Can Homeowners Arbitrage the Mortgage Subsidy?
There’s something very attractive about being given the opportunity to buy something which you know the seller is losing money on. That’s why a standard round of haggling in any bazaar will involve the seller explaining that he’s losing money already at this price: in some kind of economic theory-land the buyer shouldn’t care about such things, but in reality we always do. Some people love to spot these things and effectively arbitrage them. Do gas stations make all their money from selling overpriced sodas and lose money on the gasoline? Then if you don’t buy the soda, you’re essentially taking free money from the gas station. Will a hotel lose money on its special offer if you don’t order room service or other optional extras? Same deal. And in the financial world, there’s a certain type of person who will take low-interest-rate-for-life balance-transfer offers from credit card companies, borrow a large lump sum on the card, invest that sum in a CD, and pocket the spread. Sometimes,