tag:blogger.com,1999:blog-5404820640426099135.post1936292020272216638..comments2023-10-31T00:46:35.316+13:00Comments on Anti-Dismal: Don't let judges tear up mortgage contractsPaul Walkerhttp://www.blogger.com/profile/13731003529546075700noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-5404820640426099135.post-43069591684772453232009-02-16T22:48:00.000+13:002009-02-16T22:48:00.000+13:00So what you are saying is that the majority should...So what you are saying is that the majority should not be allowed to file for bankruptcy? But how are people that just lost jobs - and often both both of the couple - supposed to pay the mortgage? I think there's no win-win situation. The whole system needs to be changed and it'll be a painful process. And before the new system is in place, people will continue to lose houses and banks will have to be controlled to some degree.<BR/>JulieAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5404820640426099135.post-53364239000790132172009-02-16T22:16:00.000+13:002009-02-16T22:16:00.000+13:00Can't bankruptcy judges adjust other debts and the...Can't bankruptcy judges adjust other debts and their repayment schedules etc? Why should banks be any different?<BR/><BR/>If banks were to gain the impression that sometimes when they loan out money it might not come back, they might become less adventurous.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5404820640426099135.post-51957567716810673642009-02-16T19:18:00.000+13:002009-02-16T19:18:00.000+13:00Thanks Paul. I recall in the 1970s an elderly rela...Thanks Paul. I recall in the 1970s an elderly relative still being very sore about what had been done.John Macilreehttps://www.blogger.com/profile/02006468722727550303noreply@blogger.comtag:blogger.com,1999:blog-5404820640426099135.post-17889240803697480072009-02-15T16:50:00.000+13:002009-02-15T16:50:00.000+13:00Gary Hawke in his "The Making of New Zealand: An E...Gary Hawke in his "The Making of New Zealand: An Economic History" has this to say<BR/><BR/><EM>Reduction of interest rates could be seen as part of the deflation needed to bring internal costs into line with overseas prices, or as part of the package of measures recommended by the Economists' Committee to achieve equality of sacrifice, or as the implementation of cheap money. The underlying reasoning differed and was not always compatible across different lines of advice, but the recommended measures were clear and were adopted by the government. Interest rates on new issues of government stock and, with the agreement of the banks, on overdrafts and fixed deposits, had already been reduced in 1931. In 1932, more steps were taken. A Mortgages and Tenants Relief Act extended the modification of mortgages to include those not secured on farmland and made it possible for the mortgagor to initiate renegotiation of terms even before a mortgagee attempted to enforce a power of sale. The National Expenditure Adjustment Act provided for a 20% reduction in interest rates and rents provided that they need not fall below a floor (of 5% or unimproved value in the case of rents, 6$% for interest rates on loans secured on chattels, 44% on debentures of free of income tax, and 5% on other debentures, mortgages and preference shares). The sanctity of private contracts was overridden but, while this stimulated some opposition in the 1935 election, the government's decision was that it was more important to attempt to counter the Depression. Government stocks were converted to lower rates by the simple expedient of imposing an additional tax on the interest of any shareholder who declined to convert 'voluntarily' to the new issue. Overdraft rates were reduced again, with the government according to Sutch, threatening to legislate if the banks refused to do so voluntarily.</EM>Paul Walkerhttps://www.blogger.com/profile/13731003529546075700noreply@blogger.comtag:blogger.com,1999:blog-5404820640426099135.post-4434131635462207992009-02-15T16:20:00.000+13:002009-02-15T16:20:00.000+13:00John: The following comes from a paper by Grant Fl...John: The following comes from a paper by Grant Fleming on "Economists and Mortgage Relief in New Zealand in the 1930s", Australian EconomicHistory Review, Vol. 37, No. 1 March 1997, pages 54-68.