100% Debt Discharge Decision In Greece Sets Troubling Precedent For Local Banks

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Sun, 10/02/2011 - 04:01 | 1730367 jomama
jomama's picture

jubilee, bitchez

Sun, 10/02/2011 - 04:05 | 1730371 Cynical Sidney
Cynical Sidney's picture

yes! debt relief on priv/sovgn debt and jubilee!

Sun, 10/02/2011 - 05:00 | 1730400 Popo
Popo's picture

Well it sure sucks for anyone in Greece who didn't take on a suicide loan.  Any of the unfortunately responsible Greek people who correctly identified the housing market as a bubble, and thought that one day they were going to be able to purchase a house at it's uninflated, fair-value are in for a clobbering.   Too bad.  'Looks like foreclosed housing won't be returning to the market any time soon.  Instead, it's going to be given free to the Greeks who bought more house than they could afford.  'Turns out the responsible should have been more irresponsible.

That's some fucking Jubilee.  It's living hell for any responsible Greeks waiting on the sidelines, who will be forced to watch housing prices continue to levitate, as their cash, income, investments and net worth get reamed.  

I'm all for watching the banks take a beating -- but it doesn't mean that the other end of the equation should be made whole.  If you're in default you're in default.  Let the free market do it's thing.   Housing is historically 2.5x annual income.   Let it revert to the mean...  Banks and government policy create crazy price distortions which ultimately hurt people.

 

Sun, 10/02/2011 - 05:16 | 1730414 Going Loco
Going Loco's picture

Gaming the system is the only way to survive and prosper. None of the old ways of living work any longer. Working hard, playing by the rules, saving to build wealth - all gone. You have to learn game theory and get inside the heads of the central bankers if you want to survive, let alone prosper.

Sun, 10/02/2011 - 06:05 | 1730434 AnAnonymous
AnAnonymous's picture

None of the old ways of living work any longer. Working hard, playing by the rules, saving to build wealth - all gone.

///////////////////////////////////////////////////////////////

It is supposed it refers to a time prior to the US. Because noboby have more gamed the own system of rules than US citizens.

Started with natural rights theory just to game it.

US world order.

Sun, 10/02/2011 - 10:09 | 1730605 Cynical Sidney
Cynical Sidney's picture

GL: system gaming leads to collective destruction.

AnAnon: you are a darkie a hater with penii envy, you will never be blonde go cry in a corner

Sun, 10/02/2011 - 10:26 | 1730675 Smiddywesson
Smiddywesson's picture

AnAnon: you are a darkie a hater with penii envy, you will never be blonde go cry in a corner

ROTFL!  AnAnon, go back to your sneaker factory you hater. The Century of China is over.  Your Century of Homosexuality is here because you idiots aborted all the girls under your One Child Policy.  Enjoy.

Sun, 10/02/2011 - 10:49 | 1730714 Slartebartfast
Slartebartfast's picture

Ouch!

The century of homosexuality in China has arrived?  ROTFL!!!

Seriously though,the Rockefeller's really screwed the Chinese over when they suckered them into that one child policy, didn't they?  Chinese civilization has endured for tens of thousands of years.  It will be just a memory within a century.  Wonder who will populate the vacant land?  Mongols?  Russians?  Arabs?

Sun, 10/02/2011 - 14:50 | 1731126 falak pema
falak pema's picture

ching chongs wang a dangs ....does that answer your question? why the Manichean write off of the middle kingdom? You don't like them becoming top dogs...? After the USA? WIth One billion plus, I wouldn't worry too much of one child play, as the trend can reverse any day.

Sour grapes and grumpy apes...not a recipe for future. 

Sun, 10/02/2011 - 19:16 | 1731663 Hugh_Jorgan
Hugh_Jorgan's picture

The Chinese will simply roll the dice with a massive war of some kind to reduce the surplus male population. They have nothing to lose and everything to gain. This is why they have sat and tolerated the fiscal insanity of the world's reserve currency for the past 20 years. The military has defacto control of the Chinese Government. So, as soon as they can reasonably shift the finger of blame for the problems of the average Chinese person to the USA, they will begin a global propaganda campaign to demonize us openly and incessantly. Then they will look to an "Archduke Ferdinand" moment that will allow them to trigger military action.

