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The People's Bailout

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Re: The People's Bailout

#111

Post by logn »

lifeformed wrote: post #108
logn wrote: post #104

Earlier quoted context omitted.

Bankruptcy ruins your credit. It disqualifies you from holding certain jobs (such as in a company requiring people handling cash to be bonded), not to mention that credit checks are part of background checks these days. Some debt is difficult to discharge in bankruptcy (student loans). It can hurt chances of getting security clearance. What the OP is offering seems to be a nice alternative.

Isn't this also bad for your credit? Well, I guess maybe it's just less bad than bankruptcy or not paying anything at all.

I'm no expert in credit scores, but... If the original creditor already filed with the credit bureaus, that's definitely a negative on your credit. But I think the OWS can report that you "repaid" the debt which would be good. They could also bargain with the creditor to remove the negative report. Also, just reducing your balance of debt is good for credit. Plus, I don't think there's anything worse you can do for your score or future hopes of loans than declaring bankruptcy.

Re: The People's Bailout

#112

Post by lizzard »

fr0sty wrote: post #90
rdl wrote: post #37

It would be cool if someone created something like prosper, where I could see bad debt from people, and they could make pitches for why I should extinguish theirs. For $x, I could purchase and extinguish N x $x in debt, where N is some function of type, time to maturity, etc. I personally would be more likely to buy deserving-seeming medical, failed business, etc. debt than car notes or whatever, but maybe others wou…

So people list their bad debts on a website and compete for the most compelling sob story to get them written off. I actually cannot imagine how this would lead to better outsomes than just buying and forgiving debt blindly. You would preference the best and boldest liars over people who can't bring themselves to debase themselves in front of the world in hopes of your patronage. Buying blind at least solves the adve…

I would not mind buying and forgiving someone's debt blindly. I've been in situations where $2000 debt destroyed my ability to survive independently. While now I could pay off 2K instantly without even feeling it. How lovely it would be to relieve someone of that burden!

Re: The People's Bailout

#114

Post by intended »

JumpCrisscross wrote: post #77

This is a curious activity - non-performing debt, i.e. notes not generating any cash for the holder and thus not extracting any cash from the ower, are being exchanged at market value, thus transferring cash via an intermediary (OWS) from a donor to the lender. This results in a non-cash accounting change for the ower and a boon for the lender. Economic activity is boosted if the lender's investment/consumption is mo…

I strongly doubt the bonds/underlying is being sold at market value -

I assume its similar to factoring (? I forget if thats the precise term) but these are likely Non Performing loans. The original debt would be sold at fractions of the original price by banks to a collection agency.

From what I remember of economic theory, this is essentially a stimulus directed at those who have the hardest time dealing with debt. So on a simple superficial take - not bad at all, it seems even more targeted than a full stimulus to maintain all aspects of the economy.

Edit: TO be clear - I agree with your final point. Essentially you are saying that if we invest in growth and growth increases, it would be the best way for people to get out of their quagmires. In that respect, such a debt forgiveness is linked with increasing growth from what I recall.

Re: The People's Bailout

#115

Post by pmorici »

rdl wrote: post #37

It would be cool if someone created something like prosper, where I could see bad debt from people, and they could make pitches for why I should extinguish theirs. For $x, I could purchase and extinguish N x $x in debt, where N is some function of type, time to maturity, etc. I personally would be more likely to buy deserving-seeming medical, failed business, etc. debt than car notes or whatever, but maybe others wou…

When you invest in debt via peer to per lenders like Prosper and Lending Club you aren't actually buying the persons debt you are purchasing a registered security from the respective p2p company who is the actual holder of the debt.

The security is structured in such a way that only the p2p company has the right to collect on the debt should the debtor default.

Re: The People's Bailout

#116

Post by mseebach »

paulhodge wrote: post #39
marknutter wrote: post #19

How does OWS think this debt accumulated? Debt isn't some random accident like getting hit by a car while crossing the street. You have to get yourself into debt. It used to be taboo, but it's acceptable to get into debt these days and worse yet, walk away from it. OWS, to me, represents an entitled generation.

