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.
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.
That’s easy, just give him a AAA credit rating and call it a bond, some pension fund will buy it.
Take it a step further, bundle it with a bunch of other subprime loans and then pass it around like a hot potato.