I hope everyone has food and firearms, this psycho-circus ends in pain.

Mon, 10/03/2011 - 07:40 | 1732426 Cynical Sidney
Cynical Sidney's picture

i'd like to put in an argument for debt relief, clear the air and correct some misconceptions surrounding it. a lot of people are condemning debt relief or jubilee from their moral high ground, and i can relate to the sentiment.
regardless of how 'irresponsible' jubilee is, from a practical stand point, debt relief may be the last weapon we have against banksters. Little other alternative could have provided for a platform to rollback fraudulent financial transactions, since '08 we had had very few success against them, seemingly there's no other way to unwind illegitimate positions such as (morally hazardous) CDS contracts, and other financially complicated and misleading instruments that promote scams(please see Fraudulent Conveyance), most of which are simply complex financial crimes(hmm.. +1 to the oxymoron meter). the logic here is as follows: two wrongs don't make it right, but two wrongs certainly can cancel each other out. for example, the actions of repeat murderers demand the use of capital punishment, they should get what they asked for. capital punishment and debt relief are not consistent with some of our values but they are effective solutions
back to debt relief, how would it work? in effect like a flat rate wealth tax or a massive write off, a jubilee levels the overall playing field for everyone. through the process of price discovery, the market is telling us that, there are not enough money in the world to cover what we owe collectively, in other words, the people cannot create enough value to settle all the debts that were imposed on them fraudulently. a huge disconnect exists between what we produce and what our creditors say we must produce, debt relief can bridge that gap.
personally i have very little debt, (least during the hours not trading on margin) but i believe jubilee is the right thing to do at this time, to clean the slate and give everyone a second chance, to renew what we lost in this country. in order to regain the confidence of the world, we must first have debt relief.
when debt relief becomes implemented, a lot of fraudulent fiat wealth will be cleaned out, companies which have badly leveraged balance sheets will be wiped out, the super rich have much to lose. however it restores equilibrium into the market, it helps global trade, leaves us leaner and more competitively advantaged, it will ensure that we will not severely decouple from globalization, using spare labor capacity to get our GDP growing again, and gain new partnerships in the global trade (argentina).
Debt relief requires that everyone to get on board, make sure everyone is on the same page, it's the only way to go about it; and this is my effort to attempt such a thing.   #CynicalSidney

Sun, 10/02/2011 - 10:36 | 1730697 El Viejo
El Viejo's picture

If GS and JPM and Hedge Funds didn't see this coming how can you say some poor workaday slob saw it coming and is gaming the system? The rich and the banks and Hedge Funds caused this mess and they should pay. Buy and invest in the world you want. If bank bond holders lose now why should I care? Am I gaming the system? They were the ones gaming the system and now they should pay. Federal wages have been frozen for three years:  (here are some more gamers that should now lose.) http://finance.yahoo.com/news/Many-government-retirees-also-apf-4250897109.html?x=0&sec=topStories&pos=main&asset=&ccode=

More Gamers: http://www.ritholtz.com/blog/2011/04/corporate-tax-rates-then-and-now/

Smoking gun of the rich gaming the system: http://www.cbpp.org/cms/index.cfm?fa=archivePage&id=3-29-07inc.htm

 

 

 

Sun, 10/02/2011 - 13:50 | 1730968 traderjoe
traderjoe's picture

I'm not a fan of when people lump the "rich" in together. There's a huge difference between how much money, how it was acquired and how it is used.

Sun, 10/02/2011 - 11:13 | 1730739 tmosley
tmosley's picture

You'd best start hating the English and the French too, because they are the ones who systematized the concept, even though it already existed in all humans.

Christ, what the fuck is wrong with you?  Do you REALLY think that human beings own neither themselves nor the things in their possession?  Are you saying that men do not gain exclusive right to land by living there, establishing boundaries, and mixing their labor with it?

What the fuck do you want?  A return to savagery, where men kill men every day over scraps of food, and where no-one makes more than they need because it will just be stolen from them?  A world where there is no division of labor?

