Phil, I agree with you 100% that this is likely not a good deal for the borrowers. And I also agree that it’s real good to be the lender on this one. Nevertheless, the arrangement provides liquidity for a relatively illiquid asset and I feel consenting adults should be able to transact however they choose, even if it’s more dangerous for one party. And, I believe that people should be responsible for their actions- if you are a big enough boy to buy a card and borrow against it, then don’t bitch when you lose your card to pay back the lender.
Regarding a propped up industry, this does smack of the Big Short in many ways (in a mini sense). Similarly, a super-high stock market propped up by buyers on margin loans. It most definitely appears that this will have an unhappy ending for some; I suspect most own the shiny stuff. But that’s how we learn and grow. Maybe it takes some pain to get regulation and oversight. Ultimately, these loans have utility.
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