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Erasing Debt

Races for the Senate, U.S. House, etc. and other issues of national importance.

Erasing Debt

Postby Stebben84 » Fri Nov 09, 2012 1:52 pm

So I just read this article and I find it really fascinating.

http://howtosharpenpencils.tumblr.com/p ... es-bailout

Now OWS is launching the ROLLING JUBILEE, a program that has been in development for months. OWS is going to start buying distressed debt (medical bills, student loans, etc.) in order to forgive it. As a test run, we spent $500, which bought $14,000 of distressed debt. We then ERASED THAT DEBT. (If you’re a debt broker, once you own someone’s debt you can do whatever you want with it — traditionally, you hound debtors to their grave trying to collect. We’re playing a different game. A MORE AWESOME GAME.)


It sounds like a great idea, but is it too good to be true? Am I missing something? The system is so fucked up as it is, I can't see how doing this could make it any worse. If it gains traction, think about the amount of personal debt that would be eliminated.
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Re: Erasing Debt

Postby rabble » Fri Nov 09, 2012 1:58 pm

Um. Well it couldn't possibly work because it...

Shit. Sure seems like it would work.

The only thing I can think of is that they'll change the rules if this catches on. Kinda like how the casinos treat somebody with a system.
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Re: Erasing Debt

Postby ArturoBandini » Fri Nov 09, 2012 2:57 pm

This magical transformation from $14k to $500 might work in cases of particular creditor distress, but I doubt that this ratio would be the norm.

I see nothing wrong with buying out people's debt and tearing up the paper. I'm not of the mind that people should pay back their debts on principle to repay some sort of karma or something - if you or someone else can negotiate your debt bill down to a fraction of what the nominal value is, good for you.

The flipside of this operation is that any people who have savings, investments, or other capital are the counterparties in this exchange and would rather get the most money they can from such a debt buyout. You might support the idea of Rolling Jubilee at an interpersonal level, but you might also balk if your mutual fund decided to liquidate its paper assets (your assets) for pennies on the dollar.
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Re: Erasing Debt

Postby rabble » Fri Nov 09, 2012 3:14 pm

ArturoBandini wrote:You might support the idea of Rolling Jubilee at an interpersonal level, but you might also balk if your mutual fund decided to liquidate its paper assets (your assets) for pennies on the dollar.

I was under the impression that those debts are out there for that price because the holder had already decided to cut their losses and take the hit.

The consequences you're describing should have already hit the fan by the time those debts are bought.

The problem I'd have with my mutual fund would have been taking on that paper in the first place.
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Re: Erasing Debt

Postby HawkHead » Fri Nov 09, 2012 3:27 pm

ArturoBandini wrote:This magical transformation from $14k to $500 might work in cases of particular creditor distress, but I doubt that this ratio would be the norm.

I see nothing wrong with buying out people's debt and tearing up the paper. I'm not of the mind that people should pay back their debts on principle to repay some sort of karma or something - if you or someone else can negotiate your debt bill down to a fraction of what the nominal value is, good for you.

The flipside of this operation is that any people who have savings, investments, or other capital are the counterparties in this exchange and would rather get the most money they can from such a debt buyout. You might support the idea of Rolling Jubilee at an interpersonal level, but you might also balk if your mutual fund decided to liquidate its paper assets (your assets) for pennies on the dollar.


I thought you were all for the free market and leaving everyone to do whatever they want. The free market decided that $14,000 of debt was worth $500 and that is what the OWS people bought it for.

What do you think happened to all the mortgage backed securities that were sold and crippled our economy? Those became worthless and you couldn't even get $500 for them.
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Re: Erasing Debt

Postby ArturoBandini » Fri Nov 09, 2012 4:22 pm

HawkHead wrote:I thought you were all for the free market and leaving everyone to do whatever they want. The free market decided that $14,000 of debt was worth $500 and that is what the OWS people bought it for.
I am in complete agreement, read my second paragraph again. My point is that that anecdotal $500 score was the low hanging fruit and it's unlikely that such a system could scale to anything near what would be required to put a dent in total outstanding personal debt. I am 100% OK with this Rolling Jubilee thing as long as it's done voluntarily and the OWS people don't commission Congress to pay for debt buyouts using taxpayer dollars.
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Re: Erasing Debt

Postby ArturoBandini » Fri Nov 09, 2012 4:24 pm

rabble wrote:I was under the impression that those debts are out there for that price because the holder had already decided to cut their losses and take the hit.

The consequences you're describing should have already hit the fan by the time those debts are bought.

