Tag Archives: Loan

Predictors of Default

On Science of Us, Seth Stephens-Davidowitz reports about predictors of loan repayment choices.

… language that potential borrowers use is a strong predictor of their probability of paying back. And it is an important indicator even if you control for other relevant information lenders were able to obtain about those potential borrowers, including credit ratings and income. …

Here are the phrases used in loan applications by people most likely to pay them back: debt-free, lower interest rate, after-tax, minimum payment, graduate.

And here are the phrases used by those least likely to pay back their loans: God, promise, will pay, thank you, hospital.

Charles Ferguson’s “Inside Job”

Charles Ferguson’s movie Inside Job portrays as

  • evil: Feldstein, Hubbard, Paulson, Rubin, Summers, Wall Street, … ;
  • clueless or not convincing: Bernanke, Campbell, Geithner, Greenspan, Mishkin, Portes, … ;
  • aware (at least ex post): Buiter, Johnson, Lagarde, Lo, Partney, Rogoff, Roubini, Strauss-Kahn, Tett, Wolf, … .

Economics and economists are considered part of the problem rather than the solution. While the movie

  • depicts Ragu Rajan as the hero,

it is silent about the fact that Rajan is one of the most prominent economists.

Greece’s IMF Loan Rollover

Kerin Hope and Shawn Donnan report in the FT that Greece used IMF special drawing rights to repay the IMF loan.

Members are required to pay a nominal interest rate to the IMF on the gap between their actual SDR holdings and their allocation, making this week’s move by Athens the equivalent of taking out a low-interest loan from the fund to pay off another.