abhiseshakana
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March 28, 2020, 03:47:16 PM |
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The bailout is done in the form of a government that will buy bad Subprime Mortgage (SM) debt securities held by financial institution investors, such as banks, mutual funds, pension funds, and insurance, at the prevailing market prices. While the Bailout funds obtained by the Government from the issuance of government debt in the money market.
This bailout scheme is very doubtful because it does not solve the main root of the crisis, namely the problem of defaults on customers to SM companies, the oversupply property market, and the value of the property which has plummeted so that SM is unable to pay its obligations to financial investors.
The property/house debtor also does not seem to get much benefit from this bailout because the installment obligations with market interest still apply. Relief is only in the form of leeway in the criteria for confiscation by the creditor if the borrower is unable to pay its obligations.
Investors also feel a large loss that has the potential to erode capital resulting in insolvency, which has negative equity problems if no new capital injection is made. So that the surviving investor does not sell his debt, and the homeowner is still unable to pay his obligations and SM as the debt issuer is unable to pay the interest coupon.
While the form of the bailout from the American Government to investors is a loan by taking over the majority shares of several companies and financial institutions that lose money in the US capital market, to save financial institutions and banks in order to prevent a prolonged economic crisis.
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