Re:The frustration of trying to invest in my hometown
by bluGill on Monday August 03, 2020 @08:14AM
(#24036706)
I assume by higher rate you mean interest rates. (as opposed to lend to more people at the same interest rates) those higher rates themselves cost more and in turn make it more likely that they go bankrupt. The higher interest rates are (if set right) enough to recover the from the bankruptcy that happens.
Re:The frustration of trying to invest in my hometown
by DoofusOfDeath on Monday August 03, 2020 @08:49AM
(#24037044)
If Rice's risk/reward assessment is correct, it seems strange to not have even one lender offer a loan that aligns with his analysis.
I have no clue about how prevalent racism is in the lending institutions that serve that geography. But I'd expect at least one of them to have looked at this carefully, in order to maximize the value of their portfolios.
But to fix this is "simple" - lend to those higher risk businesses at a higher rate. If those businesses are actually _not_ in reality more likely to fail, then the lender makes more money.
As lenders are able to make more money, there should be more competition to lend to those risky-seeming businesses which isn't actually risky. And competition would then drive the rates back down. Therefore, leading to an equilibrium rate.