The government can only sustain the valuable borrower options by providing subsidies to borrowers who exploit them; even if recourse loans were banned, the rate on non-recourse loans would be higher in a working market, and low-down-payment purchases (under 10% down) would carry a high interest-rate penalty that would discourage them.

causalpending

Speaker

Arnold Kling

Evidence Quote

the interest rate on these non-recourse loans would be higher if the market were working and in particular it would be much higher on loans with low down payments

Source

Arnold Kling on the Unseen World of Banking, Mortgages, and Government 07/5/2010EconTalk
Created: 6/13/2026, 7:04:06 PM

My Notes

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