< meta name="DC.Date.Valid.End" content="20050825"> Amendment Nine: Why Debt Relief?

Monday, November 15, 2004

Why Debt Relief?

A colleague asked me why I was so convinced debt relief was necessary, and why I thought it would work. He chided me that debt relief wasn't realistic and quizzed me as to why I thought creditors would allow: "the wholesale conversion of their property" (apparently, "conversion" in the legal world means "thef"t). I relayed to him, A) a massive de-leveraging of the nation's total debt is the only way to avoid some pretty nasty fiscal scenarios and B) creditors don't view restructuring as theft, they view it as a way to reduce overall default risk. He's a lawyer, who represents creditors, so he thought that was funny and figured he knew better. But I'm a creditor, so I may be wrong, but it doesn't matter cause I pay his bill.

I concluded with a question: if you really think debt relief is such a radical idea, how radical a situation will it be when pension defaults are not relegated to the steel industry, but instead infect some of the largest companies in the world? Check out this little note in the NY Times and wonder aloud. And for anyone who cares, run a default probablity on Ford and GM. Then get back to me on how to explain this to lawyers a little better.

UPDATE: according to Mitya, a couple of people are "pissin' in their pants" to get a comment in, so I'm opening up the comments for this post. We'll be using Haloscan shortly, until then, just keep hitting refresh if you're in a back and forth. - Federalist X


Anonymous Anonymous said...

Dearest Mitya, I still don't think the debt relief you all have so far proposed is realistic, in the slightest. The banks will balk at this, and as you know, without creditor buy-in, there is no way move forward.

8:55 AM  
Blogger Mitya K. said...

Dear "Anonymous": I did not propse the debt relief package so far put out on this site. However I do support the general idea. I understand your point about creditor "buy-in". So, to get around that, let's pass a law that allows consumers to go into 11 as one giant block. We substantively consolidate the entire fucking class and have the biggest, largest, knock-down drag 'em out chapter 11 negotiation in the history of the world. Of course, to join the class and get your debt consolidated you would need to show your debt is a sufficiently high enough yield to warrant restructuring. My belief is anyone with over 11% annual yield (plus some type of fee basis) would be well served here and the long-term effects to the economy would be extremely beneficial. You want it that way? Fine. Let's do it that way. Now the lawyers get their cut and the banks are forced to the table.

9:03 AM  
Anonymous Anonymous said...

Jesus Christ! That would really start a revolution. I'm serious, there would be shooting in the streets.

9:16 AM  
Blogger Mitya K. said...

No there wouldn't. You think white-collar execs at MBNA are going to riot? Doubtful. They might toss their golf-clubs in the river. But they'd buy new ones. There WOULD be a riot though if 10% of the nation suddenly went broke and was unable to buy all the shit they need, like gas, milk, and electricity, oh yeah, and cable, DON'T forget cable. And it wouldn't just be a riot, it would be a total civil melt-down. Our cities would look more like Tegucigalpa and less like London. And you and I would need body guards when we went for out for an espresso to avoid getting kidnapped for a ransom (which would mean we would have to pay our body guards pretty well).

9:22 AM  
Anonymous Anonymous said...

Mitya, you are hopeless. I think you need a new doc.

9:24 AM  
Blogger Mitya K. said...

Maybe, but that doesn't explain why I make more money than you! In all seriousness, stop by next week and we'll go over some consumer debt numbers. Then we'll let you recant live on our blog.

9:25 AM  
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3:07 PM  

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