4 ms·

Rolling Jubilee - A Bailout Of The People By The People

52 points by kuahyeow 14y ago

malandrew 14y ago
Is there a marketplace for debt online that I can visit as Joe Consumer and buy the debt of others so I can forgive it or at least offer the debt back to the person at cost? What information is likely to be public about the debtor when one purchases the debt? Is there a startup business idea in this?
- jonny_eh 14y ago
  Even better, why not let people buy out their own debt at near cost?
  - jpdoctor 14y ago
    The term Moral Hazard is relevant here.
    - malandrew 14y ago
      A better question is why the original lender doesn't just try to give the original lender the chance to buy his own debt at pennies on the dollar more than what they are selling it for. i.e. "Hey we're about to sell your $10k in debt to company X for $500, but we'll sell it to you for $2000. Do you want to buy it or should we sell it off to Company X?"
      - mseebach 14y ago
        First, if the delinquent party has $2000 lying around for an expense like this, the debt agency is probably better off trying to recover the full sum. It's not like they can just loan it to them. Second, if you're years behind on your debt, you're probably not in the habit of reading letters from debt collection agencies. Third: the moral hazard: get deep in debt, set aside 20% in a high interest savings account, wait for offer.
        gpvos 14y ago
        Well, if the banks can have moral hazard, why can't we?
        kalms 14y ago
        A few years back, when the credit crisis happened, several investment companies bought up debt, and then offered people to pay it off, with half or less, compared to what they owed before that. I don't know if they actually earned anything from that type of investment, but it went on for a while. It was in Denmark.
      - michaelt 14y ago
        Company X might value the debt at $500 on the assumption there's a 25% chance they'll recover $2000 and a 75% chance they'll recover $0. Filter out the 25% who can pay and the value of the debt would presumably drop significantly!
  - kuahyeow 14y ago
    That would be in normal times, a payment plan.
programminggeek 14y ago
You know, consumer debt is probably the biggest thing slowing down the economy, even though financial institutions are wanting to saddle the average consumer with more debt. If people don't have money to buy things because they are spending money servicing debt, that slows down the whole consumer economy. The only people who win in that scenario are the banks, but they would profit more over the long term by a stronger economy than they currently do from consumer debt.
- backprojection 14y ago
  I think this makes sense from a high-level point of view. It seems like it would be bad for the economy, if more wealth flows from consumers to bank profits. This is maybe simplistic, but I'm thinking progress is better served if more people can buy iGadgets, than if bank execs can spend more on luxury goods. There are huge, positive, side effects when people buy more technology, because technology gets cheaper, which then advances economic growth.
- bradleyland 14y ago
  > ...even though financial institutions are wanting to saddle the average consumer with more debt. This isn't a rebuttal to your comment specifically, but it illustrates perfectly why bankruptcy ought to be easier and apply to more categories of debt. A lender operates on risk assessment. If provided lending categories where they can saddle debtors with obligation that follows them to their grave, the risk drops significantly. Thefore, in a poor lending market, lenders will gravitate toward lending categories with low risk.
swalsh 14y ago
This sounds like the plan is to buy debt, typically in the way a collector would. I guess, i'm curious what they're accomplishing here? By this point the way I understand it the person has effectively already defaulted.
gruseom 14y ago
Speaking of buying up debt, does anybody else remember how, early in 2009, the Obama administration set up exchanges for private investors to buy toxic assets from financial institutions with government support? I remember Geithner announcing this with much fanfare as the program to return large banks to solvency. There was a brief controversy, and then the whole thing seemed to just disppear. My impression is that it turned out the banks didn't want to sell at a price anyone wanted to pay. But I've always been curious: what really happened? Is it public knowledge? (Sorry for going off-topic... my excuse is that some of the same debt is probably involved, albeit through many layers of indirection and far downstream in the collection process.)
- hammock 14y ago
  It is called the PPIP (Public-Private Investment Program) Some info: http://www.nakedcapitalism.com/2011/01/richard-alford-why-has-the-ppip-scandal-been-swept-under-the-rug.html http://www.nakedcapitalism.com/2011/01/richard-alford-why-ha... http://www.huffingtonpost.com/2010/01/04/ppip-banks-making-a-killi_n_410203.html http://www.huffingtonpost.com/2010/01/04/ppip-banks-making-a... http://en.wikipedia.org/wiki/Public-Private_Investment_Program_for_Legacy_Assets http://en.wikipedia.org/wiki/Public-Private_Investment_Progr...
  - gruseom 14y ago
    Thanks. I skimmed those links and found it all confusing. What I got was, approximately: it still exists, it's relatively small ($30B is small in financial crisis terms), and its activities have not been particularly transparent. On the other hand, http://www.treasury.gov/initiatives/financial-stability/reports/Documents/External%20Report%20-%2009-12%20vFinal.pdf http://www.treasury.gov/initiatives/financial-stability/repo....
kuahyeow 14y ago
In the other thread : https://news.ycombinator.com/item?id=4761402 https://news.ycombinator.com/item?id=4761402
mschaecher 14y ago
Anyone know if the reasoning behind not being able to buy individuals debt is legal or if technical/execution? A marketplace for this kind of relief a la Kiva could be hugely powerful.
- weaksauce 14y ago
  Probably so you can't game the system.
  - mschaecher 14y ago
    Riiiight, because this opaque give us money and we'll buy off some anonymous people's debt is a beacon for piece of mind. A non-profit marketplace for this built similar to Kiva, LendingClub, etc. increases transparency dramatically.
    - weaksauce 14y ago
      Not how I intended it. The system was never intended to be used this way; they intended to package up "bad" loans that they get a tax write off for and then wholesale them for pennies on the dollar out to intermediaries. The intermediaries don't get to look at each name on there to see if they are getting a certain debt. It's just given a credit rating and then resold. If the secondary debt collectors can collect on the bad debt for more than they purchased it for they make a profit. By gaming the system I meant that someone might go into debt, don't pay, wait for them to offer it up on the secondary market and then buy back the debt for pennies on the dollar effectively forgiving their own debt. They might need to have someone else buy the debt for them but it's essentially the same process.
mileswu 14y ago
This is very similar to a projected supposed to help the Greek public debt situation. http://www.greecedebtfree.org/ http://www.greecedebtfree.org/
state 14y ago
What I like about this is how crazy it seems.
doctorpangloss 14y ago
I admire the design. It's like carbon credits: you can buy pollution credits and simply not use them, if you want to do good by the environment. Buying debt is much more efficient than lobbying, going through lawsuits, etc. It shouldn't be sustainable, presumably, since all these people buying up debt should raise its price. But maybe it's sustainable enough.

