Momentum Grows for Debt Repudiation

George Washington's picture

As I noted in November:

Debtors are revolting against exorbitant interest rates and fees and other aggressive tactics by the too big to fail banks. See this, this, and this.

 

Congresswoman Kaptur advises
her constituents facing foreclosure to demand that the original
mortgage papers be produced. She says that - if the bank can't produce
the mortgage papers - then the homeowner can stay in the house.

 

Portfolio manager and investment advisor Marshall Auerback argues that a debtor's revolt would be a good thing.

 

And even popular personal finance advisor Suze Orman is highlighting the debtors revolt phenomenon on her national tv show.

Walking away from home mortgages has actually become mainstream, being trumpeted by:

  • Many others

In addition, as I pointed out in February:

There
is an established legal principle that people should not have to repay
their government's debt to the extent that it is incurred to launch
aggressive wars or to oppress the people.

Matt Taibbi wrote Monday:

As
powerful as these Wall Street banks may seem, they are also exquisitely
vulnerable. Right now virtually all of them are dependent upon the
government keeping accounting standards lax enough for all of them to
claim to be functional businesses. It is generally accepted that if the
major banks on Wall Street were forced to mark all of their assets to
market tomorrow, they would all be either insolvent or close to it.

 

Thus
their “healthy” financial status is already illusory. So imagine what
would happen if large numbers of those dubious loans on their balance
sheets that they have marked down as “performing” were suddenly pushed
ahead of time into the default column. What if Greece, and the
Pennsylvania school system, and Jefferson County, Alabama, and the
countless other municipalities and states that are wrapped up in these
corrupt deals just decided to declare their debts illegitimate and back
out?

I think it’s an interesting question and would like to hear
what knowledgeable people in the field have to say about it. But the
big picture, to me, is that these companies are almost totally
dependent not only upon the continued good faith of aggrieved debtors,
but upon the government recognizing the (sometimes fraudulent) loans
made to those debtors as fully performing.

Similarly, Gregor MacDonald argued in February 2009:

The private sector debt in the United States exerts the same power over
the banking system as the public debt of the United States exerts over
our international creditors. Collectively, the debtors are in control.
Not the creditors. This is why the the Creditors, not the Debtors, will
be making most of the concessions in the years ahead. Whether the US
public debt is inflated away, rescheduled, or repudiated–or some
combination of all three–it doesn’t matter much. The process is already
underway.

Former Managing
Director and board member of Wall Street investment bank Dillon Read,
president of Hamilton Securities Group, Inc., an investment bank, and
former government servant Catherin Austin Fitts wrote Tuesday:

Look
up “fraudulent inducement.” My position as the former Assistant
Secretary of Housing-Federal Housing Commissioner and then as lead
financial advisor to the U.S. Department of Housing and Urban
Development is that the majority of the mortgages originated in the
United States after 1996 were fraudulently induced.

 

The way to
deal with criminals is to treat our contracts with them in a manner
reciprocal to how they have treated their contracts with us.

 

Will
a growing movement to abrogate contracts with institutions who have
broken the law be disruptive? Yes. Will that require painful
adjustments? Yes. That is the price we pay to deal with the challenges
we face. This includes the fact that the banks have sold criminally
originated debts to our pension funds and retirement accounts as well
as to allies and institutions around the world.

 

It is much less
painful, however, than the price we will pay if we continue to operate
by a double standard whereby large institutions and a small group of
people are permitted to live and operate above the law. So let’s
address the lawlessness in the financial sector, face the national
security issues involved in using our financial markets for economic
warfare and begin the transformation.

Austrian economist Murray Rothbard wrote in 1992:

I propose ...
out-right debt repudiation. Consider this question: why should the
poor, battered citizens of Russia or Poland or the other ex-Communist
countries be bound by the debts contracted by their former Communist
masters? In the Communist situation, the injustice is clear: that
citizens struggling for freedom and for a free-market economy should be
taxed to pay for debts contracted by the monstrous former ruling class.
But this injustice only differs by degree from "normal" public debt.
For, conversely, why should the Communist government of the Soviet
Union have been bound by debts contracted by the Czarist government
they hated and overthrew? And why should we, struggling American
citizens of today, be bound by debts created by a ... ruling elite who
contracted these debts at our expense?

