A Depressing Scenario: Mortgage Debt Becomes Unemployment Insurance / Casey B. Mulligan.

Format:

Book

Author/Creator:

Mulligan, Casey B.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w14514.

NBER working paper series no. w14514

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

A Depressing Scenario

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2008.

Summary:

When asset values fall, the owners of collateralized loans are not in an enviable position. Nonetheless, they possess a kind of monopoly power over their borrowers that they do not possess when borrowers are solvent. Lenders maximize profits by price discriminating, but create deadweight costs in the process. From the perspective of the aggregate labor market, it is as if lenders were levying their own labor income tax, on top of the taxes already levied by public treasuries. Governments have an incentive to regulate this price discrimination, repudiate part of the private debts, cut their own tax rates, or acquire the debt themselves. These conditions may describe both the 1930s and economic events today.

Notes:

Print version record

November 2008.