52 points by kuahyeow 14y ago

Is there a marketplace for debt online that I can visit as Joe Consumer and buy the debt of others so I can forgive it or at least offer the debt back to the person at cost? What information is likely to be public about the debtor when one purchases the debt? Is there a startup business idea in this?

jonny_eh 14y ago
Even better, why not let people buy out their own debt at near cost?
- jpdoctor 14y ago
  The term Moral Hazard is relevant here.
  - malandrew 14y ago
    A better question is why the original lender doesn't just try to give the original lender the chance to buy his own debt at pennies on the dollar more than what they are selling it for. i.e. "Hey we're about to sell your $10k in debt to company X for $500, but we'll sell it to you for $2000. Do you want to buy it or should we sell it off to Company X?"
    - mseebach 14y ago
      First, if the delinquent party has $2000 lying around for an expense like this, the debt agency is probably better off trying to recover the full sum. It's not like they can just loan it to them. Second, if you're years behind on your debt, you're probably not in the habit of reading letters from debt collection agencies. Third: the moral hazard: get deep in debt, set aside 20% in a high interest savings account, wait for offer.
      - gpvos 14y ago
        Well, if the banks can have moral hazard, why can't we?
      - kalms 14y ago
        A few years back, when the credit crisis happened, several investment companies bought up debt, and then offered people to pay it off, with half or less, compared to what they owed before that. I don't know if they actually earned anything from that type of investment, but it went on for a while. It was in Denmark.
    - michaelt 14y ago
      Company X might value the debt at $500 on the assumption there's a 25% chance they'll recover $2000 and a 75% chance they'll recover $0. Filter out the 25% who can pay and the value of the debt would presumably drop significantly!
- kuahyeow 14y ago
  That would be in normal times, a payment plan.

programminggeek 14y ago

You know, consumer debt is probably the biggest thing slowing down the economy, even though financial institutions are wanting to saddle the average consumer with more debt. If people don't have money to buy things because they are spending money servicing debt, that slows down the whole consumer economy. The only people who win in that scenario are the banks, but they would profit more over the long term by a stronger economy than they currently do from consumer debt.