 

***

 

Although largely forgotten by historians and by the public,
repudiation of public debt is a solid part of the American tradition.
The first wave of repudiation of state debt came during the 1840's,
after the panics of 1837 and 1839. Those panics were the consequence of
a massive inflationary boom fueled by the Whig-run Second Bank of the
United States. Riding the wave of inflationary credit, numerous state
governments, largely those run by the Whigs, floated an enormous amount
of debt, most of which went into wasteful public works (euphemistically
called "internal improvements"), and into the creation of inflationary
banks. Outstanding public debt by state governments rose from $26
million to $170 million during the decade of the 1830's. Most of these
securities were financed by British and Dutch investors.

During the deflationary 1840's succeeding the panics, state
governments faced repayment of their debt in dollars that were now more
valuable than the ones they had borrowed. Many states, now largely in
Democratic hands, met the crisis by repudiating these debts, either
totally or partially by scaling down the amount in "readjustments."
Specifically, of the 28 American states in the 1840's, nine were in the
glorious position of having no public debt, and one (Missouri's) was
negligible; of the 18 remaining, nine paid the interest on their public
debt without interruption, while another nine (Maryland, Pennsylvania,
Indiana, Illinois, Michigan, Arkansas, Louisiana, Mississippi, and
Florida) repudiated part or all of their liabilities. Of these states,
four defaulted for several years in their interest payments, whereas
the other five (Michigan, Mississippi, Arkansas, Louisiana, and
Florida) totally and permanently repudiated their entire outstanding
public debt. As in every debt repudiation, the result was to lift a
great burden from the backs of the taxpayers in the defaulting and
repudiating states.

 

***

 

The next great wave of state debt repudiation came in the South
after the blight of Northern occupation and Reconstruction had been
lifted from them. Eight Southern states (Alabama, Arkansas, Florida,
Louisiana, North Carolina, South Carolina, Tennessee, and Virginia)
proceeded, during the late 1870's and early 1880's under Democratic
regimes, to repudiate the debt foisted upon their taxpayers by the
corrupt and wasteful carpetbag Radical Republican governments under
Reconstruction.

Ambrose Evans-Pritchard wrote in 2009:

In the end, the only way out of all this global debt may prove to be a
Biblical debt Jubilee.

Economist Steve Keen is also calling for a debt jubilee, stating:

We should write the debt off, bankrupt the banks, nationalize the financial system, and start all over again.

We need a twenty-first century jubilee.

[We’re
going into] a never-ending depression unless we repudiate the debt,
which never should have been extended in the first place.

If we
keep the parasitic banking sector alive, the economy dies. We have to
kill the parasites and give a chance to the real economy to thrive once
more and stop the financial [crooks] doing what they did this time
around ever again.

 

 

And Michael Hudson - who also calls for a debt jubiliee -  wrote yesterday:

The only way to resolve the [European debt crisis] is to negotiate a debt write-off...

The
most cynical (but not necessarily inaccurate) view of debt I've seen is
that banks loan out imaginary money they don't really have, which was
"collateralized" by capital they did not really have, based upon
central bank printing presses which create money out of thin air which
they don't really have. But then when debtors have trouble repaying
onerous loans, the bankers seize real assets. See this and this.

Indeed:

In First National Bank v. Daly (often referred to as the "Credit River" case) the court found that the bank created money "out of thin air":

[The
president of the First National Bank of Montgomery] admitted that all
of the money or credit which was used as a consideration [for the
mortgage loan given to the defendant] was created upon their books,
that this was standard banking practice exercised by their bank in
combination with the Federal Reserve Bank of Minneaopolis, another
private bank, further that he knew of no United States statute or law
that gave the Plaintiff [bank] the authority to do this.

The court also held:

The money and credit first came into existence when they [the bank] created it.

(Here's the case file).

 

Justice
courts are just local courts, and not as powerful or prestigious as
state supreme courts, for example. And it was not a judge, but a
justice of the peace who made the decision.

But what is important is that the president of the First National Bank of Montgomery apparently admitted that his bank created money by simply making an entry in its book ...

