One paragraph there says the banks need to sell them so they can invest in other things... Do I smell the banks realizing "oh shit, we're holding a bomb, we need to convince some other fool to take it before it blows up...".
If a loan is supported by a known lease it is more attractive to investors than a regular loan, so I somewhat doubt they are thinking about it like this.
The real reason they will be doing this is this is what they do in general. They don’t hold on to huge amounts of risk with predictable returns (because it consumes their operating and regulatory risk capital inefficiently) they will instead find buyers for that risk, which frees up capital they can then use on their next thing. That basically gives up some of the long term, low return, low volatility risk for shorter term, higher return, higher volatility risk.
That’s exactly the same as going into a furniture shop and going “if this furniture was so good, then why would they want to sell it so badly”. They’re a furniture shop - they make and sell furniture. There’s only so much furniture you need for yourself after all no matter how good it is.
Investment banks make investment products for investors. They do keep risk for themselves so you will find when they sell these loans they will often keep a slice, but they only need so much Oracle datacenter loan risk - they want to have free capital to find other opportunities to fund.
https://archive.is/haWGQ
One paragraph there says the banks need to sell them so they can invest in other things... Do I smell the banks realizing "oh shit, we're holding a bomb, we need to convince some other fool to take it before it blows up...".
If a loan is supported by a known lease it is more attractive to investors than a regular loan, so I somewhat doubt they are thinking about it like this.
The real reason they will be doing this is this is what they do in general. They don’t hold on to huge amounts of risk with predictable returns (because it consumes their operating and regulatory risk capital inefficiently) they will instead find buyers for that risk, which frees up capital they can then use on their next thing. That basically gives up some of the long term, low return, low volatility risk for shorter term, higher return, higher volatility risk.
Banks commonly originate loans and then sell them. That's pretty normal nowadays.
If the loans are such a good value, then why do the banks want to get rid of them so badly? Dumb investors...
That’s exactly the same as going into a furniture shop and going “if this furniture was so good, then why would they want to sell it so badly”. They’re a furniture shop - they make and sell furniture. There’s only so much furniture you need for yourself after all no matter how good it is.
Investment banks make investment products for investors. They do keep risk for themselves so you will find when they sell these loans they will often keep a slice, but they only need so much Oracle datacenter loan risk - they want to have free capital to find other opportunities to fund.