Sun, 10/02/2011 - 11:39 | 1730786 TDoS
TDoS's picture

So the natives who lived here before Europeans, by your definition, owned this land.  Then what?  Savagery came with a gun, a steel blade, and a pox infected blanket, took what was theirs, claimed righteousness by jotting new lines on a piece of paper, and this you stand by as the correct order of things.

Land ownership is a joke.  No man creates land.  Man is subject to the land.  Without land - healthy, viable land - man and all his imaginings like governments, currencies, state lines, and even ownership, cease to exist.

Now pay attention: When man can own land, you immediately create a slave and a master class.  The owners and the owned. Those with no land forced to rent from the owners, further enriching the owners, who "buy" more land.  The population increases, reducing the demand for the labor of the slave class, reducing their wages, and further distancing them from ever becoming "owners" themselves.  

Native peoples lived without currency, without masters, without ownership for hundreds of thousands of years.  They managed to do so without destroying the life giving planet on which they relied. Capitalism has been around for a blink of an eye, and has coated the world in nuclear fallout, acidified the oceans, offset the atmospheric balance, decimated rain forests and other old growth, eviscerated the top soil, and on, and on, and on.  

This system has eaten everything, and is now eating itself.  It doesn't care about you or your money worship.  Nature bats last bitches.  

Sun, 10/02/2011 - 11:52 | 1730805 Errol
Errol's picture

TDoS, you knocked that one outta da park!

Sun, 10/02/2011 - 12:55 | 1730840 Grimbert
Grimbert's picture

One of the reasons there was an American revolution was because the local Europeans wanted to expand westwards, and British/English law forbade that, because it was recognised that that land belonged to the indians. 

There are still disputes over land ownership in Canada because they respect the fact that the land belonged to other people relatively recently.

Most of the buildings in my city are many hundreds of years old, and I bet you can trace the land ownership back 1000 years to the Normans, nearly to the Vikings. 

So land ownership does work, but for the first few hundred years it might be contentious. I would never buy property in North America for that very reason.

Sun, 10/02/2011 - 13:40 | 1730949 Confused
Confused's picture

NIcely said. 

Sun, 10/02/2011 - 20:09 | 1731705 azusgm
azusgm's picture

Ever heard of the Aztecs, or the Egyptians, or the Greeks, or the Pheonicians?

I hope you aren't suggesting that the Europeans are the root of all evil and the originators of oppression.

Mon, 10/03/2011 - 02:36 | 1732370 TDoS
TDoS's picture

I never once mentioned race. This isn't about race or national origin. It is about cultural memes. It is about the ideas we hold in our heads which then guide our actions, and whether or not those actions are ultimately sustainable or not, whether they are exploitative or not, etc. If they are, then the ideas in our heads are toxic and need altering.

That's the amazing thing about our greatest predicaments: We can solve them merely by changing our minds. If we change our minds about what it means to be a human, to live in concert with our human and non-human neighbors, to give back as much as we take, to see that the value in a tree is in it living and trading respiratory gasses with us, not in cutting it down and turning it into Louisville sluggers.

We are at a critical juncture in our history, where we need to evolve or else perish.  Everything must be on the table.  No more rearranging deck chairs.  An infinite growth paradigm cannot last forever, and there is no longer enough energy to back up the money we would need to create in order to plug our debt hole and double down again.

Evolution doesn't care if a species wants to change or not.  They change or die.  That is our choice.  Change our minds, and thus our actions, or die clinging our crumpled and useless money.

Sun, 10/02/2011 - 06:29 | 1730447 CosmicBuddha
CosmicBuddha's picture

I agree GL. The perverse incentives set up by corrupt central bankers and governments destroy economies by this very mechanism. When the monetary system is subverted the economy is corrupted; and when the economy is corrupted the people are corrupted, and then the whole system collapses. The only long term solution is sound money: for true prosperity we need gold as money coupled with a 100 per cent reserve banking system.

Sun, 10/02/2011 - 09:38 | 1730592 traderjoe
traderjoe's picture

The only way to win is to not play the game.