The problem I'd have with my mutual fund would have been taking on that paper in the first place.
All good points.
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Re: Erasing Debt

Postby HawkHead » Fri Nov 09, 2012 4:32 pm

ArturoBandini wrote:
HawkHead wrote:I thought you were all for the free market and leaving everyone to do whatever they want. The free market decided that $14,000 of debt was worth $500 and that is what the OWS people bought it for.
I am in complete agreement, read my second paragraph again. My point is that that anecdotal $500 score was the low hanging fruit and it's unlikely that such a system could scale to anything near what would be required to put a dent in total outstanding personal debt. I am 100% OK with this Rolling Jubilee thing as long as it's done voluntarily and the OWS people don't commission Congress to pay for debt buyouts using taxpayer dollars.


I sure people hanging out in a park don't have the resources to "dent" the system unless a Kurt Vonnegut character is in the crowd.

I find your last sentence humorous. OWS is on a scale of $500 and you don't want Congress to pay but the Wall Street bankers who needed billions of dollars to bail out the financial system is unmentioned. Maybe it was a simple oversight. Maybe it was a Fraudian oversight.
Last edited by HawkHead on Fri Nov 09, 2012 4:34 pm, edited 1 time in total.
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Re: Erasing Debt

Postby rabble » Fri Nov 09, 2012 4:33 pm

HawkHead wrote: Maybe it was a Fraudian oversight.

I like that one. Was that intentional or just a cute typo? :-)
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Re: Erasing Debt

Postby ArturoBandini » Fri Nov 09, 2012 5:54 pm

HawkHead wrote:I find your last sentence humorous. OWS is on a scale of $500 and you don't want Congress to pay but the Wall Street bankers who needed billions of dollars to bail out the financial system is unmentioned. Maybe it was a simple oversight. Maybe it was a Fraudian oversight.
It wasn't oversight. Since you know my posting history so well I figured that it would go without saying that I absolutely oppose congressional bailouts of banks/hedge funds. Opposing the bailouts was one of the few times in my life where I've actually made the effort to write and phone representatives.
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Re: Erasing Debt

Postby Steve Vokers » Fri Nov 09, 2012 6:23 pm

In most cases, forgiven debt is taxable income. So they may be helping them reduce their debt, but they may be creating a tax bill instead.

And the IRS will collect.
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Re: Erasing Debt

Postby Igor » Fri Nov 09, 2012 11:31 pm

I would think that the main issues would be:

- Lots more debt than money to buy it
- If you go around buying lots of $500 debt, they are going to start raising the price.
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Re: Erasing Debt

Postby pjbogart » Sat Nov 10, 2012 12:54 am

Igor wrote:I would think that the main issues would be:

- Lots more debt than money to buy it
- If you go around buying lots of $500 debt, they are going to start raising the price.


Expanding those points, aren't we talking about obscene amounts of debt that would need to be retired? Even if you just focused on medical bills and student loans, aren't you really just doing a favor to the collectors who wouldn't ever see a nickel without your assistance?

And yes, if you actually started paying off a significant amount of personal debt, collectors would consider that debt more valuable. Why sell debt for 10 cents on the dollar when you can get 20? If Warren Buffet announced that his entire fortune would go to pay off defaulted student loans, why sell if for less than full price?

And why bother paying your debts? If the fairy godmother was going to come in and save your ass, why not just default on purpose?

And why wouldn't lenders factor in this amazing philanthropy when making loans? Even if the debt retirement programs only amounted to a few extra cents on the dollar, wouldn't that factor in to who's eligible for a loan?

It's a cool idea, and I'm sure a few lucky recipients would be delighted by their good fortune, but it's a short term gimmick that fails to address to a much larger problem.
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Re: Erasing Debt

Postby Mad Howler » Sat Nov 10, 2012 2:06 am

Hold on Peej,

I wasn't sure what to make of the following link, but "Industrial-grade high-yield" debt seems to be all the rage in some circles. Perhaps this is a maneuver by OWS to illustrate a not so well appreciated and current market distortion.

http://www.ft.com/cms/s/0/4174d77e-275c ... z2BngDaMFu

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Re: Erasing Debt

Postby snoqueen » Sat Nov 10, 2012 1:47 pm

Maybe what would help people who are hopelessly over their heads in student loan debt and facing long-term job prospects that suck would be a provision that if they default on the loans (particularly after they go to collections) it doesn't end up on their credit record. Alternately, only a small part of it ends up on their credit record.

Their credit record is just about the only thing that keeps people playing the pay-back-your-loans game. Whoever made the loan in the first place has long since sold it off. Nobody has a whole lot of fondness for the collection agencies where it ends up.

I don't think defaulting on a student loan means a person's prospect of paying back other loans is no good indefinitely. Other loans should be made (or not) on the basis of current income and current employment.

Another possible modification could be allowing student loans to be part of a bankruptcy.

There's no way every single party to these messy transactions is going to end up whole, so I think allowing young people a fresh start on their lives ought to be a priority.
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