The judge voided the mortgage, since he found that the bank hadn't given any real consideration, but simply created money out of thin air.

In other words, according to the most cynical view, the entire debt-money system is a scam ... and should be repudiated.

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Cammy Le Flage's picture

Line one:  Its one thing for repudiation of debt to be done      Yes.

Line Two/Three:

(for whatever reasons), but 

its an entirely different animal to have a judge rule that

Not at all

Line Four: the mortgage was never valid in the first place and     Partial not at all.

Line Five: so the owners of the house don't have to pay.    It happens when thieves are sloppy.

Line Six: My question: will they still be allowed to live in it?   It depends on the bargain at hand. 
and, that solely depends on tax law in the local/state jurisdiction (there are fifty).  In some states, tax liens wipe the lien - ALL of them.  construction, loan, blah blah blah

Line Seven:

And my next question: do I still have time to buy the biggest house

on the block and then claim the bank made the mortgage with money out of thin air? 

No unless:   If you live in Miami Florida, West Coast florida lower end (south) - Or start looking at Spain.  they gave the keys back a while back.  So did Ireland.   Or get a boyfriend/girlfriend and move to the Bahamas.  One of the best little places to be on the planet at this time.  Better than the Swiss.  Bahamians in bed with the chinese and US --- and neither of them can take 'em!  Never....Chinese port (largest in the hemisphere) in Grand Bahama - US Navy and research facilities, Coast Guard, etc. (all over the place) - what a damn quandry....of fun.

P.S. You don't want to own real estate anymore - you want to just have unlimited use of it.  there is a big diff.

Cammy Le Flage's picture

Line one:  Its one thing for repudiation of debt to be done      Yes.

Line Two/Three:

(for whatever reasons), but 

its an entirely different animal to have a judge rule that

Not at all

Line Four: the mortgage was never valid in the first place and     Partial not at all.

Line Five: so the owners of the house don't have to pay.    It happens when thieves are sloppy.

Line Six: My question: will they still be allowed to live in it?   It depends on the bargain at hand. 
and, that solely depends on tax law in the local/state jurisdiction (there are fifty).  In some states, tax liens wipe the lien - ALL of them.  construction, loan, blah blah blah

Line Seven:

And my next question: do I still have time to buy the biggest house

on the block and then claim the bank made the mortgage with money out of thin air? 

No unless:   If you live in Miami Florida, West Coast florida lower end (south) - Or start looking at Spain.  they gave the keys back a while back.  So did Ireland.   Or get a boyfriend/girlfriend and move to the Bahamas.  One of the best little places to be on the planet at this time.  Better than the Swiss.  Bahamians in bed with the chinese and US --- and neither of them can take 'em!  Never....Chinese port (largest in the hemisphere) in Grand Bahama - US Navy and research facilities, Coast Guard, etc. (all over the place) - what a damn quandry....of fun.

P.S. You don't want to own real estate anymore - you want to just have unlimited use of it.  there is a big diff.

Cammy Le Flage's picture

Off with their heads!  That is So last google years!  Fuckers!   They will pay.  OH, they will PAY.    They will wish for jail in the old system that never comes.  Don't think about them anymore.   Think about us.  Fuck them.

I hope everyone just starts doing what I am doing.  There is new "money" goin' on.....and it is brighter than gold:

Navigational abilities in times of chaos and change and pure key relationships - that should be many but never for manipulation purposes only - oh, but we will be manipulating in the most decent of ways.  The mapmakers....that is what we are - an Old Spanish Proverb:  "Traveler, there are no roads.  Roads are made by walking."

Welcome friends.   We are giving it away by living it as example.   Peace out my favorite place on this interNET.

thank you Mr. Durden and Miss Marla and those that dreamed those archetypes up~

This is a fight club.  But we ain't fighters.....much more than that.

Pure Evil's picture

"the fact that the banks have sold criminally originated debts to our pension funds and retirement accounts as well as to allies and institutions around the world"

So, exactly how did you expect them to steal all that wealth in the first place?

Someone had to take on the facade of benevolent Master Criminal.

And all that money sitting around was just to tempting not to give it a try.

