Stephen Roach Thinks the Unthinkable: Debt Forgiveness

[jacobdcoates]

Re: Stephen Roach Thinks the Unthinkable: Debt Forgiveness

^ divide and conquer not working on this guy


on the other hand:



How is it going to be done at your expense? Your borrowing costs will go up? That means you've been benefiting from the loans going to deadbeats all along. Loose credit for everyone.

Do you hold stock or bonds in debt companies? If so, again, you benefited all along from the loans going to deadbeats.


disclosure: I am not carrying debts that would be eligible for anything like this, longtime apt./house renter

The only divide and conquer is the FIRE over everyone else. Please ignore the rest of my argument, The germain parts anyways.

A Spade is a Spade, this is what has happen to our society. Socialism/Feudalism for the rich is no better or worse than Socialism/Communism for the poor. It is a piss poor way to run a society.

:The corrupt, propaganda spewing, immoral, criminal, law re-righting in there favor lenders and rich have a moral right to have all the debt paid to them since they setup the corrupt economic and political system where by the very jobs, income, and livelihoods of these so called partying deadbeat debtor are systematically destroyed and shipped off to what is essential slave labor in other parts of the world so the rich/saver/investors(speculators) could earn a couple of percent more return and start a campaign to massively in-debt their fellow citizens so the could suck what remaining weather their is upward on the economic social scales. Nevermind, the fact that the were lending money they created out of thin air, not real wealth that they actually worked for.
Too top it all off then indoctrinate them(average americans) their WHOLE life that they are suppose to buy a house, go to college to be successful, etc etc. Are we surprised? "

[dcarrigg]

Re: Stephen Roach Thinks the Unthinkable: Debt Forgiveness

What we need is more Financial Darwinism: You make a mistake? MAN UP and deal with it. Next time, you'll think twice before being so foolish and/or greedy.

I don't believe in financial darwinism. It's a theory I've seen violated with my two eyes. Now financial creationism - where you pray to the altar of Goldman and money is willed into existence - there's a theory I can buy.

I guess my point is that financial darwinism didn't exist when taxpayers were forced to bail out all of the banks and take toxic, crap, garbage mortgages onto the public balance sheet. If the system only works so that the supply-side of capital (lenders) get 'bailed-out' by the demand-side of capital (taxpayers), then we're in trouble.

If, on the other hand, we let the banks go under in the first place, I'd be with you. But now it's too late for that - Darwin as already been proven wrong. So, if we're to pray to the gods for quantitative easing, it may as well trickle-down...

[dbarberic]

Re: Stephen Roach Thinks the Unthinkable: Debt Forgiveness

This discussion reminds me of the ethical argument against strategic defaulting on your mortgage. The current point of view portrayed in the media is that it is morally wrong and unethical for a private homeowner to strategically default on their mortgage, meanwhile banks/REITs/and corporations have been strategically defaulting and handing in the keys to their RE when it no longer makes sense from a ROI perspective to hold the property since 2008.

I’m sure that the number of people who took out loans with the intention to commit fraud by going on a shopping spree and never intending to pay back the loan is very small. More than likely, the largest population of defaulters was fraudulently induced to enter into loans for which they never would be able to pay back, unknown to the borrower and facts ignored by the lender.

[c1ue]

Re: Stephen Roach Thinks the Unthinkable: Debt Forgiveness

What we need is more Financial Darwinism: You make a mistake? MAN UP and deal with it. Next time, you'll think twice before being so foolish and/or greedy.

Sounds nice.

This might be more understandable if there had not been a gigantic system - up to and including the President of the United States, the Chairman of the Federal Reserve, literally all of the MSM, plus finger puppet front men like Trump and Kiyosaki, all alongside your friends/neighbors/relatives/acquaintances, all bobbling their heads to the mantra of "Home prices only go up".