Sun, 10/02/2011 - 09:58 | 1730620 dwdollar
dwdollar's picture

You have to play the game at some level. Unless you move to Alaska and NEVER use any product from the outside world.

Sun, 10/02/2011 - 16:12 | 1731306 Going Loco
Going Loco's picture

Perverse though it may be to do so, I wish to explain myself further.

I do not advocate gaming the system, nor do I applaud it as a survival mechanism. I merely observe that the old rules no longer work. I stand by my dictum that you have to learn game theory and get inside the heads of the central bankers if you want to survive, let alone prosper. I did not say that this is a Good Thing.

In the 1960s my mother, who was a chicken farmer, read Carson's  "Silent Spring", and worked to abolish factory farming. She had a particular hatred of battery hen cages. She failed in this endeavour. In the 1980s my father, a respected economist at the World Bank, returned from a mission to a notably flea-infested part of Africa and described the work he did as "the aid racket". Towards the end of his career he became so disillusioned by the World Bank, the FAO, and (particularly) America, that he lost heart. My parents worked all their lives, became wealthy, bequeathed their wealth to me, and died sceptical about the entire wealth-creating process, and the powers that were built upon it.

I do not like gaming the system. I am just saying that it's the only game in town.

 

BTW I think gold has bottommed.

Sun, 10/02/2011 - 07:30 | 1730478 jm
jm's picture

This "jubilee" business seems over the top.  If she got her debt discharged, but in exchange she is out of the house or net worth set to zero, this is nothing more than a bankruptcy proceeding.

Sun, 10/02/2011 - 07:52 | 1730485 Snidley Whipsnae
Snidley Whipsnae's picture

In 41 of the 50 US States home mortgages are recourse loans, meaning that when a home owner walks away from a home with underwater mortgage and the bank sells the home for less than the home owner owes on the mortgage, the bank can get a lein against the homeowner for the difference.

Banks then sell these leins for one cent to seven cents on the dollar to collection agencies. The collection agencies sit on the leins, waiting for better economic times to arrive, and then go after the those with judgements against them... meanwhile interest on the judgement accrues at ~ 8% per annum.

The collection agencies have 20 years to begin action against the former homeowner.

Does any of this sound like debt forgiveness?

Mish has an article about this here... "House is Gone but Debt Lives On"

http://globaleconomicanalysis.blogspot.com/

 

Sun, 10/02/2011 - 08:04 | 1730494 jm
jm's picture

The article is about Greece.  I have no idea if this was a formal bankrupcy proceeding or not, just trying to cut through all the crap sensationalism that people whip themselves into by reading a headline.

But all the same, you example seems very fishy to me.  If you go through bankruptcy in the United States, you could sue a collector who tries to collect on a recourse loan pre-bankruptcy, I would wager.  If you didn't get square with the law and simply left a bill then a collector could try to collect years from now, but they would have to pay off a lot of senators and representatives to make this stick.

This Greek lady prolly had a negative net worth set to zero.  This is a good thing for her.

Sun, 10/02/2011 - 08:29 | 1730516 Snidley Whipsnae
Snidley Whipsnae's picture

Did you read the link? If not, I suggest you do so.

Most home owners in the US that are walking away from their underwater homes are not going through bk or even seeking advice from an attorney familiar with mtgs.

At any rate read the link and we can discuss the problem further. My point is...

debt forgiveness in Greece, like some wines, does not travel well.

Sun, 10/02/2011 - 08:41 | 1730530 jm
jm's picture

My point is:  face the consequences of your actions and don't just walk away.  Failure to do this is the choice of those parties, and the implications and costs should fall to no other party but them.   

So much that is wrong with the world hinges on the failure of this one single point.

I understand poverty quite well from my youth, and it has less to do with money than most think.  Poverty is the lack of apparent choices available to a person, and the sense of helplessness this imparts.  It informs the sense of helplessness in many posters' comments.  But life is never hopeless when one accepts the truth of their situation.  The truth immediately makes choices available.

Sun, 10/02/2011 - 08:59 | 1730554 ZeroPower
ZeroPower's picture

Well said jm.