Eventually, not even "sub-pennying" will be enough for these Master Criminals.

Mitchman's picture

Dear All,

 

Look up William Pitts - particularly on Facebook.  He has filed a complaint with the SEC nd with the FBI alleging that the Federal Reserve has engaged in illegal insider trading of numerous stocks, etc.

He needs all our support.  He is getting a lot of momentum and has some heavy duty people behind him.  Check him out. 

tom a taxpayer's picture

Debt repudiation?  Why not...since state and federal prosecutors have so far failed to bring the major prosecutions commensurate with the greatest financial crimes in U.S. history.  

No justice, no peace.

bugs_'s picture

Repudiate the Repudiators!

Currently Smoking Cannabis's picture

"The banks" are just legal entities of assets and revolving people.  Why should we assume that the individuals who ran this scam and pocketed the loot would give a crap if their bank went belly-up?  They'd just sail off to their non-extradition bunkers with piles of gold.  The ones who would get screwed would be whoever was left working at said bank.  And they weren't the problem.

You think Fuld got it worse than the MBA with the 100k student loan downstairs?  Who do we really want to punish?

We need perp walks and prison time, and someone somewhere to enforce existing regulations.  Smashing the entities doesn't affect the real crooks.

 

three chord sloth's picture

As long as this debt jubilee also includes the debt our governments ran up in our name, then it may be a good idea.

SWRichmond's picture

The most cynical (but not necessarily inaccurate) view of debt I've seen is that banks loan out imaginary money they don't really have, which was "collateralized" by capital they did not really have, based upon central bank printing presses which create money out of thin air which they don't really have. But then when debtors have trouble repaying onerous loans, the bankers seize real assets.

This is the essence of the ongoing scam.  It is now out in the open.  The chorus of recognition is growing.

B9K9's picture

SWR, I posted this downstream:

In other words, according to the most cynical view, the entire debt-money system is a scam ... and should be repudiated.

George, there's this little book called the Bible that chronicles about 5,000+ years of human history. There are countless admonishments against the practice of usury that ALWAYS lead to money-lenders taking possession of forfeited real property that was pledged as collateral.

I think many would be hard pressed to characterize this tome as "cynical". On the contrary, it speaks across thousands of years warning future generations to beware of crimes yet to be committed.

The credit money system at its core is a fraudulent construction. Compounding principle+interest can never be repaid. Basic exponential math dictates that interest expense will always outrun income.

There is not one instance recorded in history where lenders bemoan their fate resulting from usurious practices - the lamentations are always those of borrowers.

***

George, SWR & ZH gang, I'm beginning to develop a thesis that economic cycles have nothing to do with fiscal, monetary or any other economic policy. Rather, these cycles are merely a function of the population as a whole becoming educated about what is in essence a fraudulent scam.

Once the people are in on the game, they pull back ie de-lever. It doesn't matter how low Ben keeps mortgage interest rates, or how much money the Fed shovels into equities, or how many times the state controlled media repeats the same green-shoots propaganda.

The people now know the truth, and there ain't nothing the power-elite can do about it except prepare for the crash. The real game will be two-fold: (a) will they get the underlying assets; and (b) will they get to keep the money-credit system in place after the reset?

My belief is the answer to both will be no; this time around is a real game changer.

SWRichmond's picture

Human memory among the masses is exactly one generation long.  That is the basis for our being taken advantage of, time and again.  I hope your answers are correct.  That is the end I am working towards.

Cammy Le Flage's picture

It is not an interesting legal theory.  It is classic black letter contract law.  Failure of consideration.  No true consideration - no contract - invalid as a matter of law.  Your analysis of this is right on.

Waterfallsparkles's picture

I have a few other ideas.  One is that if the Bank takes the House back after giving you a "Loan" the Bank never lent you the Money they just created a Debt.  Would them getting the House back be considered Unjust Enrichment? 

I think so.  More later as I think it over some more.

Waterfallsparkles's picture

If the Bank Forcloses would an individual have an action of Detinue against the Bank?  Maybe.  The Title to the Real Estate is in the name of the Individual and the Bank takes possession of the Property an Individual could proceed with a Case of Detinue. 

