America 1919

Chapter 1575 - Capítulo 1575: 574: The Early Arrival of Subprime Loans

Capítulo 1575: Chapter 574: The Early Arrival of Subprime Loans

If previously, they only ventured into real estate by targeting young people ready to get married.

Then what if the notion of real estate investment, property appreciation is ingrained into the people’s minds.

Real estate business would then no longer be solely for young people planning to get married, but for all Americans.

In an instant, the scale of the real estate expanded countless times!

“I understand, boss, I’ve already thought of how to operate this!”

Looking at the excited expression on Café Jackson’s face, Donnie nodded with satisfaction.

Isn’t that what those real estate developers were doing in later generations?

“That’s not enough!”

Just when Café Jackson thought Donnie’s two ideological views were invincible, Donnie still said it’s not enough?

“Boss, could it be that you’ve long had an idea about this business?”

At this moment, Café Jackson couldn’t help but doubt that even though he just mentioned this idea, Donnie could expand on it with so many thoughts.

If he were to say Donnie hadn’t thought of this business earlier, Café Jackson wouldn’t know how to describe this situation.

Donnie waved his hand, not explaining, but continued,

“There is something we still need to be wary of.

If the real estate business really stirs up, countless companies will surely swarm in.

To sell their properties, they will undoubtedly come up with numerous unimaginable incentives.

More importantly, whether they realize it or not, they will follow us in promoting the benefits of homeownership.

So by then, more people will start buying houses.

But we must know, the population of the United States is limited, even if, with economic recovery, the birth rate increases.

There’s absolutely no way it can keep up with the speed at which new communities are emerging!”

Café Jackson felt he was almost unable to keep up with Donnie’s thinking.

What he could consider only extended to five years later.

But what Donnie was talking about were things that were obviously ten or even twenty years away.

“So boss, you mean to say, there will inevitably be a surplus of houses in the future!”

Donnie nodded and said, “Yes, and no!”

“As long as the real estate business develops, this issue is bound to emerge, there’s no doubt about it.

What I’m talking about is home loans.

If you only see home loans as the last piece of this business chain, then you’re underestimating this industry.

As I just mentioned, if it’s merely a case of surplus houses, that’s not the biggest issue, the biggest issue is, the economy of the United States cannot always remain in a high-speed development phase, the last decade, all Americans thought the US economy would always develop rapidly.

In the end, they were faced with the Great Depression.

The economic law is like the rise and fall of dynasties, it can’t always be prosperous and rapidly developing.

There are peaks and troughs, that’s the natural law, so after Franklin Roosevelt revives the US economy.

It’ll be another high-speed development phase, but when this high-speed development phase ends… ”

At this point, Donnie paused and took a sip of whiskey.

Café Jackson impatiently watched Donnie, he had a feeling that what his boss was about to say could potentially change the current business model.

Indeed, there were some genius entrepreneurs who were always on guard against potential crises, but they never had an obvious solution.

Isn’t that what my boss is implying now!

Donnie smiled and continued: “If another economic crisis really occurs, then there will definitely be a large number of people unable to afford their huge mortgage payments.

At that time, there would be no one to take over.

Then these properties would become bad debts, severely affecting the company’s financial health!”

Café Jackson nodded, he hadn’t thought about these things before, but now he understood Donnie’s reasoning and knew it made sense.

During the financial crisis, didn’t we see how many people abandoned their homes, and how many banks collapsed due to bad mortgage debts!

“So what do you mean, boss?”

Donnie smiled and said, “It’s simple, turn these people’s loans into securities products, and sell them!”

Buzz!

Café Jackson was stunned, he stood up, pacing back and forth, with a complex expression on his face.

How come I never thought of that?

What Donnie was essentially talking about is the subprime.

Right now, the United States doesn’t even have the concept of subprime yet.

The closest equivalent was the Florida real estate business of yesteryear.

But those real estate developers usually borrowed to buy a piece of land first, and then cycle loans using that land.

And the banks accepted this type of loan.

But what Donnie wants to do now is to turn ordinary people’s home loans into a new type of security product.

Actual subprime wouldn’t appear in the US until the 1980s!

And now Donnie is introducing this concept fifty years early!

“There is a problem with this!” Café Jackson said excitedly, “This way we can turn these loans into securities products and sell them, so even if the real estate industry explodes in the future, the impact on us is minimal.

But how do we make those bankers believe in this product?”

This was the question Café Jackson most wanted to know now.

Donnie still wore a bright smile on his face, not at all worried about the beast of subprime being released by him, and what impact it would have on the great United States.

“Housing prices are steadily rising, funds from the society are continuously flowing into this industry, then everyone’s attention will be on this sector.

If at that time, a company specializing in subprime emerges, and that company can make big money, guess what everyone else will do?”

Café Jackson understood in his heart, laughing as he said: “Then everyone will enter this industry.”

Immediate interests will blind everyone’s vision.

Donnie stands in the position of a transmigrator, able to clearly know what this situation will lead to.

But others will be blinded by short-term interests.

“That’s right, by then you just need to sell the company running the subprime business.

Even if there really is another financial crisis then, it won’t affect us!”

Donnie laughed as he spoke.

Café Jackson had now calmed himself, speaking seriously to Donnie.

“Boss, this is not something that happens overnight, it might even take ten, twenty years to come to fruition!”

Donnie laughed and said, “Then take ten, twenty years to do this business.”

Café Jackson nodded seriously and said, “I understand, I will now focus all my efforts on this task!”

Donnie waved his hand and said, “This matter doesn’t require all your energy, hand it over to a trusted subordinate, you just need to steer the direction from behind.

Now that Robert has left the consortium, there’s a lot of work that needs you to take over!”

Café Jackson again showed an excited expression, knowing this was Donnie’s way of valuing him.

It was also an indirect way of telling him not to worry about his status in the consortium.

“Thank you, boss, I know, however, I do need to set up a framework for them in the initial stages.

And once that framework is established, those people can settle down and focus their attention on expanding outside rather than inside!”

Donnie nodded with satisfaction, “Alright, then do as you say!”

Subsequently, Café Jackson raised some of his doubts, seeking clarification from Donnie.

Donnie detailed what he knew to Café Jackson.

The two of them chatted late into the night, Café Jackson had a rough framework in his mind.

Then he would have to lead his team in making the framework more detailed.

After Café Jackson left, Donnie leaned back on the sofa.

Donnie was also contemplating whether this plan would affect Venus Bank, after reviewing it, Donnie still thought it shouldn’t be much of an issue!