Sun, 10/02/2011 - 09:45 | 1730598 john39
john39's picture

how is it fair that I bought a house in the bubble years and therefore overpaid as a result of the FED playing games to make the economy look healthy.  now the bubble pops, I lost all my equity as my house value declines....  next I lose my job and my ability to repay the debt on a house that contines to sink in value...     your suggestion is that i work three jobs to try and repay the bank (which admittedly is not the FED- but part of the corrupt system run by the FED)...    sorry man, but i am not going to waste my life trying to prop up the banks.  true savers will get screwed....  but the truth is that we all got screwed by the same people.   they are the ones that should pay the price to fix things, not the little people.   btw, i did not buy a mcmansion, just a small house well within my budget.

Sun, 10/02/2011 - 10:31 | 1730681 infinity8
infinity8's picture

so fucking sick of this - why did you buy the fucking house?! if you didn't know at the time that you were "overpaying" whose fault is that? do you still have a babysitter?

Sun, 10/02/2011 - 10:44 | 1730706 LetThemEatRand
LetThemEatRand's picture

Does the bank need a babysitter too?  Seems to me there were two sides to this fucking deal.  In fact, isn't the sophisticated lender in a much better position to decide the risk of a housing/economic downturn?  So why not rephrase your question:  "why did you loan money to the buyer of the fucking house?  Didn't you know she was overpaying?"

Sun, 10/02/2011 - 10:50 | 1730716 infinity8
infinity8's picture

I've got a car I'd like to sell you.

Sun, 10/02/2011 - 10:53 | 1730719 LetThemEatRand
LetThemEatRand's picture

Sell it to the woman in this story.  I'm sure we can find a banker who will lend her more money to buy it.

Sun, 10/02/2011 - 11:43 | 1730795 infinity8
infinity8's picture

that'll be $5,000,000 thanks. boy, banks and greek women are Stooooopid.

Sun, 10/02/2011 - 13:27 | 1730930 Ahmeexnal
Ahmeexnal's picture

Of course the bottom end knew they were overpaying.
Of course the banks knew they were lending to deadbeats.
Of course both ends knew this would eventually blow up.
Of course both ends knew the prudent responsible sheep (and their sons and grandsonds) would pick up the tab.
It has worked that way for millennia.

Sun, 10/02/2011 - 10:58 | 1730721 azusgm
azusgm's picture

Two questions:

 

1) What was rent?

 

2) What was the trajectory for rent?

 

Hindsight can be a form of tunnel vision.

Sun, 10/02/2011 - 11:11 | 1730734 infinity8
infinity8's picture

rent was the better deal, esp. w/trash and water included, no maintance $'s, etc. and "unit available" signs all around. a lot of the underwaters are people who had bought and sold at least once since 2000. it sounds too good to be true for everyone else. . . sick of it.

Sun, 10/02/2011 - 11:27 | 1730763 john39
john39's picture

a rather silly comment, really.  most people didn't realize that they were overpaying because the way our system works, most are kept deliberately ignorant of the "big picture".    If i take your logic to its conclusion then, no one should have bought a house from 2004 on because they should have known that big banks and the FED were creating the biggest financial bubble in world history for the purpose of collapsing the middle class and literally stealing wealth from millions of people.  yeah, guess we all should have seen that coming...  but, just because I fell for it back then, doesn't mean that I am going to play this game twice.   i will not be their debt slave any longer.  the debt based slavery system has to end, let the chips fall where they may.   savers and debtors alike get screwed in this system.

Sun, 10/02/2011 - 21:36 | 1731986 chindit13
chindit13's picture

If your home had risen in value, would you have considered an equity loan?  If you sold the home and moved to a less expensive residence, would you have kept the gain?

If so, that sounds eerily familiar to a bank prop desk that believes in privatized gains but socialized losses.

If it is wrong for the banks, it is wrong for everybody.

Sun, 10/02/2011 - 12:30 | 1730868 ZeroPower
ZeroPower's picture

Fair? Fair?

Come on... one must shy away from such questions which are easily retorted to by saying 'life isn't fair'.