If the Bank did not give the Individual a Consideration for the Loan then the Bank taking the Title would constitute Unjust Enrichment and Detinue.  It would be upon the Bank to prove they had the right to continue to hold the Property from the Individual.

More later.

Waterfallsparkles's picture

There have been Law Cases whereby the Mortgage was wiped out with the Debtor claiming the Bank did not "Lend" them the Money.  That the Money was created from Zero Capital.  So, the Bank did not have a claim as they did not give the Borrower any "Real" Capital just Money created from Zero. 

The Court ruled that the Bank did not have a Claim against the Mortgagor because it never lent them any Capital.

Interesting Legal theory. If the Bank creates the Money from Zero it does not have any Capital at risk on a Loan.  So, what do they lose it you do not pay.  In effect they lose zero, nothing.  So, they should not have a claim as they have no Loss.  The Law states you have to have a Loss to make a Claim.

Interesting circle.

George Washington's picture

I added the main case to the main post.  Take a look...

Waterfallsparkles's picture

There have been many more cases where the Borrower demanded that the Bank produce the Original Deed there is only one to prove they are the rightfull Enity to demand Forclosure.

Many Banks cannot find or produce the Original Deed.

hamurobby's picture

cant post that, its the rum.....

hamurobby's picture

Sooo, should we get completely liquid (bgb!) and wait until they let us have the homes we are living in and just pay the taxes on them? This cant end good, if you have skin in the game.

DosZap's picture

 if you have skin in the game.

You got it, those of us that OWN our homes outright, are the suckers.

hamurobby's picture

Yes we, er I, have considered getting a small 1st morgage, but she doesnt see the benefits of that. I keep trying to tell her, I dont see the dollar buying more "stuff" in the future. In fact I see it going to ner 0 by 2012, but its anyone's guess.

Waterfallsparkles's picture

The Bank Bailout created Moral Hazard.

If the Banks can walk away from their bad bets or Debts then why can't the People that owe them Money?

The Banks getting paid for their Losses and Bad Debts caused Americans number 1 to pay for thoes losses but also instilled in them that it was OK to just walk away from a losing loan.

The Banks created a new mentality with the American People that it is Ok to walk away from a Loan or Debt without retribution.  In fact the Banks got paid to wipe the bad Debts and investments off their Balance sheets by the Government.

Paulson thought Moral Hazard was to wipe out Shareholders that had no idea what the Company was doing to hide Debt, while rewarding the Companies that embrased the cover up.

Americans are not stupid.  If the Banks got a Bail Out they want one too.  Their way to get a Bail Out is to Default on their Debt.

I say good for them they paid for it with the Bail Out and three Generation of Taxes.  Might as well get theirs now, just like the Banks.

unwashedmass's picture

 

he who defaults first, makes out best in the end. that's why our idiot government will kowtow to the banks and make sure that we don't default until the last dollar the peasants have has been handed over to JPM and GS.

Cammy Le Flage's picture

P.S.  I have not lost one thing related to how I live - except my credit rating.  Not one thing at all and I remain zero burden on anyone and take care of other lives in the process.  It can be done at this time.  We don't get a lot of these times in humanity.  Just do it.  (Nike does not pay me)

DosZap's picture

GREAT FICO scores are so sad.(for 90%+ of Americans).

Most sheeple think they are CREDIT scores, their not,their Debt scores.The Banks LOVE you.

People who, pay cash for cars/etc, have  credit cards, and pay in full end of month,typically have poor/lower FICO scores.

Even though they may be very wealthy.

Monthly payments paid on time, over time, and the amounts,determine your FICO score............your the best debtors.

 

velobabe's picture

debt scores

did you know apple stores won't take cash or a check for an iphone? i fu#king walked out. apple has sold out to the cc industry. this blew my mind, well for that day anyway. can't seem to keep track of all my mind blowing days.

