Hacker News Reader

Just another in a long list of the awful long term consequences of zero interest rate environments interacting with the principle-agent problem.

The people approving these loans get to report better quarterly numbers and by the time the chickens come home to roost, they’ve already moved on.

LBO lenders charge high rates. This means a loan that eventually settles for less than face value can still be more profitable than a low-interest loan that gets paid off on schedule.

I guess those loans are rather quickly sold on to third parties, either as bundles or stand alone. Kind of like what happened to MBS, mortgage backed securities.

Also, a lot of the time, the government will bail them out, and they can continue doing that.