Perhaps a better way to phrase it is "has an interest in". In either condition I think you would agree that the bank has some reasonable non-zero worth claim to the house. But it clearly is not the same as $200,000 cash.
Yeah, I agree it has an interest in it. It's just I can't name what the bank's asset actually is. What should go on the balance sheet? It gave cash to the borrower (ok, I know it's more complicated than that, but for the sake of argument let's pretend it gave a bundle of Bens), so it credits that asset by $200k. What does it debit? Not a share in a house. A promise to pay, sure, but that's just notional. What is the asset in reality?
(Hopefully I'm being clear that I'm not asking what GAAP says. I mean what does the bank have that it didn't have before?)
EDIT: this problem doesn't arise with a non-recourse mortgage, where the bank's asset is pretty clearly a share in the house. If the house burns down, the bank loses its money.
Sure, I know what the accounting says. I just don't know what it means.
If I own stock in Microsoft, it means I own a percentage of all its assets (real estate, intangibles, etc), along with a right to a percentage of its revenue streams. Plus I run the risk of my asset being worthless if Microsoft fails. So I know what that means.
Similarly, if I own Microsoft bonds, it means I have a right to a fixed revenue stream from it, and further, can claim a proportion of its assets if it stops paying me. So I can be said to 'own' a proportion of its assets, insofar as I have certain rights over them. And again, I run the (smaller) risk of my asset being worthless if Microsoft fails.
If I have lent Bob money on a non-recourse basis to buy a house, it's a similar story: I have the right to a fixed revenue stream from Bob, and can claim his asset if he stops paying me. So again, I can be said to own a proportion of the house, less whatever I'd pay him if I seized it. And again, I run the risk of the house burning down, etc etc.
In all three of these examples, my balance sheet asset refers to something real.
But if I've lent Bob money on a full-recourse basis, what is the asset? Not the house -- we've established that. Not the cash -- the cash is gone. So what is the debt instrument in my balance sheet based on?
How does anyone ever end up with a claim that allows garnishing future wages (that do not exist and are not guaranteed to exist at the time the loan is issued)?
The whole point of a loan (of any kind) is that it comes with risks. Different types of loans have different risks, and allow ownership claims of more or less things distributed in time and space). But no loan is risk-free, and so the idea that a loan provides an ownership claim of something that only notionally exists doesn't seem particularly strange.
I understand that. But if I own something that's only notional, it would seem to be saying that I own something that doesn't exist. Which is impossible.
Obviously I have claimed a right to $200k of future revenue streams Bob is able to provide me with (plus interest).
So ISTM that the 'asset' I would claim to own is Bob himself. I don't own a house or company stock that provides me future revenue streams; I would claim to own a share in a person that provides me with the same. This seems the only logical way to understand the situation.
You have a claim on something (Bob's labor) that might provide you the principal plus interest that you lent Bob, or it might not. But you do not own it.
You lent Bob the money with (hopefully) a clear understanding that in so doing, you could end up not receiving back some or all of the principal and interest. You adjusted the terms in various ways to decrease the chance of that happening, but you did not do this by acquiring ownership of anything.
But again, "Bob's labor" is purely notional. It doesn't exist. I can't have a claim to it as a free-floating entity independent of actually-existing things.
If I have a claim on Microsoft's future revenues, this implies that I own a share of Microsoft. If I have a claim on Bob's future productivity, this implies that I own a share of Bob.
Your rights as a shareholder of Microsoft are strictly delineated. You cannot, for example, walk into a MS office and take one of their computers (or any other equipment). You cannot claim any of their gross revenue, only what the board decides to release as a dividend. You can vote, but only at specific meetings that comes with their own highly evolved set of rules and regulations. You claim is actually fairly vacuous by comparison with most understandings of "ownership". You are literally a "shareholder", not an owner.
I'm replying a bit late to this... but what you say is true in both cases. Ownership doesn't entail doing whatever you like. It's the same with many things. You may own a mortgage-free house, but you still need to pay property tax; there are restrictions on what you can do within that house (not least criminal law); etc.
But this doesn't affect the argument. In fact, it looks as though you agree with my suggestion, which is that being owed money (on a full-recourse basis) by Bob has a very strong resemblance to being a shareholder in Bob.
I'm not sure where you got your idea of stock ownership, but you're describing it backwards for normal stock you buy at your broker. You would only have those ownership rights if you have a special class of stock, which is not something you normally buy at a stock exchange.