 

Cammy Le Flage's picture

Ok.  I will admit it.  I knew my creditors were raping me every single moment of every day.   And, I actually made decent money.  I revolted.  I stopped paying everyone but essentials until I got a better deal (I don't like to not pay for what I got - mom made me be this way - no stealing).  Guess what.  They don't even know what they are doing and they do not care.  This occurred in September 2007.  I remained in my home which did not go into foreclosure until March 2008.  My lawyer did not answer the foreclosure complaint until January 2009 - just filed a 2 page "motion for extension of time to respond to complaint" - for b.s. reasons: review it, meet with client.  Well even they know there is nothing really to review. Their lawyers did NOTHING until December 2008.  Meanwhile, I enjoyed by beautiful little townhouse (oh, and still maintained and paid maintenance etc.)  Well, after 2008, my association was happy that I am still there to pay the maintenance!  It is now March 2010.  A giant powerhouse law firm has been retained to take over my baby bottle law foreclosure case - which means in law speak "they don't have a case".   They don't know who owns my mortgage at all because none of the legal requirements for property transfer were followed by them to secure the interest at all.   I stopped paying the property taxes also - thank god!  Rates are out of control and a true market real estate price for anything cannot be ascertained fairly in these times.  If they wanted my house, they would have taken it already.   Credit cards?  Oh, they sold those off to debt collection bottom feeders without a written assignment.  Dumb.  I actually wanted to pay them some money fairly at mediation that never occurred.  No paper - case dismissed.   I wonder if I am the only one on the planet paying $175/month rent/maintenance fee in a "have to live in" area in a metropolitcan area in a big country?  If we ALL repudiate - everything will crumble in a heartbeat.  We can all party while some people in power have heart attacks and then clean up the mess when it is over -like we always do.  That would be better than jail for this craziness.  Oh, the trick?  Don't try to make a lot of money while telling everyone No.  Broke people cannot be collected on and debtors prison is gone.  They can't lock the whole world up.   My "deposition" is being taken in May 2010.  May 5 - Cinco De Mayo so my lawyer and I can drink Tequila after making fun of the suits from the powerhouse law firm that are 26 years old and don't know what they are doing yet.

Crime of the Century's picture

I stopped paying the property taxes also - thank god!

And this has kept the sheriff away how?

Ned Zeppelin's picture

Takes a while.  The first sale is at the tax claims bureau (or its equivalent in your state of county).  at this sale, the property is offered for sale for the price of the taxes due, BUT SUBJECT TO all liens of record.  If there is an underwater mortgage before the sale, there is one after the sale, and guess what, all you did if you foolishly bought the home is step into the debtors shoes. So that doesn't fly.

a couple of years later you go to a judicial sale.  Largest creditor typically bids for $1 + its mortgage, and - voila - owns a house. Yippee says the bank's overloaded REO (real - estate- owned) department, another house to sell to no bidders.  Better to leave the debtor in place preserving the value of the collateral by maintaining the home.  No tax collections mean all those muni bonds start to crack under the pressure. Not to mention the mortgage, which has been bundled and shredded into a CMBS sitting in some pension fund or Federal Reserve account slowly becoming worthless. 

Had our leaders pursued a just path to begin with and bankrupted the rich and powerful, the problem of debt repudiation might have been avoided, at least for a while, or equitably restructured.  But greed knows no boundaries until it finally devours itself.

DosZap's picture

Bingo!....right on the head...........WHO would take it?..

NO ONE.

1fortheroad's picture

Good for you and I mean that.

Cistercian's picture

 Epic win!Good job there...and I wish you all the best!

MikeNYC's picture

I've been thinking for months now that someone should organize a "We Repudiate" movement in the middle and high schools.

 

I don't have any kids or anything, so it would be weird for me to go out and try to organize some into a movement.

 

Sounds like a great idea for some of the young libertarians/young tea partiests (do they exist?)

 

Start a groundswell that makes it clear "When we inherit this dump, we're not paying the bills the drunk old men dumped on us. Not one dime. World get ready."

hamurobby's picture

Im all for "tea", its better than koolaid anyday.

Edmon Plume's picture

Debt repudiation will once again stick the responsible for the actions of the irresponsible.  Like paying your neighbor's mortgage?  Mine showed up with tricked out cars and big screen TVs and parties when they knew damn well they were in great danger of default, and they told everyone they were.  Sorry, but this doesn't seem like good news to me.  For every debt they repudiate, it costs them money they pass on to the rest of us in terms of higher rates, fees, etc.  Especially revolving debt that is unsecured.

