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The whole banking system would collapse like in 2007-2008 because "everyone stops paying mortgages all at once" is basically what happened then. Renters stop p
by jdm2212 6y ago
The whole banking system would collapse like in 2007-2008 because "everyone stops paying mortgages all at once" is basically what happened then.
Renters stop paying their rent so landlords go broke. Landlords stop paying their mortgages. Mortgage-backed securities go into default. Anyone with lots of exposure to mortgage-backed securities folds. Their counterparties in all sorts of financial arrangements can't collect (insurance, bonds, you name it). Credit markets dry up, and all the Main Street businesses that are rolling over some of their debt find they can't borrow, so they file for bankruptcy. Normally, they'd take out loans to make it through bankruptcy and restructure... but no loans are available, so they liquidate.
EDIT: worth noting that this is less likely now than in '07-'08 because the Federal Reserve has been buying up bonds like crazy (that basically means financial institutions, governments and businesses are often able to get unlimited cheap credit) but if they scaled that back or stopped doing it, things are already so bad there would've been a credit crisis in March or April without a national rent/mortgage freeze. So imagine how much worse it would be with one.
- 5ociety 6y agoIt kind of sounds like we need a different money system?
- 5ociety 6y agoand whose better at designing systems than you and me?
- Ididntdothis 6y agoWe may do better than the bankers who like to design fragile systems as long as they can make boatloads of money :)
- AnimalMuppet 6y agoUnless you're an expert at designing systems as complicated as the entire economy, maybe a lot of people.
- 5ociety 6y agobecause they're doing such a good job?
- AnimalMuppet 6y agoThey don't have to be doing a perfect job for you to be able to do a worse one...
- 5ociety 6y agoPretty sure I could do better. Downvote me again. You're making a difference!
- AnimalMuppet 6y agoThe more I listen to you, the more grateful I am that you will never be given the chance. Someone who's so cocksure that he's sure he's smart enough to organize the entire economy is the last person I want to see given the chance.
- 5ociety 6y agoI don't know if I'm that smart but I suspect I am a lot smarter than you.
- DanBC 6y agoPeople cannot downvote comments that are replies to their own comments, so any downvotes are not coming from AnimalMuppet.
- AnimalMuppet 6y agoTo be fair, I did downvote his initial comments...
- jchrisa 6y agoI like Holochain as they don't maintain a global ledger. Here is some reasoning why: https://www.wired.com/2014/07/document-coin/ https://www.wired.com/2014/07/document-coin/
- popotamonga 6y agoIn my country they just declared 1 year no mortgage payments for everyone who needs.
- ars 6y agoWhat country is that? Is everything government owned? Because how can a landlord possibly manage that? And why is the landlord the one asked to help the tenant, isn't that the job of government?
- throwaway_jobs 6y agoSuspension of mortgage would help the landlord not the renter. The owner/landlord pays the mortgage not the tenant, the tenant pays rent to the landlord.
- ubercow13 6y agoDoesn't seem to be happening in the UK yet, where many mortgages are suspended.
- chrisseaton 6y agoNot many people ended up taking up these offers. Less than 10% I think.
- ars 6y agoSuspended, but interest keeps accumulating, and will eventually have to be paid? Because banks can handle a bit of that, if the bank is able to borrow from a central bank. Or suspended and never paid?
- squarerootof-1 6y agoI would like to add to your comment and highlight that this isn't similar to 2007-2008 as those loans were made to people who should never have gotten them in the first place and had no hope to pay it off. Those loans were straight up losses, whereas here, the loans are still good and some companies are even earning interest by delaying mortgage payments. But if too many people stop paying at the same time, the system will collapse and we'll have a repeat of GFC.
- jeromegv 6y agoWhat's the proportion of commercial landlords that have a mortgage to pay? Because when their building is already paid, interruption of rent isn't really impacting them.
- wmf 6y agoAll of them? The economy has been pushing everyone, including landlords, to lever up for decades.
- bananabreakfast 6y agoProperty tax on commercial property is huge and lasts forever. Interruption of rent may force them to sell their property or be unable to afford their taxes.
- rwmj 6y ago> Renters stop paying their rent so landlords go broke. Landlords stop paying their mortgages But I said in my question: "if we suspended mortgage repayments for N months and rental payments for N months" Landlords are not paying their main cost (the mortgage) so why do landlords go broke? They have some fixed overheads but those are usually a few % of the mortgage.
- AnimalMuppet 6y agoThat doesn't help the mortgage holders, though...
- rwmj 6y agoThe normal way payment holidays work is the missing months are added at the end, and the interest (historically incredibly low at the moment) accrues as normal. So the mortgage holders are not really out of pocket here. Nor are the landlords since they can charge another tenant at the extended end of their mortgage term.
- jotm 6y agoWhat if everybody gets a loan, minimal/no interest with delayed repayment? Just pretend it's not a handout, but actual debt that will be repaid... someday? Just a thought
- jdm2212 6y agoThat's what the Federal Reserve is doing, in effect, by offering zero interest loans to every city, business, and bank.
- devalgo 6y ago>The whole banking system would collapse like in 2007-2008 because "everyone stops paying mortgages all at once" is basically what happened then. This obviously ignores the issue with massively leveraged firms making poor bets on housing bonds. But lets be real, they'll get bailed out if there's any problem.
- ljf 6y agoI would disagree - everyone didn't just stopping paying their mortgages. The issue was that it was uncovered how inappropriate a portion of mortgages had been and how toxic the investment mixes were. This realisation led to banks valuations changing and led to a run on banks. The property behind these mortgages was worth less than the mortgages supplied on them. While the default rate increased in some areas, it was in no way universal, or as high as we see today in the retail property market. Also (currently) the property backing the mortgage has retained its mortgaged value. So these are not that similar scenarios