For more detail - you overpaying for a house wasn't so much as the Fed (it takes 2 to tango) and over-eager buyers not realizing the intrinsic value of a home, as it was merely due to bad luck on your behalf for being an unfortuante buyer in that time.

You saying you will walk away from this is no better than the hippies right now camping outside WS, living on hard working Americans tax $$, seemingly protesting "for the people" yet in reality have no clue what they want besides from some media exposure which they, rightfully so, aren't even getting.

 

Sun, 10/02/2011 - 16:28 | 1731336 RockyRacoon
RockyRacoon's picture

Your bread is obviously buttered on the banker side.   After this point your comments will be considered with that caveat.

Sun, 10/02/2011 - 16:38 | 1731358 ZeroPower
ZeroPower's picture

..and yet, it might explain why i prefer to spend my little free time reading and responding on finance-oriented websites as opposed to wherever people buttered for free with my tax money spend their days.

Sun, 10/02/2011 - 22:25 | 1732075 LetThemEatRand
LetThemEatRand's picture

It may also explain and reveal that you are a shill.  You can't defend these bankster fuckers and also claim that anyone who is against them is somehow sucking off you teet.   You're really not as important as you think you are.  Really.

Sun, 10/02/2011 - 10:29 | 1730677 Hi Ho Silver
Hi Ho Silver's picture

Face the consequences? And what would those be?  Being a debt slave for the remainder of a 30 year agreement?

Walking away has it's consequences.  A mortgage contract includes remedies and penalties for default; loss of equity, credit damage.

I don't know anyone who has ever asked for their mortgage to be purchased by Fannie or Freddie.  If it wasn't their decision how can they be held culpable for the Bank's and Govt's decision to expose the public?

 

 

Sun, 10/02/2011 - 12:50 | 1730897 jm
jm's picture

The consequences vary by circumstance, but in every case it implies living within one's lowered means, at least for a time.

Don't take my comments as supportive of bank bailouts.  Taxpayer abuse is what keeps banks from actually taking the steps they need to shore up their balances sheets.  As painful as this is going to be, I'm coming around to the idea of ending this charade up to the point of systemic meltdown.

Very few of the problems of the global economy areanywhere near resolution even after Civil War style quantitative easing and New Deal^2 style fiscal stimulus.

Sun, 10/02/2011 - 11:24 | 1730700 LetThemEatRand
LetThemEatRand's picture

I agree. Let the banks face the consequences of writing loans that any moron could have seen would not be paid back.  Or does personal responsibility only apply to persons?  Wait, never mind, corporations/banks are persons too according to U.S. law anyway.  Sucks to be a person when you have to take responsibility for mindless greed and short-term thinking.  If there were really personal responsibility, we would see clawbacks of banker bonuses that were paid from origination of these ridiculous loans.  

Sun, 10/02/2011 - 13:06 | 1730909 jm
jm's picture

I think it useful to see why banks get such treatment, not that there is anything right in it.  Banks play a crucial role as economic coordinators.

Every business has to roll their debt.  When you impair their bank, it is harder for them to do it.  Businesses will either have to get an extension of day to pay, or they will have to pay more in financing.  This puts some small chunk companies out of business.  So there are more unemployed people.  They have trouble making their mortage payments, which makes banks even less willing to roll debt.  The combination of fewer customers (due to lowered income through unemployment, inability to roll debt and extend days to pay, among other things) in turn puts remaining businesses under pressure.  This is all a vicious cycle.  Easing bank stress through Fed policy is thought to be a way to short-circuit this cycle.  Whether it works or not is debatable at this point.

I have no problem with stopping this cycle.  But I think that banks should have been placed in receivership as a condition, or some similar arrangement like Woori Financial or Mizuho, if bondholders faced liabilities in excess of their capital investment. But that would mean 401ks vaporize because equity = 0, and bondholders too.

Not really good options anywhere you look.

 

Sun, 10/02/2011 - 14:36 | 1731090 mjk0259
mjk0259's picture

In the US, banks are rarely holding these loans. They sold them to USA taxpayer (FNMA) a couple weeks after they wrote them at a profit with many fees.

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