Debt Offset
- Thread starter kirbys&s
- Start date
Theory sound good. However you will note the large number of references to what the Banks "should do". It is also incorrect to insinuate that this type of action will have zero cost. The accompanying assumption is that the Banks should provide for all loans where negative equity is apparent. This could in theory be done, but practically it would lead to significantly higher bad debts in the Banks & these bad debts would need to be predominately covered by the taxpayer. It also assumes that a Bank has only recourse to the security of the PDH, which is incorrect. Negative equity alone is not a basis to account for bad debts. If a borrower can still make his/her loan repayments then there would be no provision made.
It is overly simplistic & won't happen!
It is overly simplistic & won't happen!
Brendan Burgess
Founder
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- 53,362
Hi Kirby
That idea and article are a year old. I think that all the bonds that are going to be bought back have now been bought back.
The government put in real money to capitalise the banks. If the banks start writing down mortgages which would otherwise be paid, the taxpayer will need to put in fresh capital.
Doohan is implying that there is a direct connection between your mortgage and the bonds. There isn't.
The bonds are being written down mainly because of the losses on loans on development property. I don't think that there is any substance to Doohan's argument, but if there is, it would be that property developers should have their loans written down.
Brendan
That idea and article are a year old. I think that all the bonds that are going to be bought back have now been bought back.
The government put in real money to capitalise the banks. If the banks start writing down mortgages which would otherwise be paid, the taxpayer will need to put in fresh capital.
Doohan is implying that there is a direct connection between your mortgage and the bonds. There isn't.
The bonds are being written down mainly because of the losses on loans on development property. I don't think that there is any substance to Doohan's argument, but if there is, it would be that property developers should have their loans written down.
Brendan
Brendan Burgess
Founder
- Messages
- 53,362
I just found his article
I wonder who these were?
The fatal flaw is the false connection between your mortgage and a particular bond.
The connection should be between the losses already incurred on the lending and the losses being imposed on the bondholders.
Brendan
I wonder who these were?
The fatal flaw is the false connection between your mortgage and a particular bond.
The connection should be between the losses already incurred on the lending and the losses being imposed on the bondholders.
Brendan