Why can't the government nationalize tha banks and cancel the debt?

[An Intellectual]

Why does our right-wing government (Congressional Democrats included) refuse to look at the most obvious solution?

EDIT: By "debt" I mean every mortgage in the United States. Would the sky fall? No! Would millions of Americans own their own homes? Yes! Would fat cat CEOs be left poorer? Yes. :)

[Democrats_win]

1. That's exactly what they should do.

[dmallind]

2. Cancel what debt?

Sincere question - which debts should be cancelled?

[An Intellectual]

4. They should cancel the mortgage debt.

[Selatius]

13. Only troubled mortgages or both troubled mortgage holders and those in good condition?

If you just cancel the debts of people in trouble and leave those who are in no trouble with nothing, there's going to be a lot of fire from that.

[stray cat]

3. Cancel 60 trillion in debt from the morgage swaps as that seems to be the underlying problem?

If they cancel the debt who loses and who wins. Who has direct or indirect loses from the 60 trillion? (and 60 trillion is not an imaginary number as per 60 Minutes)

[EOTE]

5. Can you explain to me how that would work?

I admit that economics confuses the hell out of me. For me, it's beyond comprehension that debt can simply be cancelled. I'm very interested to know how this would work. Any information you can provide would be appreciated. Thanks.

[SammyWinstonJack]

6. I'd like to know too.

[An Intellectual]

7. No problem!

The government would assume control of the financial institutions, paying shareholders face value for their shares. For it's first act as owner of the banks, it would forgive every mortgage.

Sure, the fat cat CEOs would be upset, but isn't that a good thing? ;)

EDIT: I initially said the government should only forgive the troubled mortgages.

[DangerDave921]

8. What are you talking about?

So let me get this straight. I continue paying my mortgage every month for the next 25 years to own my house, while those in debt just get their mortgage canceled? Do they get to keep the house? If so, then you're giving free houses to people.

I just don't comprehend what you're suggesting.

[An Intellectual]

10. Good point, the government should probably forggive every mortgage. Honestly...

... what would happen? Would the sky fall? No.

Millions of families would own their own homes; that's what would happen.

[DangerDave921]

19. why stop at homes?

Why not cars? And food? And clothes?

Why not let the government just say POOF to all the debt that anyone in the country may have?

[dmallind]

29. The problem really isn't mortgages though

Only about 6% of people are in trouble with their mortgages.

The real problem is all the derivatives sold BASED on those mortgages contain an unknown amount of bad debt, which means the financial companies that hold those derivatives don't know whether they will get money, and the people who lend THEM money based on the value of those derivatives are guessing at what that is.

Forgiving mortgage debt would be nice for me and other owners, but is neither necessary nor likely to make much of an effect on the issue in the financial world, which is one of lack of trust and transparency in banks holding speculative investments.

Cancel derivatives? immediately render them valueless? Then you will freeze credit for many years to come as banks holding those "assets" (almost all of them) will need to massively deleverage. That credit is used by companies to meet payroll, buy inventory and expand their facilities to hire more people.

Bad idea all round IMO.

Now I have no problem making consumer loan derivatives illegal from this point on. In fact I suggest that. Let banks who loan money either keep that loan or sell that loan singly as a loan and not a derivative to another bank.

If we did that and have the Fed simply guarantee bank to bank loans within leveraging limits IF KEPT AT NO MORE THAN PRIME + 0.5% max, then bingo short term losses on the part of the guys who speculated most, and much more stability in bank credit, which is the real reason this is a problem.

The "bailout" does that in part, but without the limits and by buying the debt instead of guaranteeing the loans. Crucial errors in my book, but then again I ain't treasury secretary so bugger all use that is.

[garlicmilkshake]

16. Obviiously "intellectual" doesn't mean what it used to.

:eyes:

[RoyGBiv]

23. The Chinese might have something to say ...

... and the Germans and English and Japanese ...

This is a world economy, for better or worse. You just "cancel the debt" and the whole thing goes to shit immediately.

[MilesColtrane]

27. So I'd get a royal screwing...

...because I didn't try to buy a house I couldn't afford?

