Puerto Rico files for biggest ever U.S. local government bankruptcy • Hacker News Board

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#401

Post by DougBTX » Thu, May 04, 2017, 11:28 AM UTC

wonderwonder wrote: post #313

myrandomcomment wrote: post #295

Earlier quoted context omitted.

Sorry but what you are saying is since people are too stupid to understand the contract they signed and to do some math it is the companies fault? My wife and I at one point were in the hole nearly 1m. The crash put my house way under and the job money fun time went away. It sucked. You know what we did. We canceled the cable TV, we stopped eating out. We watched every penny. I work jobs I hated, hated, hated. We got…

The companies are more than capable of doing the math as they are signatories on the same contract. They interest rate they charge on the loaned money is based on their own internal algorithm that determines the risk of default on a particular borrower. Risk is priced into the loan. I am glad you and your family were able to work your way out of the debt you found yourself and I commend you for it. Many others are no…

An economic argument would be that a customer defaulting now will signal to future lenders that they are a risky customer, leading to a raise in rates for future loans. The moral framework which says that defaulting is bad is in some way codifying the economic argument, by categorising actions that will lead to future difficulties as "immoral".

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#402

Post by jacobush » Thu, May 04, 2017, 11:30 AM UTC

ericd wrote: post #352

foobarrio wrote: post #237

Earlier quoted context omitted.

If a bank is making loans at rates that do not cover defaults they should go out of business because they are crappy at their job. If I take my car to a mechanic am I expected to know as much about my car as the mechanic? Do I tear down and redo/inspect any work they do to my car? If I go to a mechanic and ask them if it's okay to do something dangerous to my car and they go ahead and do it, I'd say the mechanic is w…

I would say that your asking for a $1M USD mortgage with a $20k income would be reckless at best, and dishonest at worst. Yes, they're also at fault, but you're not blameless in that case. You have a personal and societal responsibility to spend within your means. To do otherwise causes damage to the rest of us.

It could though cause damage to his social standing by not overspending...

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#403

Post by LeifCarrotson » Thu, May 04, 2017, 11:30 AM UTC

savanaly wrote: post #23

vkou wrote: post #10

Earlier quoted context omitted.

> We owe money to the creditors... and what you do with a debt is to you pay it off. That's not the case. Sometimes, you pay your debt off. Sometimes, you default, and file for bankruptcy. For lenders, it's the cost of doing business. If they don't want to deal with the possibility of bankruptcy, they shouldn't lend out money. Lenders charge creditors a premium, because of the risk of default. It's as much on them to…

That's true in any individual case. But if we make it our social norm that bankruptcy is nothing to be ashamed of and to be taken lightly, won't it change the equilibrium for future generations of lenders and borrowers such that an inefficiently low amount of lending goes on? If everyone has the expectation that the lenders and borrowers will try their best to live up to the contract they made in good faith, wouldn't…

> If everyone has the expectation that the lenders and borrowers will try their best to live up to the contract they made in good faith, wouldn't it be a better equlibrium?

No. This will result in bad actors defaulting with little penalty except shame and guilt (which they won't care about) and good actors suffering. We want an equilibrium where good behavior results in at least equal if not better economic outcomes to bad behavior.

This should be priced into the lending until the penalties of defaulting (loss of credit, future lending problems, loss of existing assets and so on) creates the right cost to balance out the cost of paying off the loan.

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#404

Post by LeifCarrotson » Thu, May 04, 2017, 11:35 AM UTC

kmc059000 wrote: post #289

hkmurakami wrote: post #38

Earlier quoted context omitted.

Would love to read more on the subject if you have links to both the PR and Dallas situations handy.

Here is an article on the Dallas pension problem. http://www.economist.com/news/finance-and-economics/21711335... The gist as I understand is that pensioners were promised a 8.5% return (which didnt happen) and (some?) retirees are able to withdraw their current value in their pension in full. There is talk of reducing benefits, which is causing a situation much like a run on banks to occur. I've seen a few proposed…

Offering recourse to the pension-holders will clearly require penalizing groups that did not cause the problem.

But can't we also penalize those that made the un-keepable promises and mismanaged the funds? This won't make the policemen financially whole, but it would offer at least some sense of justice, and, more importantly, send a message to others currently operating similar schemes.

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#405

Post by onion2k » Thu, May 04, 2017, 11:40 AM UTC

briandear wrote: post #389

ryandrake wrote: post #108

Earlier quoted context omitted.

> But if we make it our social norm that bankruptcy is nothing to be ashamed of and to be taken lightly I don't know about "taken lightly" but bankruptcy and defaulting on a debt should not be something to be "ashamed" of, for an individual, a company, or a government. Default is an option specifically written into every debt contract out there. There should be no more shame in choosing to default as there would be f…

Not paying your debts is immoral. Sure the risk is priced in but so is the risk of shoplifting in the prices you pay at stores. That doesn't mean that because the risk is priced in that it's somehow moral to shoplift. Also the reason for default does have some bearing on morality -- a person that declares bankruptcy because of years of buying a new TV every year and going on expensive vacations is much different than…

This issue isn't due to forces outside their control, but specifically because of decisions they consciously made. It is political malpractice and the people of Puerto Rico will now pay the price for generations.

