Banker 2: Well, let's not get ahead of ourselves. Home mortgages, yes, but a business would never default on their real estate, where would people work from?
Banker 1: That's genius, here's 100 billion dollars, go buy some swaps.
Bankers 1 and 2: pikachu face
Scene closes, title opens, "The Bigger Short"
If a developer goes under you don’t have the same systemic risk of deposits/ consumers losing their shirts as you do when a bank goes under.
Some commercial loans are considered qualifying, and don't have retention requirements.
The skin in the game requirement, notably, only acts as an incentive for issuers to write good loans. If they think the loans are good, but it turns out they weren't, I believe we're in the same situation. Especially with how money was essentially free, it seems like it would have been quite easy for issues to cover their retention requirements and still cover lots of real estate.
The impact on banks if the loans go bad should be the same though, I believe.