True Financial Darwinism, as you put it, includes not just the TBTF becoming the TB That F'd, but also all those mortgage brokers who made crap NINJA loans getting commissions clawed back (and arrested for Ecstasy use), those investment banks repackaging crap NINJA loans into crap mortgage MBS's getting their fees clawed back (and arrested for fraud), those investment bankers selling crap mortgage MBS's (and getting arrested for cocaine use), to the ratings agencies who were paid to rate the crap mortgage MBS's into AAA bonds getting their ratings fees clawed back (and their government oligopoly on ratings broken).

But somehow Financial Darwinism only seems to apply to the little guy. After all, he surely must have known everybody in the chain, top to bottom, was literally making a buck off his sorry a**.

He should have been more careful while working his regular job which has seen no real inflation adjusted income growth in more than a decade.

[bill]

Re: Stephen Roach Thinks the Unthinkable: Debt Forgiveness

A classic on the subject:

http://www.washingtonpost.com/wp-dyn...021302783.html

By Eliot Spitzer
Thursday, February 14, 2008

Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers' ability to repay, making loans with deceptive "teaser" rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.
Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.
Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.


What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.
Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.
Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.
In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.
But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.
Throughout our battles with the OCC and the banks, the mantra of the banks and their defenders was that efforts to curb predatory lending would deny access to credit to the very consumers the states were trying to protect. But the curbs we sought on predatory and unfair lending would have in no way jeopardized access to the legitimate credit market for appropriately priced loans. Instead, they would have stopped the scourge of predatory lending practices that have resulted in countless thousands of consumers losing their homes and put our economy in a precarious position.
When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.
The writer is governor of New York.

[lektrode]

Re: Stephen Roach Thinks the Unthinkable: Debt Forgiveness

Sounds nice.
....
.......
True Financial Darwinism, as you put it, includes not just the TBTF becoming the TB That F'd, but also all those mortgage brokers who made crap NINJA loans getting commissions clawed back (and arrested for Ecstasy use), those investment banks repackaging crap NINJA loans into crap mortgage MBS's getting their fees clawed back (and arrested for fraud), those investment bankers selling crap mortgage MBS's (and getting arrested for cocaine use), to the ratings agencies who were paid to rate the crap mortgage MBS's into AAA bonds getting their ratings fees clawed back (and their government oligopoly on ratings broken).

But somehow Financial Darwinism only seems to apply to the little guy [?!!!]. After all, he surely must have known everybody in the chain, top to bottom, was literally making a buck off his sorry a**.

He should have been more careful while working his regular job which has seen no real inflation adjusted income growth in more than a decade.

uh huh - they also should've been more careful at the voting booth (in 2008 esp), than to believe the dipshits in DC who convinced them that 'change they (in lwr manhattan) believe in' meant that the little guy was going to get a break from all them .gov programs that would somehow be 'paid for by the rich' (who then promptly left town (CA in particular) and left - GUESS WHO - holding the bag/bill for all them nanny state give aways? (not the least of which the ones referred to as "saving the banking system" and "saving/creating jobs" in the public sector....

i personally think debt does need to be 'forgiven' or written off - that would be the debt that WE THE PEOPLE got crammed down our throats to bailout the banks - but i guess thats uncle ben's plan, aint it? inflate it away to.... china?
while The Rest of US get slowly/inexoribly bled to starvation, so that the BIG NEW YORK BANKS get to be 'profitable' enough less than one year after they were bankrupted by their greed/malfeasance, to pay themselves more billions, while they could give a shit less what the true inflation rate actually is (slugman & co), since if yer making millions/billions, who gives a damn what a bottle of moet costs?

all i can say is: i hope the liberals will be _very_ happy with whats coming....

[goodrich4bk]

Re: Stephen Roach Thinks the Unthinkable: Debt Forgiveness

Once upon a time, there was a mechanism for the orderly retirement of bad debt known as bankruptcy. Then the bank lobby passed legislation known as BAPCPA made insolvent middle-income debtors into indentured servants.

