I don't know if it's just happenstance or just me but the flavor du jour of a lot of my reading lately has been how we've just got to do something to dig ourselves out from under this debt mountain. Public, maybe, okay, maybe not, but certainly private--the great ice cornice of mortgage debt that still hangs over our head from the aughts, and the. Also maybe the fiery implacable demon of student loan debt whose menace is, I suspect, still only beginning to sink in on us.
Yes, well, right, sure. But as to mortgage debt in particular--just exactly how would you do it? As a matter of simple politics, we've observed from the beginning that there's large and well-disciplined view that any effort to assist these
deadbeats borrowers would be about as unpopular as it was to succor the cigar-chomping gluttons perched atop the mountains of gold merde in the vaults of Wall Street.
Yes well again. But suppose we overrode the moral objections and soothed the instrumental fears, just exactly should we do? Leave debtors in possession of their homes with lower liabilities? Write down a whole bunch of principal? Have a jubilee?
I know the standard way to stick it to the man in creditor's rights is inflation: pay off the expensive debts with inflated confetti money. Even if that were a good idea, it doesn't seem to be in the offing, so set it aside. I gather also that in the 30s, the Feds did engage in a kind of mortgage relief program where they bought up debt on the cheap, then refinanced with the magic of triple tax free, leaving the debtors in possession under a more tolerable burden (do I have this right?). I know (this time I'm more sure) that the Supreme Court invalidated a farm bankruptcy law, only to to pirouette around and endorse an almost-indistinguishable statute a couple of years later. Good stories both, but do they matter to us now?
Oh, and there's that little matter of who takes the fall here--who owns those bond we want to write down? I haven't seen or constructed a comprehensive flow of funds statement here, but I'm thinking of all those pension funds, grotesquely underfunded, scrambling for yield to meet their magical-thinking projections, happy to price as "safe" any borrower with a pulse. The pensions funds. Oh. Right. That would be me.