Comments on: Is everybody in DC stupid? http://www.kennelson.com/newblog/is-everybody-in-dc-stupid-3373 Politics, Technology, and other stuff from St. George, UT Wed, 21 Dec 2011 17:11:36 +0000 hourly 1 http://wordpress.org/?v=3.0.4 By: Ken http://www.kennelson.com/newblog/is-everybody-in-dc-stupid-3373/comment-page-1#comment-1495 Ken Thu, 12 Mar 2009 02:54:27 +0000 http://www.kennelson.com/newblog/?p=3373#comment-1495 The guy stated he isn't worth lending too. I'm sorry but you can't finagle out of he is likely a bad credit risk and should be avoided. Banks also have to factor in that demand for cars in general is low, so the value if they repossess it is less. The guy stated he isn’t worth lending too. I’m sorry but you can’t finagle out of he is likely a bad credit risk and should be avoided.

Banks also have to factor in that demand for cars in general is low, so the value if they repossess it is less.

]]> By: carl http://www.kennelson.com/newblog/is-everybody-in-dc-stupid-3373/comment-page-1#comment-1494 carl Thu, 12 Mar 2009 02:04:21 +0000 http://www.kennelson.com/newblog/?p=3373#comment-1494 "having a very difficult time getting a car loan. But their biggest fear is they think they may get laid off in the next six months. So if we could get credit flowing in the consumer areas, I think it would stabilize the economy more than anything else" We have here an analogy of the "mark-to-market" dilemma for banks. The present value of a worker with an uncertain employment situation cannot be determined with certainty. But the worker and the lender may have high estimates of the future value of the borrower. For example, he has a college degree and a history of good steady employment. If the government can do something to reduce the layoff probability, the borrower's worth and confidence improves dramatically and a car purchase starts a virtuous circle of value added. The phenomenon is called stimulus. “having a very difficult time getting a car loan. But their biggest fear is they think they may get laid off in the next six months. So if we could get credit flowing in the consumer areas, I think it would stabilize the economy more than anything else”

We have here an analogy of the “mark-to-market” dilemma for banks. The present value of a worker with an uncertain employment situation cannot be determined with certainty. But the worker and the lender may have high estimates of the future value of the borrower. For example, he has a college degree and a history of good steady employment. If the government can do something to reduce the layoff probability, the borrower’s worth and confidence improves dramatically and a car purchase starts a virtuous circle of value added. The phenomenon is called stimulus.

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