>even in the traditional case of the banking issuing the loan to an individual, there would not be sufficient recovered capital to repay the loan.
This just is not necessarily true, and more importantly runs into the issue that now lenders will not lend to people and land that they believe cannot be be positively valued for the entire term of the debt. In real life if you buy a home on a 30 year mortgage, the lender does not need to care much if it could be less valuable in 20 years, only that it retains enough value to be worth the rest of the loan if it needs to be seized.
As for embezzlement, go try to get a loan as a new LLC without assets, or revenue, or personal collateral. The reality is that under your proposed system, no bank would ever take the risk of loaning money to a plot of land. Forget fraud and embezzlement, there's zero mechanism for preventing flat out bad management from ruining a plot over and over again if you don't attach debts to people.
This just is not necessarily true, and more importantly runs into the issue that now lenders will not lend to people and land that they believe cannot be be positively valued for the entire term of the debt. In real life if you buy a home on a 30 year mortgage, the lender does not need to care much if it could be less valuable in 20 years, only that it retains enough value to be worth the rest of the loan if it needs to be seized.
As for embezzlement, go try to get a loan as a new LLC without assets, or revenue, or personal collateral. The reality is that under your proposed system, no bank would ever take the risk of loaning money to a plot of land. Forget fraud and embezzlement, there's zero mechanism for preventing flat out bad management from ruining a plot over and over again if you don't attach debts to people.