Just repealing BAPCPA, and allowing bankruptcy "cramdown" of first mortgages would solve a lot of this debt overhang problem without costing the government a cent...at least not a cent that hasn't already been spent, or that will have to be spent regardless.

Bingo!

Cramdown is still available for all non-residential loans, such as Donald's Trump Tower debt, and the non-residential loan market hasn't disappeared. But as a BK attorney, here are the conditions I would put on cramdown:

1. The debtor must sell all other non-exempt assets and pay the proceeds to the lender;
2. No cramdown if they lied on their loan application;
3. In the event the debtor sells the home within 5 years, the lender gets a diminishing equity kicker (100% in the first year, 80% in the second year, 60% in the third year --- until 0% in the sixth year).
4. The debtor must confirm his Chapter 13 or Chapter 11 plan with mandatory 5 year dedication of disposable income (as currently defined by the Bankruptcy Code)
5. The deficiency is discharged only upon successful completion of the five year plan or sale of the property, whichever first occurs.

This would reward only honest debtors who pay their bills for the next five years. It would allow the employed honest debtors to keep their homes and prevent unnecessary REO inventory from hurting their non-foreclosure neighbors. It would encourage borrowers to maintain and even improve their properties for the carrot of an increasing equity share. It would allow the banks to postpone a writeoff the deficiency for five years (because the actual loss would not be known until the sixth year). And it would net the banks more than they will receive from foreclosure and REO resales.

All without affecting moral hazaard due to the requirement of an honest loan app.

[lektrode]

Re: Stephen Roach Thinks the Unthinkable: Debt Forgiveness

DITTO!
must say this is the most reasonable/workable solution eye have heard to date!

Bingo!

Cramdown is still available for all non-residential loans, such as Donald's Trump Tower debt, and the non-residential loan market hasn't disappeared. But as a BK attorney, here are the conditions I would put on cramdown:

1. The debtor must sell all other non-exempt assets and pay the proceeds to the lender;
2. No cramdown if they lied on their loan application;
3. In the event the debtor sells the home within 5 years, the lender gets a diminishing equity kicker (100% in the first year, 80% in the second year, 60% in the third year --- until 0% in the sixth year).
4. The debtor must confirm his Chapter 13 or Chapter 11 plan with mandatory 5 year dedication of disposable income (as currently defined by the Bankruptcy Code)
5. The deficiency is discharged only upon successful completion of the five year plan or sale of the property, whichever first occurs.

This would reward only honest debtors who pay their bills for the next five years. It would allow the employed honest debtors to keep their homes and prevent unnecessary REO inventory from hurting their non-foreclosure neighbors. It would encourage borrowers to maintain and even improve their properties for the carrot of an increasing equity share. It would allow the banks to postpone a writeoff the deficiency for five years (because the actual loss would not be known until the sixth year). And it would net the banks more than they will receive from foreclosure and REO resales.

All without affecting moral hazaard due to the requirement of an honest loan app.

[charliebrown]

Re: Stephen Roach Thinks the Unthinkable: Debt Forgiveness

I believe that the word "debts" is largely symbolic here meaning many things that we should forgive our neighbors for, sins, transgressions, trespasses etc.

I do get that you are joking. It's not actually that the debts forgiven that erks a lot of people, but who gets forgiven
and why, and the body of people who make the rules.

If you do have a bible, you can look up Leviticus 25. This outlines the year of jubilee which occurred every 50 years.
In this time, debts were forgiven, and land reverted back to the original owners. And I believe the original owners were not the wealthy but poor peasents, who lost their land trough anceint FIRE tactics. This does not seem to be rules for individuals, but rules for the society. I am not so sure the bible does not promote socialism. Some of the Christian bible,
like the Koran have been hijacked for political purposes.

Truth be said we live in a fallen world, and no ism will result in the utopia that is hoped for. I just try to Love thy neighbor,
and that is hard. This is not the sappy love of hollywood, but the sacrificial love of God.