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In countries (for example, Sweden) where recourse loans allow seizure of household income to enforce payment of mortgage obligations, private consumption may plummet as debt payments (and eventually rising interest rates) crowd out discretionary spending.
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If the plan were approved, the student would get additional capital in the form of a loan from the college's endowment fund;a full recourse loan with an interest rate and equity kicker commensurate with the risk involved in any startup.
They're non-recourse loans to banks.
But Ms. Marcuse testified that Mr. Taubman spoke out against non-recourse loans.
Ezra Klein, similarly, argues that because the plan relies on these "non-recourse" loans, the prices it will produce will be in some way "artificial".
Yet for all the criticism of this subsidy, the truth is that the plan's reliance on non-recourse loans is not an especially radical idea.
Lee Sachs was in charge of implementing TALF, which would subsidize the speculative purchase of distressed securities by providing cheap non-recourse loans.
In a European version, cheap, non-recourse loans would encourage investors to buy Italian or Spanish bonds and bring down yields.
Another option is for the EFSF to offer investors protection against a first loss on bonds, and for the ECB to provide those investors with cheap, non-recourse loans.
As I pointed out earlier today, for the past seventy-five yeAmericanrican banks have benefited from the same kind of FDIC-insured, non-recourse loans that the Geithner plan will make available to outside investors.
And that, at least, should make us wonder whether the Geithner plan's similar reliance on non-recourse loans really is as much of a recipe for distortionary pricing and overvaluation as it's been made out to be.
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