Many of the people who have maxed out credit cards and other massive and suffocating debts are people who don't understand finance.  They think it's free money honey.  Sorry, but those are the last people who I want to repudiate any debts, because they are the ones who are in most need of a good financial whipping, and who have the least incentive to worry about people who do pay their debts.

Notwithstanding the fact that banks can and do raise rates for no reason, most of the sob stories I've heard have to do with things the borrower did wrong, like miss payments; the fact that the banks suck doesn't automatically mean the borrower doesn't suck.

trav7777's picture

This is a popular perception but it's inaccurate.

The banks *needed* people to do exactly that in order to grow the credit base.  The credit base MUST grow as a mathematical artifact of the monetary debt-based system.  So they in essence had to make these loans to these people.  They ran OUT of good credit risks. 

The people were only the part of the iceberg above the waterline; most of the rest of the transactional loop was derivatives, CDOs, securitization, leverage, CDSs, CDO squareds, etc., etc.  CDOs built out of the CDSs and IRSs that traded along with the CDOs in the first place.  The person was just the live body needed to support this mountain of debt.

You have been paying for your privilege of using the FRN anyhow; it's not like this was free ever.

Don't hate on the neighbor; look at what the USG has put you on the hook as a taxpayer for.  It DWARFS your neighbor's mortgage.  Would that this were all we had to pay. 

poorold's picture

You are spot on with your comments, but leave out a most important consideration.

Who is it that deemed these folks creditworthy and allowed them the ability to do what they did?

These people did not rob a bank to get the money.  The bank/financial institution gave them the money because they told the borrower he could afford to spend it any way he wanted to and would be able to pay it back.

And the more money the bank lent out, the more money the banker got paid.

Too bad it wasn't the banker's money the banker was lending and too bad the banker is not being held accountable for his lending decisions.

Almost Solvent's picture

These lenders are whores.
The kind that steal your wallet and give you a nasty STD. Whores the whole lot of 'em.

Mercury's picture

I believe the preferred term is "lifestyle facilitator."

Cammy Le Flage's picture

Bey!  You is drinkin' the Kool Aid!  Our whole monetary system is based on debt, debt, debt - that can never be repaid.  We need a new system obviously.  Oh, and if you see my posts below.  do not get mad and I did not get anything new really.  Except a toothbrush and I went to the dentist for a teeth cleaning.

sgt_doom's picture

You are soooooooo right on, dude!

docj's picture

I'm totally with you, Edmon.  My wife and I have FICO scores in the low 800's and I feel like a freaking sucker.

But the "do the right thing for people who did the right thing" ship sailed about 60-years ago.  Repudiation/Default is not a matter of if anymore, it's going to happen.  It's just a matter of how many more suckers are going to take it up the posterior - and as the morons who were jumping on Greek CDS contracts as recently as this morning show, there's plenty of suckers out there just waiting for their prostate exam.

Rainman's picture

Making loans to people with an average IQ of +/- 50 bps usually ends badly for the lender. The borrower is happy to have had the opportunity to participate in a once in a generation opportunity to get somethin' for nuthin'. The lender sells the bad paper to the Fed.  

Cammy Le Flage's picture

The quicker we repudiate.  The better.  Frankly, it is classic strategy used by the powers that be when they want to renegotiate.  F them and F debt for everyone and everything. 

The Patagonian's picture

I'm a Humanities person, not finance.  But I come here to ZH because all of a sudden finance is affecting my personal life and I am trying to learn what the hell is going on.  ZH, when I first got here, ran an article from an Australian economist who seemed to be well respected, who claimed that the only way out of this was a world-wide jubelee.

I remember that distinctly, it was only after a week or so that I signed up for an account here - oh, about six to eight months ago.  I haven't seen much from him since.

What I have seen since are astro-physicists stating that the dollars of debt owed total more than the stars in the known universe, when we are talking trillion and only billions of stars are know.

That to me says that there will have to be a jubilee and forgiveness of debt as there is no mathmatical possibility of anyone paying off anything.

But like I said, I'm a humanities person, please feel free to correct me on the math.