My taxes would go toward paying off everybody's house, while I continue to rent and try to scrape up a down payment?

[Dr Fate]

30. Fortunately, you get to give your money to millionare & billionare bankers instead.

n/t

[Kelvin Mace]

9. So, everybody who has a mortgage

should just be given their house free and clear? As I have a mortgage that sounds great, though I think renters would be just a tad miffed.

Also, the folks who misbehaved and gamed the system should be rewarded?

[aquart]

11. Didn't FDR have them make the payments to the gov't?

[An Intellectual]

12. That's a good point, too, and could be solved by national rent-controls.

[anigbrowl]

17. Yeah, renters would be picking up the tab for house buyers.

I don't think the OP has really thought this through. Nationalization is not an economic cure-all.

[Duer 157099]

22. Goddamn right renters would be pissed!

Housing should never be allowed to be such a fundamental investment instrument as it's become in this country -- because people who cannot afford to play the game really get screwed when the gamblers push the prices up through the roof!

So many people have been living on their "equity" that this country has forgotten how insane housing cost actually is, in terms of wage/housing ratio.

[Greyhound]

24. True that many would "lose", but millions more would "win", and if done

right, the winners so greatly outnumber the losers and life becomes so much better for the rest of us that their contribution is considered to have saved the world.

So you only have one house now, but everybody has a place to live, education, heath care, justice, etc.

Wouldn't you consider that worth it?

The ramifications would be enormous and it would take time, but removing profit from the basic necessities would be to nearly everyone's benefit.

[TexasObserver]

14. Because that would be insane and ineffective, as well as illegal.

[Greyhound]

15. Even better, devalue the dollar to toilet paper (it's almost there anyway), issue enough to pay

the debt, then dissolve the Fed and establish a new currency backed by something real (I like time, myself) and establish a new social floor that covers basic necessities as a type of minimum wage.

If done openly and over a year or so, the world will have no choice but to go along or walk away from us, and we are much better able to sustain ourselves than other countries, so while they might try to get along without us for a while, they will be back.

None of them want the expense of policing the world and we cannot afford it any longer.

[Dr Fate]

18. Because we dont give money to ourselves, we give it to millionare & billionare bankers instead.

Why? becaue America is not a socialist welfare state! The "market" will make you or break you. (unless you are a millionare or billionare banker, or course)

[Bryn]

20. Why can't we just get rid of Wall Street - Stock Market?

Just get rid of them all. It's not working out.

Go back to Pop and Mom banks, stores, etc.

[leftofthedial]

21. because that would work

meaning it would stop the flow of wealth away from the middle class into the tiny elite.

[rocktivity]

25. Because there's no money in it

for his lobbyist and financial backer friends!

:headbang:
rocknation

[HamdenRice]

26. You have to understand what debt is. It's also people who worked and saved ...

and lent it to other people. Many of the people who lived below their means to save money are Chinese, Japanese and Korean farmers and workers. They lent us the money to finance the construction and renovation of our houses.

Right now, the $1.4 trillion we owe China represents 10 years of the savings of the Chinese people. Are you suggesting we just stiff them on ten years of their work?

Don't you think they would be upset and never lend us a dime again?

Countries have gone to war over being stiffed on debt.

[galileoreloaded]

28. Uh, for the same reason you can't shoot people even if they really deserve it?? n/t

[Cleita]

31. Then BushCo couldn't go on stealing from the Treasury right up

to January 20, 2009.

[mudesi]

32. Because that would utterly destroy the economy

That would make every single bank in the nation go bankrupt. That would lead to hyperinflation which would lead to cash becoming essentially worth less than the paper it's printed on.

[librechik]

33. they have to finish robbing us first.

[ddeclue]

34. Because ours is a fiat currency and would turn to toilet paper instantly.

The world wide depression and instant wars that would result wouldn't be pretty either.

[Waiting For Everyman]

35. It COULD nationalize the banks (they're bankrupt anyway) and restructure

the debt. And they will eventually. Because they'll have to - if they want it paid back, that is.