<BR/><BR/><EM>Economic debate onmortgage relief during the 1930s depression yielded two possible relief measures. On the one hand, Barney Murphy, professor of economics at Victoria University College, advocated a non-interventionist<BR/>stance by arguing that greater social damage could be caused by breaking mortgage contracts than by observing them. Government alteration of contracts would increase private sector uncertainty and hinder any possible recovery in agriculture. On the other hand, Professor Horace Belshaw of Auckland University College applauded Adjustment Commissions' efforts to negotiate new terms and agreements between mortgagors and mortgagees. For Belshaw, lower interest rates were concomitant with recovery in the farm economy.We should note that both economists highlighted the importance of the State in creating an economic climate conducive to increased agricultural investment as a precondition for recovery. In essence, Murphy championed business confidence and expectations of future farm income as the most influential factors in farm investment decisions while Belshaw stressed the need for lower interest rates if farmers were to trade out of their difficulties.<BR/><BR/>MacDonald and Thomson are right to maintain that Adjustment Commissions were important in popularizing the view that domestic, as well as international, factors contributed to the `rural crisis'. But the Commissions were far from path breaking in coming to grips with the underlying causes of rural depression.The basic principles of many of the Adjustment Commissions' edicts can be located in early Canterbury theorizing on farm finance and land values. As early as 1923 Condliffe and Belshaw had stressed that land values should reflect productive value, that long-term finance was desperately required to satisfy the peculiarities of farmers' financial requirements, and that interest rates needed to be flexible and reflect changing market conditions.<BR/><BR/>Finally, this paper has raised some problems with interwar policymakers' views on the necessity of nominal interest rate flexibility for an efficient agricultural finance system; problems that are important to bear in mind in current policy formation. Official advisers, Belshaw included, failed to distinguish between farmers' nominal and real mortgage costs in tendering advice on the establishment of the Mortgage Corporation. Indeed, an apparent lack of understanding of the behavioural variables important during the 1920s and 1930s in determining agricultural investment led to an overemphasis on State remedies.While perhaps justifiable as a crisis measure, State interference in private sector contracts and the provision of concessionary loans did little to offset negative farmer expectations and encourage investment.</EM>Paul Walkerhttps://www.blogger.com/profile/13731003529546075700noreply@blogger.comtag:blogger.com,1999:blog-5404820640426099135.post-61780669972362391602009-02-15T14:21:00.000+13:002009-02-15T14:21:00.000+13:00John: The short answer is that I don't know much o...John: The short answer is that I don't know much on this. But I will check into it. Fiscal policy in general, it appears, didn't play much of a role in getting NZ out of the depression. As I noted <A HREF="http://antidismal.blogspot.com/2008/11/new-zealands-recovery-from-great.html" REL="nofollow">here</A> monetary policy was the main driver.Paul Walkerhttps://www.blogger.com/profile/13731003529546075700noreply@blogger.comtag:blogger.com,1999:blog-5404820640426099135.post-10704662066234699072009-02-15T08:53:00.000+13:002009-02-15T08:53:00.000+13:00Paul, in this context I would be interested in you...Paul, in this context I would be interested in your thoughts on some economic history - mortgage "relief" in 1930s New Zealand.John Macilreehttps://www.blogger.com/profile/02006468722727550303noreply@blogger.comtag:blogger.com,1999:blog-5404820640426099135.post-67720518219807873782009-02-15T06:07:00.000+13:002009-02-15T06:07:00.000+13:00It is interesting to me that the banks object so l...It is interesting to me that the banks object so loudly. They are not lending their own money anymore. And bankruptcy cramdowns will not likely be common enough to have the far-reaching effects that the banks are worried about.<BR/><BR/>What the banks are really worried about, I think, is the increased leverage that borrowers will have in modifying their loans. Right now, the banks can take a "Take it or leave it" approach to modifications. If the cramdown legislation passes, then borrowers will be able use the threat of bankruptcy to negotiate more favorable terms. While there may be losses, modifications of salvageable loans will occur with or without cramdown or stimulus of federal aid. The question is "On what terms?"Anonymousnoreply@blogger.com