H. Res 365

• I Wear Pants

  112th CONGRESS 1st Session H. RES. 365 Expressing the sense of the House of Representatives that Congress should cut the United States' true debt burden by reducing home mortgage balances, forgiving student loans, and bringing down overall personal debt.
  IN THE HOUSE OF REPRESENTATIVES July 22, 2011
  
  Mr. CLARKE of Michigan submitted the following resolution; which was referred to the Committee on Financial Services, and in addition to the Committee on Education and the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned
  [HR][/HR] RESOLUTION Expressing the sense of the House of Representatives that Congress should cut the United States' true debt burden by reducing home mortgage balances, forgiving student loans, and bringing down overall personal debt.
  Whereas the threat of default stands to exacerbate an already dire situation for citizens of the United States with regard to personal debt by increasing the cost of debt service and future borrowing;
  Whereas the average person in the United States, much like the Federal Government, owes more in monthly bills than he or she has on hand, but, unlike the Federal Government, individuals and households who suffered employment setbacks during the financial crisis face extraordinarily high costs to finance their debt;
  Whereas while 30-year Treasury bond yields have hovered around 4.3 percent, some credit card borrowers who have missed payments face interest rates of up to 29 percent, rates that would only go up should the government default;
  Whereas average borrowers in the United States often face terms that are more severe than market conditions warrant, and additional uncertainty brought on by approaching the debt ceiling or actual default are likely to increase the mark-up that lenders demand;
  Whereas according to Nobel Prize-winning Economist Joseph Stiglitz, the credit card debt situation faced by many United States citizens is similar to `partial indentured servitude', where `an individual with debts equal to 100% of his or her income could be forced to hand over to the bank 25% of his gross, pre-tax income for the rest of his life, because the bank could add on 30% interest each year to what a person owed.';
  Whereas in 2009, nearly half of people in the United States had credit card debt, with a median balance of $3,300;
  Whereas credit card interest payments alone now total approximately $94,000,000,000 per year;
  Whereas in 2011, the average borrower graduating from a 4-year college left school with roughly $23,000 of student debt, but compounding this burden, only 56 percent of 2010 graduates were able to find work following completion of their studies according to a study by the John J. Heldrich Center for Workforce Development at Rutgers University;
  Whereas in 2009, average mortgage payments surpassed $1,000 per month;
  Whereas as of March 2011, 2,400,000 United States homeowners with mortgages, or 27.9 of the total population of home mortgagors, had less than 5 percent equity on their homes;
  Whereas if home prices fall between 5 and 10 percent by the end of 2011, as some forecast, nearly one-third of United States homeowners with mortgages would owe more on their homes than the properties are worth;
  Whereas Mark Fleming, the chief economist for the business analytics firm CoreLogic, has stated that `Negative equity holds millions of borrowers captive in their homes, unable to move or sell their properties. Until the high level of negative equity begins to recede, the housing and mortgage finance markets will remain very sluggish.';
  Whereas increases in credit card interest rates have the same negative impact on consumer demand for goods and services as price increases, creating a drag on the economy that is made worse by uncertainty over the debt ceiling;
  Whereas student loans, mortgage debt, and credit card debt create a vicious economic cycle as consumers avoid spending on account of their debts and businesses forego hiring because they lack customers;
  Whereas reducing household debt and increasing savings directly ameliorates the United States' trade deficit;
  Whereas when United States citizens save more, they are able to finance United States imports rather than borrowing from abroad;
  Whereas given that savings finance investment and that investment drives economic growth, increasing the savings rate should be a priority;
  Whereas under bankruptcy rules, corporations are allowed to write down the debt restructure because it is essential to keep them functioning;
  Whereas corporations are deemed to be systemically important to the United States economy and keeping families in their homes is also systematically important;
  Whereas evictions have destructive consequences not only for families but also for neighbors, municipal governments, the environment, and the fiscal health of the United States;
  Whereas high personal savings economies tend to be high growth economies;
  Whereas the experiences of the `Asian Tiger' economies (South Korea, Singapore, Taiwan, and Hong Kong) during the late 20th century or China in the present period illustrate this notion;
  Whereas just as importantly, high savings countries tend to be more economically resilient; and
  Whereas after suffering the lessons of the Financial Crisis of 1997, East Asian countries' savings levels skyrocketed, which is widely cited as a reason they have suffered minimal impacts from the recent financial crisis: Now, therefore, be it
  

  • Resolved, That it is the sense of the House of Representatives that--

  • • (1) the high rate of personal debt is an urgent national concern for the health of the United States economy, on par with the urgency of addressing the Federal debt and debt limit;

  • • (2) Congress should cut the United States' true debt burden by reducing home mortgage balances, forgiving student loans, and bringing down overall personal debt;

  • • (3) having the Federal Government avoid default and reducing the Federal debt will not make the United States stronger alone, but household debt should be cut too in order to make the United States strong; and

  • • (4) helping citizens of the United States become free of debt to promote personal financial security and to strengthen the Nation's economy should be a top priority of the United States.

