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Why are we rescuing the Banks when we should be rescuing the Borrowers?


clearmurk

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I’ve been reading about some economic modelling which has looked at how a recession might be managed. For the specific model developed, the findings were stark

- If the banks are rescued, unemployment peaked at 13% and the economy returns to equilibrium after 10 years
- If the debtors are rescued, the recession is over in less than 2 years and unemployment peaks only at 10%.

Steve Keen, “Declaring Victory at Half Time”, Real World Economics Review, No 52 (10 March 2010), pp 63-66
http://www.paecon.net/PAEReview/issue52/whole52.pdf

So why have we been so eager to rescue the banks? What are the linkages between the banks and our political parties that have led to this deference and subservience?

One approach to rescuing the borrowers was outlined by Karl Deeter of Irish Mortgage Brokers on radio this morning (Today with Pat Kenny). This would involve an (unconditional) write-down of mortgage debt to the current value of the property (presumably in line with the property tax valuation). I might add that this should only be applied to properties which are the Principal Private Residence, as in my view the “buy to let” sector involved much commercial speculation and should therefore be treated as any other business failure.

Would those in the know care to cost such an approach?
 

Socratus O' Pericles

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The bankers are influential the borrowers aren't.
 

Ren84

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I've always felt a debt rightdown at the start of this whole crisis was the only real solution. That remains my opinion, although its effects probably wouldn't be as pronounced at this stage.
 

Aindriu

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I've always felt a debt rightdown at the start of this whole crisis was the only real solution. That remains my opinion, although its effects probably wouldn't be as pronounced at this stage.
Well, my europhile friend, dream on cos it aint gonna happen anytime soon.
 

H.R. Haldeman

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I've always felt a debt rightdown at the start of this whole crisis was the only real solution. That remains my opinion, although its effects probably wouldn't be as pronounced at this stage.

I do not accept a direct transfer from wider society to write off the debts of mortgage holders.

Moreover, I am SICK of being told - constantly, non-stop - that it is a self-evidently moral thing to do. It is not moral that poor people, pensioners, the working poor, the renting poor (indeed, renters in general), those paying their mortgage and struggling to do so, and everyone else in between has tax money used to pay for other people's costs of abode.

I do not know what kind of moral universe we live in whereby every commentator, politician and columnist can insist this is somehow "the right thing to do" and there's hardly a word of dissent. It's not even questioned. When these people say "We have to keep people in their family homes", what they actually mean is: "We have to keep some people in their family homes." It's not moral and I will not longer accept being told it is. I am perfectly capable of deciding for myself what I consider moral. And this ain't it.
 

Cato

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Aug 21, 2005
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Why are we rescuing either of them?
I may be wrong but I seem to recall you (or someone looking like you!) coming out with a solution of sorts before where the bailout to the banks wasn't directly given to them but divided across every household in Ireland. The money would have to go towards paying down debt where there were debts and otherwise go into some long term savings plans in the banks.
 

Socratus O' Pericles

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When he says rightdown he probably means write down.
 

Ren84

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I do not accept a direct transfer from wider society to write off the debts of mortgage holders.

Moreover, I am SICK of being told - constantly, non-stop - that it is a self-evidently moral thing to do. It is not moral that poor people, pensioners, the working poor, the renting poor (indeed, renters in general), those paying their mortgage and struggling to do so, and everyone else in between has tax money used to pay for other people's costs of abode.

I do not know what kind of moral universe we live in whereby every commentator, politician and columnist can insist this is somehow "the right thing to do" and there's hardly a word of dissent. It's not even questioned. When these people say "We have to keep people in their family homes", what they actually mean is: "We have to keep some people in their family homes." It's not moral and I will not longer accept being told it is. I am perfectly capable of deciding for myself what I consider moral. And this ain't it.
You're quite right of course. Charity should only be extended to banks. :roll:
 

Cato

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Aug 21, 2005
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20,561
I do not accept a direct transfer from wider society to write off the debts of mortgage holders.

Moreover, I am SICK of being told - constantly, non-stop - that it is a self-evidently moral thing to do. It is not moral that poor people, pensioners, the working poor, the renting poor (indeed, renters in general), those paying their mortgage and struggling to do so, and everyone else in between has tax money used to pay for other people's costs of abode.

I do not know what kind of moral universe we live in whereby every commentator, politician and columnist can insist this is somehow "the right thing to do" and there's hardly a word of dissent. It's not even questioned. When these people say "We have to keep people in their family homes", what they actually mean is: "We have to keep some people in their family homes." It's not moral and I will not longer accept being told it is. I am perfectly capable of deciding for myself what I consider moral. And this ain't it.
Looking back now, if new bankruptcy laws had been introduced at the start of this and then houses repossesed (anything 180+ days overdue), and with NAMA simply releasing their total housing stock onto the market, then we could have crashed the whole thing and made renting, and indeed buying, homes far cheaper but the banks would have been left in an even worse state. There would have had to have been the willingness to let them go and suffer the chaos and loss of savings that would have followed.
 

shiel

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I thought our public representatives made a decision on that 5 years ago.
 

Clanrickard

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Apr 25, 2008
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I do not accept a direct transfer from wider society to write off the debts of mortgage holders.

Moreover, I am SICK of being told - constantly, non-stop - that it is a self-evidently moral thing to do. It is not moral that poor people, pensioners, the working poor, the renting poor (indeed, renters in general), those paying their mortgage and struggling to do so, and everyone else in between has tax money used to pay for other people's costs of abode.

I do not know what kind of moral universe we live in whereby every commentator, politician and columnist can insist this is somehow "the right thing to do" and there's hardly a word of dissent. It's not even questioned. When these people say "We have to keep people in their family homes", what they actually mean is: "We have to keep some people in their family homes." It's not moral and I will not longer accept being told it is. I am perfectly capable of deciding for myself what I consider moral. And this ain't it.
They should be turfed out after 3 months if they can't pay but the debt gets written off.
 

H.R. Haldeman

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You're quite right of course. Charity should only be extended to banks. :roll:


My post specifically stood up for:

> Poor people
> The working poor
> The renting poor
> Pensioners
> Families struggling to pay their mortgage
> Wider society

...and yet you read it and saw it as advocating a bailout for banks.

I'll say it again: We are living in a warped moral universe in this country whereby Ren here can defend all these people paying for other people's mortgages, and yet I'm the bad guy.

Madness.
 

Ren84

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Jan 14, 2011
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50,016
My post specifically stood up for:

> Poor people
> The working poor
> The renting poor
> Pensioners
> Families struggling to pay their mortgage
> Wider society

...and yet you read it and saw it as advocating a bailout for banks.

I'll say it again: We are living in a warped moral universe in this country whereby Ren here can defend all these people paying for other people's mortgages, and yet I'm the bad guy.

Madness.
Paying banks mortgages: good
Paying people's mortgages: bad.
 

Politics matters

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Sep 16, 2012
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6,006
My post specifically stood up for:

> Poor people
> The working poor
> The renting poor
> Pensioners
> Families struggling to pay their mortgage
> Wider society

...and yet you read it and saw it as advocating a bailout for banks.

I'll say it again: We are living in a warped moral universe in this country whereby Ren here can defend all these people paying for other people's mortgages, and yet I'm the bad guy.

Madness.
An unemployed, former construction worker, who is struggling to pay his mortgage, wouldn't be a poor person in your eyes?
 
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