|
| Right. A loan forgiven to anyone who has the capacity to repay becomes income. Student loans would be more like PPP in that they basically become a gift of income (both tax free actually due to Congress).
The 1920-30's and 1980's forgiveness / write-downs were because the borrower did not have the capacity to repay, but could possibly repay a lesser amount. As Dr. Harl explains, the losses were shared between the borrower, the lender, fellow borrowers via higher interest rates, and the government.
The problem with a presumption of "if it gets bad enough the gov will socialize losses" is that this moral hazard gets capitalized into land values - imo. | |
|
Lessons we learned twice last century
