NEW YORK (Reuters) – More than three years after the financial crisis struck, the economy remains stuck in a consumer debt trap. It’s a situation that could take years to correct itself. That’s why some economists are calling for a radical step: massive debt relief.
Federal policy makers, they suggest, should broker what amounts to an out-of-court settlement between institutional bond investors, banks and consumer advocates – essentially, a “great haircut” to jumpstart the economy.
What some are envisioning is a negotiated process in which cash-strapped homeowners get real mortgage relief, even if it means forcing banks to incur severe write-downs and bond investors to absorb haircuts, or losses, in some of the securities sold by those institutions.
“We’ve put this off for too long,” said L. Randall Wray, a professor of economics at the University of Missouri-Kansas City. “We need debt relief and jobs and until we get these two things, I think recovery is impossible.”
Read the rest at Raw Story, Radical proposal: Massive debt relief to kick-start economy
7 comments:
Tom,
As long as most think it is "taxpayer on the hook", ie half of the accounting will show up as a govt liability, this good idea has less of a chance to get thru...
But it is good to see yes Prof Wray show up on the reuters screen...
resp,
Right, Matt. I think it is a big deal that Reuters picked Randy as the go-to guy. This definitely is another step in advancing MMT into the mainstream.
The incidence of stimulus related articles seems to be increasing. Now that the they have used the debt-ceiling non-issue to get their cuts, perhaps their getting us ready for economic recovery via deficit spending ??
There was also an article somewhere quoting Bernanke as saying that monetary policy has its limits, and that fiscal policy should be utilized to overcome the unemployment problem.
All that is needed is some events to justify the deficit spending. Hmmm.
Forgiving debt is a good first start, but as today's billyblog suggest there needs to be a redistribution of national wealth to wages. Other than a real change in the wealth structure I'm afraid we would just be beginning another debt cycle by simply forgiving past debt.
federal authorities don’t have a “magic wand” – even at Fannie Mae and Freddie Mac, the government-backed home-loan titans.
These sources explain that even though Fannie and Freddie are effectively owned by the federal government, they are controlled by an independent regulator, the Federal Housing Finance Agency. And it’s up to the FHFA, and not the administration, to approve any principal reductions on home loans involving Fannie and Freddie. (from Reuters piece)
Ahh, our old friend Humphrey's Executor v. United States strikes again. It doesn't just keep Tsy from controlling the Fed, it screws up the government across the board.
Because of Humphrey's Executor, the President to this day lacks day-to-day control over large swaths of regulatory policy and enforcement in the Executive Branch — from communications regulation (the FCC) to labor regulation (the NLRB) to securities regulation (the SEC) to nuclear power regulation (the Nuclear Regulatory Commission). Those and many other independent agencies have huge policymaking and enforcement authority and greatly affect the lives and liberties of the American people. Yet those independent agencies are democratically unaccountable — neither elected by the people nor supervised in their day-to-day activities by the elected President.
http://www.leagle.com/xmlResult.aspx?page=5&xmldoc=In%20FCO%2020110701130.xml&docbase=CSLWAR3-2007-CURR&SizeDisp=7
What's the antidote here, beowulf?
"What's the antidote here, beowulf?"
The issue goes back to the Supreme Court (perhaps over the very Yucca Mountain NRC case whose appeals court opinion I quoted) to overturn Humphrey's Executor and go back to its old precedent (Myers v. United States). The President would then exercise supervision and control (via the "hire and fire" power) over every federal agency, including the FCC, NLRB, SEC, the Fed and FHFA. The President could use this "magic wand" to approve principal reductions on mortgages held by Fannie and Freddie.
Post a Comment