You can read their whole explanation, it's an interesting read: http://strikedebt.org/debt/ Short answer: various methods of systematic trickery and financial booby-trapping perpetrated by, you guessed it, the 1%.

In shock revelation, OWS blames all ills of world on "the 1%". Film at, you guessed it, 11.

One of the reasons OWS isn't more popular is that 99% of the 99% understands that the vast majority of personal debt was and is incurred by regular people living beyond their means, and not by nefarious schemes by nefarious monocle-wearing capitalists. Unsympathetic as it might be, they merely provided the rope.

Re: The People's Bailout

#117

Post by logn »

corkill wrote: post #92

Actual wall street gets bailed out by government (taxpayers). OWS wants taxpayers to voluntarily bailout private individuals. I understand the human side of it, helping relieve people of debt seems like a noble cause. But the economics of it seem so warped to me, can someone explain why allocating money to forgive private debt is a good thing economically?

When the markets dropped and wealth "vanished" the government fixed it by adding back that wealth by printing money and giving it to banks. Same concept with giving it to people. OWS and like-minds oppose corporate welfare when it's not afforded to common people.

Re: The People's Bailout

#118

Post by lifeguard »

patio11 wrote: post #25

For the benefit of folks who might not understand how debt collection works, which may include OWS: if you buy $10,000 of an individual's debt for $500 and then forgive the debt, they have just incurred income of $10,000 and are obligated to pay taxes on it exactly as if you had handed them $10,000 in cash for services rendered. If you don't inform the IRS that you forgave the debt, via a 1099-C, you're going to get…

@patio11, you need to understand two important facts:

1. The executive branch has broad discretion about bringing people to the judiciary branch for sanction. For example, district attorneys do not prosecute every case brought to them.

2. Occupy has excellent legal council. At the local, state, and federal level the few (none?) of the cases that have been brought to court have resulted in a conviction. I cite the victory record as proof of their skill and occupy's integrity, not of a lust for litigation.

Don't hate the players, hate the game.

Re: The People's Bailout

#119

Post by pmorici »

malandrew wrote: post #31
scrumper wrote: post #18

Earlier quoted context omitted.

Generally, any time there is more demand for something the will increase. OWS entering the market for certain kinds of distressed debt would be expected to increase the price of that debt - the group of buyers in the market has increased by one, so there is more competition for the asset. There is absolutely nothing wrong with this at all. The creditors are simply selling the debt to try and recover something from th…

Question: If OWS does this often enough to the point it becomes expected by debtors (i.e. "I won't pay because maybe I'll win in the OWS debt lottery"), wouldn't that in effect reduce the number of people that would actually pay back the $14k? And assuming it does have a global effect that should depress the market value of distressed debts further, right? How can OWS depress the probability that creditors will get t…

At the point that OWS is buying the debt it has likely already effected the individuals credit record and score which would make it much more difficult for the person to get additional credit for some number of years.

Re: The People's Bailout

#120

Post by JumpCrisscross »

intended wrote: post #114
JumpCrisscross wrote: post #77

This is a curious activity - non-performing debt, i.e. notes not generating any cash for the holder and thus not extracting any cash from the ower, are being exchanged at market value, thus transferring cash via an intermediary (OWS) from a donor to the lender. This results in a non-cash accounting change for the ower and a boon for the lender. Economic activity is boosted if the lender's investment/consumption is mo…

I strongly doubt the bonds/underlying is being sold at market value - I assume its similar to factoring (? I forget if thats the precise term) but these are likely Non Performing loans. The original debt would be sold at fractions of the original price by banks to a collection agency. From what I remember of economic theory, this is essentially a stimulus directed at those who have the hardest time dealing with debt.…

Market value of a non-performing loan is a fraction of par, often pennies on the dollar. The lender will likely not sell to OWS for less than what they are being offered by the market.

If these are NPLs the borrower has not been making payments - they go from not making payments on an NPL to not making payments on a forgiven loan. The lender, on the other hand, goes from owning worthless paper to having cash on hand. The stimulus comes only if performing or distressed loans still being serviced are bought, but the price for these will be much higher.

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