So the children of the children of the children of people of Puerto Rico should accept their situation because of "decisions they consciously made"? They're not even born yet. How does that work?

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#406

Post by cmdrfred » Thu, May 04, 2017, 11:41 AM UTC

xyzzyz wrote: post #380

myrandomcomment wrote: post #362

Earlier quoted context omitted.

I agree but that is not the case for most of this. People spend to much and run up to much debt because they are trying to keep up with the Jones. My wife was property manager for a large company. One of the properties in Orange County, New Port Beach area, had the highest rate of late payments and evictions. This is a A+ complex and has some of the highest rents for the units in the area. Guess what, those people th…

I personally know people (Not friends) that have gone through bankruptcy 2 times, doing the same stupid shit the 2nd time as the first and it does not look like anything has changed with the last. The companies that lent them money for the second time should have gotten a clue, shouldn't they? Isn't this precisely what credit reports are for? It is definitely stupid to live over one's means and then go bankrupt, but…

After seven years that data is removed from your credit report due to consumer protection laws. Its possible they had no idea, and even if they did its illegal for them to deny credit because of it if it was 7 years or more ago.

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#407

Post by hvidgaard » Thu, May 04, 2017, 11:41 AM UTC

njovin wrote: post #194

enraged_camel wrote: post #179

Earlier quoted context omitted.

>>I don't know about "taken lightly" but bankruptcy and defaulting on a debt should not be something to be "ashamed" of, for an individual, a company, or a government. It totally depends. There is nothing shameful about declaring bankruptcy because you got into an accident and your insurance company refused to pay your six-figure hospital bill. But if you take out a big loan to build a new hotel and blow it all on ho…

That sounds more like fraud. What if I take out a loan, am perfectly capable of paying it off, but the asset backing the loan has lost sufficient value so as not to be worth the continued investment? Is there any shame in defaulting and letting the lender suffer some of the consequences? In my personal opinion, no. Especially with secured or collateral-backed loans, the lender knew there was risk going in and there's…

You can declare bankruptcy all you want, but if you are able to pay your debt, it will not be accepted.

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#408

Post by [deleted] » Thu, May 04, 2017, 11:54 AM UTC

klipt wrote: post #130

Terr_ wrote: post #118

Earlier quoted context omitted.

From a ruthlessly clinical evolutionary game-theory perspective... It's also that someone who spreads their genes by creating a child is obtaining a kind of "asset" for themselves, one which society can't transfer and won't morally destroy in retribution. If A and B both invest in, say, a house, and B disappears leaving debts behind, at least A can sell the house and B isn't getting any ongoing utility from it.

If that were the issue we'd throw parents who give their kids up for adoption in debtors' prisons too.

[deleted]

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#409

Post by cmdrfred » Thu, May 04, 2017, 11:54 AM UTC

klipt wrote: post #130

Terr_ wrote: post #118

Earlier quoted context omitted.

From a ruthlessly clinical evolutionary game-theory perspective... It's also that someone who spreads their genes by creating a child is obtaining a kind of "asset" for themselves, one which society can't transfer and won't morally destroy in retribution. If A and B both invest in, say, a house, and B disappears leaving debts behind, at least A can sell the house and B isn't getting any ongoing utility from it.

If that were the issue we'd throw parents who give their kids up for adoption in debtors' prisons too.

There is value in spreading genes, but also in spreading memes. The biological patents give the former, the adoptive parents give the latter. As this is an agreement that all parties consent to and it has consideration for all involved and say its a valid system.

Re: Puerto Rico files for biggest ever U.S. local government bankruptcy

#410

Post by giancarlostoro » Thu, May 04, 2017, 11:55 AM UTC

chimeracoder wrote: post #15

djsumdog wrote: post #2

Puerto Rico should really be a state by now. Would it being a state given it any distinct advantages (or are there any specific problems in light of it not being a state) in this type of situation?

> Puerto Rico should really be a state by now. Would it being a state given it any distinct advantages (or are there any specific problems in light of it not being a state) in this type of situation? Puerto Rico's economy has been crippled by the Jones Act, which affects all US states/territories that rely solely on sea transportation for trade with the US. Hawaii is the only state that fits that description, and the…

Jones Act and a couple of other things:

https://www.bna.com/demise-puerto-rico-n57982074653/

Used to be that Puerto Rico was once upon a time #1 in manufacturing, Japan was #2. The USA and England followed. Something to think about. Puerto Rico exports out of the US more pharmaceuticals than California currently, or at least it did in 2015[0]. There's so much potential for Puerto Rico. We also have a lot of engineers in NASA (or did?) because they go to Puerto Rico to hire engineering students if I remember correctly from Mayaguez. So much potential and it's sad to see it go to waste, I think all Puerto Ricans are to blame as much the people as the politicians. We all always blame politicians but as a people we don't do enough.

[0]: http://www.puertoricoreport.com/puerto-rico-leads-pharmaceut...