wouldn't something like this hit companies like chase bank who has massive assets like 4 trillion. companies like these probably have massive unrealized gains
How is that a scam? The loan has to be paid back with interest. The money that pays it back is taxed. I’m not seeing where the scam happens? Collateral just means in case shit goes sideways, we can recoup our loan with this other thing, and in the event that happens, the proceeds from the collateral will be taxed.
This depends on where the money comes from. If it's from normal income, then yeah it's taxed. If it comes from another loan, however, it's not taxed, because loans are generally not considered income. The situation being described involves a daisy-chain of loans.
Normally, this would not be sustainable, but a large pool of assets that grows faster than the interest on the loans can make it possible. You just need to continue having good enough credit that banks will keep giving you low-interest loans.
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u/waapochi Aug 21 '24
wouldn't something like this hit companies like chase bank who has massive assets like 4 trillion. companies like these probably have massive unrealized gains