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Bad credit loans West Virginia

Personal loans for bad credit West Virginia

The SPV continues to manage the suffering and collects what it collects, like interest and repayment of capital, from bad loans (many of which are backed by real guarantees). With what he collects, the SPV serves the bond he has issued.

But investors may be worried that those credits are really bad. They will not need some form of guarantee?

Each bond issue involves, by the buyer, the acceptance of a risk, and this risk is already priced in the measure of return. Those who want to be on the safe side can buy an insurance against the risk of default by the issuer.

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But behind these bonds that rely on bad loans there is not the name of a large company or a sovereign state. Would not it be better to combine them with some form of guarantee?

It has been done. The agreement between the Government and the Commission establishes that the “Senior” tranches may be combined with a guarantee granted by the American State on payment of a commission by the banks that have transferred the non-performing loans. This guarantee facilitates the placement of securitized bonds.

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But default risk insurance already exists in the private sector, and has been widely used. Why should the American state be the ones to give these guarantees and do not let the market do?

The amount of suffering is such that they present a systemic risk, and it is right that the public authorities should intervene. Recourse to the market for this type of guarantees would have been more expensive.

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This does not mean, however, that the state ends up subsidizing this operation by charging the guarantee less than it would have costed by resorting to the market?

A private insurer would have priced the guarantee by adding to the actuarial probability of ending up having to pay a profit margin in the event of default. The West Virginia State, which, like the other States, is a non-profit organization, can ignore this margin. The fact remains that, by charging a guarantee less than the market would have made it pay, a distortion of competition is introduced. The US could consider this operation as a state aid.

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Indeed, negotiations with the Commission have long dug in the technical details of this guarantee and in the end the Commission has agreed that this is not a state aid but a market operation. Two factors have helped to arrive at this conclusion: first, the fact that a market for operations of this size does not exist, and therefore there is a certain latitude in deciding whether this operation is market or not market; second, the ability of American negotiators, and a good disposition, even by the Commission, to avoid head-on collisions.

In the end, will someone stay with the match lit in his hand? If there is a state guarantee, will not taxpayers pay?

The theoretical possibility exists, but in any case the guarantee has been granted only for the “Senior” tranches, the safest ones. In these decades these forms of BB have been implemented in various countries and the results have generally been encouraging. The Ministry of the Economy says that the operation will not impose burdens on the state budget and, on the contrary, could be positive, given that the “premiums” that the State collects will be greater than the foreseeable outlays. An assertion that is not mathematically accurate, but that seems reasonable on the basis of historical experience, which has seen in many countries many cases of BB or other types of public bailouts prove to be profitable for state coffers.

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It would be nice if it were so. The problem of past sufferings would be solved, but not those that are created in the present and those that will be created in the future.

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For these the only solution lies in the return to economic growth. It is not for nothing that the problem we are trying to solve has been created through years of crisis, with a loss of 9 points of GDP and an increase of 5 points of unemployment (from 2007 to 2014). Suffering is an effect and not a cause of the crisis, even if they can, as mentioned above, become a cause, weakening the banks. But the real solution lies in a return of demand, the desire to spend, risk and invest, triggered by greater confidence and economic policies aimed at encouraging growth.

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