backprojection 14y ago
I think this makes sense from a high-level point of view. It seems like it would be bad for the economy, if more wealth flows from consumers to bank profits. This is maybe simplistic, but I'm thinking progress is better served if more people can buy iGadgets, than if bank execs can spend more on luxury goods. There are huge, positive, side effects when people buy more technology, because technology gets cheaper, which then advances economic growth.
bradleyland 14y ago
> ...even though financial institutions are wanting to saddle the average consumer with more debt. This isn't a rebuttal to your comment specifically, but it illustrates perfectly why bankruptcy ought to be easier and apply to more categories of debt. A lender operates on risk assessment. If provided lending categories where they can saddle debtors with obligation that follows them to their grave, the risk drops significantly. Thefore, in a poor lending market, lenders will gravitate toward lending categories with low risk.

swalsh 14y ago

This sounds like the plan is to buy debt, typically in the way a collector would. I guess, i'm curious what they're accomplishing here? By this point the way I understand it the person has effectively already defaulted.

gruseom 14y ago

Speaking of buying up debt, does anybody else remember how, early in 2009, the Obama administration set up exchanges for private investors to buy toxic assets from financial institutions with government support? I remember Geithner announcing this with much fanfare as the program to return large banks to solvency. There was a brief controversy, and then the whole thing seemed to just disppear. My impression is that it turned out the banks didn't want to sell at a price anyone wanted to pay. But I've always been curious: what really happened? Is it public knowledge? (Sorry for going off-topic... my excuse is that some of the same debt is probably involved, albeit through many layers of indirection and far downstream in the collection process.)

hammock 14y ago
It is called the PPIP (Public-Private Investment Program) Some info: http://www.nakedcapitalism.com/2011/01/richard-alford-why-has-the-ppip-scandal-been-swept-under-the-rug.html http://www.nakedcapitalism.com/2011/01/richard-alford-why-ha... http://www.huffingtonpost.com/2010/01/04/ppip-banks-making-a-killi_n_410203.html http://www.huffingtonpost.com/2010/01/04/ppip-banks-making-a... http://en.wikipedia.org/wiki/Public-Private_Investment_Program_for_Legacy_Assets http://en.wikipedia.org/wiki/Public-Private_Investment_Progr...
- gruseom 14y ago
  Thanks. I skimmed those links and found it all confusing. What I got was, approximately: it still exists, it's relatively small ($30B is small in financial crisis terms), and its activities have not been particularly transparent. On the other hand, http://www.treasury.gov/initiatives/financial-stability/reports/Documents/External%20Report%20-%2009-12%20vFinal.pdf http://www.treasury.gov/initiatives/financial-stability/repo....

kuahyeow 14y ago

In the other thread : https://news.ycombinator.com/item?id=4761402 https://news.ycombinator.com/item?id=4761402

mschaecher 14y ago

Anyone know if the reasoning behind not being able to buy individuals debt is legal or if technical/execution? A marketplace for this kind of relief a la Kiva could be hugely powerful.

weaksauce 14y ago
Probably so you can't game the system.
- mschaecher 14y ago
  Riiiight, because this opaque give us money and we'll buy off some anonymous people's debt is a beacon for piece of mind. A non-profit marketplace for this built similar to Kiva, LendingClub, etc. increases transparency dramatically.
  - weaksauce 14y ago
    Not how I intended it. The system was never intended to be used this way; they intended to package up "bad" loans that they get a tax write off for and then wholesale them for pennies on the dollar out to intermediaries. The intermediaries don't get to look at each name on there to see if they are getting a certain debt. It's just given a credit rating and then resold. If the secondary debt collectors can collect on the bad debt for more than they purchased it for they make a profit. By gaming the system I meant that someone might go into debt, don't pay, wait for them to offer it up on the secondary market and then buy back the debt for pennies on the dollar effectively forgiving their own debt. They might need to have someone else buy the debt for them but it's essentially the same process.

mileswu 14y ago

This is very similar to a projected supposed to help the Greek public debt situation. http://www.greecedebtfree.org/ http://www.greecedebtfree.org/

state 14y ago

What I like about this is how crazy it seems.

doctorpangloss 14y ago

I admire the design. It's like carbon credits: you can buy pollution credits and simply not use them, if you want to do good by the environment. Buying debt is much more efficient than lobbying, going through lawsuits, etc. It shouldn't be sustainable, presumably, since all these people buying up debt should raise its price. But maybe it's sustainable enough.