Politics & Money

The Myth of Lending Long

Tanta over at CR muses today on New Century’s collapse and why the myth of lending long is just that — a myth:

What does startle me is the failure to connect the two dots: the EPD problem and the financing problem. My contention is that we have seen unprecedented numbers of EPDs because we were not, actually, lending long, we were pretending to lend long. (This is my Bridge Loan theory about Alt-A and subprime: a loan structure that forces you to refinance in two years or face financial ruin is not a long-term loan, regardless of what the technical final maturity date is).

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