interest and instead 50% of the revenue growth of Twitter” then this would be an easy way to lose money.
Haven’t heard of a stupid banker yet, though, so what would the chances be?
femtech@midwest.social 3 weeks ago
I mean, the 2008 housing market was done by greedy and stupid bankers.
curbstickle@lemmy.dbzer0.com 3 weeks ago
Who also made massive profits.
TheGrandNagus@lemmy.world 2 weeks ago
Stupid? It was a masterstroke by them.
They made a fortune, then governments had to throw money at them or risk a complete economic crash.
After the crash, people were poorer, and credit was cheap, so they came to banks for loans and financed everything more and more.
Houses temporarily crashed in price, but the poorest were too risky for banks to lend to, leading to houses being bought up en-mass by people who were already wealthy.
Bankers in 2008 were greedy, yes. But certainly not stupid.
CaptainPedantic@lemmy.world 3 weeks ago
An! Thank you for the explanation
Vanth@reddthat.com 3 weeks ago
Careful there, bud, you’re singing the siren song of bank bailouts.
uriel238@lemmy.blahaj.zone 3 weeks ago
The proletariat is still sore about the ones in 2008. They revealed plan the stratified economic system.