So the reason SVB had trouble with their assets is that they had to reprice the mortgage based securities they had to sell off.
If I wanted to buy back my house's mortgage from the bank, they'd ask me to pay the full principal.
But if JP Morgan buys it off SVB, they'd discount the mortgage and pay either 80 cents to the dollar or 50 cents (!), while they get to collect the whole principal & interest back from me as I repay.
What if I could buy it off SVB at fire sale prices, instead of some other financial firm?
This is probably most relevant when you think of medical debt, for example John Oliver's medical debt give away where he bought 14.9 millon dollars in debt for 60k & just forgave it through a non-profit (because debt forgiveness is a taxable event, which is just a tax loophole otherwise).
If you owe a hospital a million dollars and they are willing to sell it for 100k, why should you keep owing a million after its been sold for that price?
gopalv|3 years ago
If I wanted to buy back my house's mortgage from the bank, they'd ask me to pay the full principal.
But if JP Morgan buys it off SVB, they'd discount the mortgage and pay either 80 cents to the dollar or 50 cents (!), while they get to collect the whole principal & interest back from me as I repay.
What if I could buy it off SVB at fire sale prices, instead of some other financial firm?
This is probably most relevant when you think of medical debt, for example John Oliver's medical debt give away where he bought 14.9 millon dollars in debt for 60k & just forgave it through a non-profit (because debt forgiveness is a taxable event, which is just a tax loophole otherwise).
If you owe a hospital a million dollars and they are willing to sell it for 100k, why should you keep owing a million after its been sold for that price?