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OK, I was gone, but I have a substantive question I need to ask.

I've heard some talk recently by Reich or Krugman or maybe even Occupy about pushing as policy some time this summer a mass mortgage write-down program in order to give the economy a real shove in the right direction.

The biggest mortage holders are forced to write down (reduce the balance owed) on most mortgages held in the US. A give-back to the folks who've done it all right but have been left holding a half-empty bag.

Whatcha think?

I ruminate a bit below the fold.

So, it SOUNDS GREAT, for one thing. Massively populist, putting the monkey on the correct back, so to speak. Mortgage banking was the problem, here's part of a solution for ordinary homeowners.

It's gotta play well in Peoria among the working class. Here is Obama pushing for money to come back to you! What a stump speech it could make. It puts the Republicans in a very painful position to argue against it.

It is even possible: it can be done in some reasonable amount perhaps with targets for areas hardest hit, and it is a direct stimulus to the part of the economy that needs it most.

So I'll stay and see what people think, is there any chance this could occur to the Obama White House as a program worth pushing for?

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Comment Preferences

  •  Even civilizations in the Ancient World... (3+ / 0-)
    Recommended by:
    Odysseus, Toon, Aspe4

    like the Babylonians, the Egyptians, and the Romans knew that debt could not be carried over ad infinitude.

    The occasionally had "debt holidays" to re-boot their economies.  

    We might learn something from these civilizations that lasted thousands of years and were able to weather many economic crises.  

    I do believe that the right thing to do in this case is to adjust debt in favor of property owners...I just don't know how you do it in any equitable manner.

  •  Freddie Mac head has already said this isn't (1+ / 0-)
    Recommended by:
    slinkerwink

    feasible--would cost taxpayers.  Why it can't come off the backs of the banks (who are sitting on mountains of cash), I can't quite get.  

    They're offering a trick in return:  forbearance (where you can skip paying on your mortage for a period of hardship).  

    I need to read the details, but if this is one of those skip a payment(s) type offers, where interest still accrues and the loan is extended by months or years, it will simply mean banks will make even more money off the loans.

    I am anxious to see the details.

    His silence says everything we need to know.

    by livjack on Tue Jan 24, 2012 at 09:36:59 AM PST

  •  Forgiving principal is not a "win" (5+ / 0-)
    Recommended by:
    CS11, Odysseus, MGross, tardis10, FG

    Constitutionally, the federal government cannot force mortgage holders to forgive principal without compensating them.  That means that the taxpayers pay for this.

    As a matter of fairness, I do not think the vast majority of homeowners (who are current on their mortgages) would support the forgiveness of principal if they have to pay for it.  After all, their house may be worth less than they paid for it, too, and they are not getting a cash gift from the taxpayers -- and they don't want to pay someone else's mortgage besides.  

    I think the average homeowner would go along with a restructuring of debt to today's interest rates, to longer payout periods, that kind of thing.  I think forgiving principal is a something that would not be supported.  

    •  I disagree--why can't they get back some of the (0+ / 0-)

      money they gave banks to restructure loans, which they simply took and did not follow through with restructuring.

      It's time for the freaking banks to give us back some of that money.  They are sitting on piles, and giving out their execs bigger bonuses than ever.  

      The old way of doing things simply will no apply any longer.  Change the regulations that require paying taxes on written down principal, or whatever else the old-think-capitalists pull out of their hats to say it's "impossible."

      Think out of the box.

      Something has to be done.

      His silence says everything we need to know.

      by livjack on Tue Jan 24, 2012 at 09:54:33 AM PST

      [ Parent ]

  •  have fun paying taxes (5+ / 0-)

    the bank writes down your mortgage 100k, you have to pay taxes on that, its income.  you got 30k in cash sitting around for the IRS this year?

    Bad is never good until worse happens

    by dark daze on Tue Jan 24, 2012 at 09:44:52 AM PST

    •  Yep, that's the biggest problem with this. (3+ / 0-)
      Recommended by:
      Odysseus, SquirrelWhisperer, Aspe4

      Forgiven debt is income that has to be declared.  I suppose they could write up a loophole to make some of this deductible, but I would imagine the bright tax lawyers for the rich would find a way to exploit it (costing the rest of the taxpayers more money).

      "The next time I tell you someone from Texas should not be president of the United States, please, pay attention." Molly Ivins

      by janmtairy on Tue Jan 24, 2012 at 09:57:53 AM PST

      [ Parent ]

  •  It might be popular with people who get (2+ / 0-)
    Recommended by:
    CS11, FG

    the benefit. What about the majority who don't. Will there be any kind of standards so that the benefits will go to the less well off. What if someone like Romeny qualified but the majority of Americans would not.

    •  and then they will use that to pit Americans (2+ / 0-)
      Recommended by:
      twigg, Aspe4

      against each other:  hey! I didn't get help neither should you....hey! I don't have a pension, neither should you. . ., hey! my employer doesn't provide health insurance, neither should yours. . .I could go on.

      It seems to be working remarkably well so far.  Even here on daily kos.

      His silence says everything we need to know.

      by livjack on Tue Jan 24, 2012 at 10:25:08 AM PST

      [ Parent ]

      •  Correct (1+ / 0-)
        Recommended by:
        Toon

        There is way too much "If I can't have it, neither can you", even right here on DKos.

        It's unattractive.

        All the crap about "forgiven debt is income" ... as an obstacle it's just plain rubbish. Easiest thing in the world to write that into the Tax Code.

        "Forgiven Debt" actually isn't income, and it never was. Whatever the IRS thinks, it's just dumb.

        And yes, the Banks CAN be forced to write down debt. It's quite easy. They write down the freakin' debt or they get a windfall tax, and we write down the debt. Take your pick.

        I hope that the quality of debate will improve,
        but I fear we will remain Democrats.

        by twigg on Tue Jan 24, 2012 at 11:12:54 AM PST

        [ Parent ]

      •  It's Not About (0+ / 0-)

        I didn't get help neither should you

        It's about "You're going to be helped because you have debt and I'm going to have to pay for it because I don't", and I think this is perfectly understandable.

        There is no free lunch.

        I won't be coming home tonight, my generation will put it right - Genesis 9:3

        by superscalar on Tue Jan 24, 2012 at 12:29:04 PM PST

        [ Parent ]

  •  It has to come in two parts: (0+ / 0-)

    a) Force the write-downs tax-free.

    b) The gov't pays the banks every penny of their losses out of new money.

    Otherwise this can't possibly work.  You do it one-sided per the diary, you kill the banks.  They'd have to write off the already massively inflated assets on their balance sheets, which would show them to the world as insolvent, then bankrupt.  Chapter 7, not Ch. 11.  

  •  This ship already sailed. (4+ / 0-)

    The opportunity for something as helpful and sensible as this was in 2009 before the Great Looting was complete.

    "Those who can make you believe absurdities can make you commit atrocities." - Voltaire

    by Greyhound on Tue Jan 24, 2012 at 10:36:30 AM PST

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