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Letters from Willetts – hedging loans

June 15, 2011

I wrote earlier here about a letter I had received from David Willetts which suggested that the government was keen to explore options about ‘monetizing the loan book’.

I suspected this was about selling off loans taken out at particular universities.  David Kernohan writes instead  that the rate of non-payment against individual institutions would  be ‘hedgeable’

 Insurable risk against the non-payment of expected dividends from anticipated income. This is hedgeable. Not content with establishing a market in higher education, the government wants to start playing with derivatives.

Since we might also see bonds issued against fee income, that talk of an education bubble has a bit more content.

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