  • • Any thoughts on this? I'd really like this as, selfishly perhaps, it'd be wonderful to not have student loans. Though I haven't really thought about it enough to recognize the actual effects of such an action (or perhaps I'd be too stupid to recognize them even after contemplating it).
• I Wear Pants

  Seriously, no one has an opinion yea or nay on this?
• Cleveland Buck

  

  Obviously no. How many banks would need to be bailed out again because of this? How many trillions of dollars would Bernanke have to print and put on bank balance sheets? Not to mention, bankruptcy would keep people from borrowing again right away, which is a good thing. If they want to buy something in the future they would have to save their money, which is desperately needed right now. Doing this would just encourage everyone to start borrowing again and in a few years when it crashes again what do you do?
• majorspark

  

  Pay your own damn bills. I paid my student loan off. Why expect others to foot your bill? What has happened to this country? The only good thing about this bill is it will get things over with a lot sooner.
• I Wear Pants

  I think it would encourage people to start saving and spending again.
  
  I don't see why this would make banks need to be bailed out.
• I Wear Pants

  majorspark;899075 wrote:Pay your own damn bills. I paid my student loan off. Why expect others to foot your bill? What has happened to this country? The only good thing about this bill is it will get things over with a lot sooner.

  So by this post I can assume that even if you thought this would help the economy you'd oppose it on principle?
• majorspark

  

  I Wear Pants;899078 wrote:So by this post I can assume that even if you thought this would help the economy you'd oppose it on principle?

  Its not going to help the economy. Why don't we just print every American $100,000? Think of how many Americans would be encouraged to spend and save with that amount.
• Cleveland Buck

  

  I Wear Pants;899076 wrote:I think it would encourage people to start saving and spending again.
  
  I don't see why this would make banks need to be bailed out.

  No it wouldn't encourage saving. It would encourage more borrowing if the government is going to bail you out when you get into too much debt. It would encourage spending the newly borrowed money, but that isn't going to help the economy, it will hurt it further. Consumer spending is already above it's pre-2008 peak and rising and our economy is worse off for it.
  
  Banks would need to be bailed out because these are assets on their balance sheets. If the government is going to forgive them then they are worth zero to the banks. If the government is going to buy these debts then it is a bailout. You can't just forgive everyone's debt and magically those balances disappear and no one is adversely affected.
• majorspark

  

  Why doesn't the federal government do this. Pay your student loan of and give me back the money I paid for mine. Wow I am glad we got these economic wizards in Washington. I can play their game too.
• I Wear Pants

  majorspark;899089 wrote:Its not going to help the economy. Why don't we just print every American $100,000? Think of how many Americans would be encouraged to spend and save with that amount.

  Key word was "if you thought". It was a hypothetical scenario. I'm asking if you're opposed to the idea in general regardless of whether it would help (not saying you believe it would).
  
  As in, if this would help the economy (emphasis on "if") would you still be opposed to it because you believe people should "pay their own damn bills"?
  

  Cleveland Buck;899091 wrote:No it wouldn't encourage saving. It would encourage more borrowing if the government is going to bail you out when you get into too much debt. It would encourage spending the newly borrowed money, but that isn't going to help the economy, it will hurt it further. Consumer spending is already above it's pre-2008 peak and rising and our economy is worse off for it.
  
  Banks would need to be bailed out because these are assets on their balance sheets. If the government is going to forgive them then they are worth zero to the banks. If the government is going to buy these debts then it is a bailout. You can't just forgive everyone's debt and magically those balances disappear and no one is adversely affected.

  Didn't the government take over all the FAFSA based loans? I think that's the ones they're talking about forgiving not private loans from other lenders.
  
  And I think the only debt they are talking about forgiving is the student loan debt but talking about having other mortgages refinanced at lower rates to discourage people from defaulting on them/lowering the number of foreclosures. Which could help banks as they'd have people paying money (may be lower payments but lowered payments are still higher than no payments from people defaulting).
• majorspark

  

  I Wear Pants;899098 wrote:Key word was "if you thought". It was a hypothetical scenario. I'm asking if you're opposed to the idea in general regardless of whether it would help (not saying you believe it would).
  
  As in, if this would help the economy (emphasis on "if") would you still be opposed to it because you believe people should "pay their own damn bills"?

  There is a law of economics. Like the law of gravity. If the house wants to pass a bill claiming we can jump off a cliff flap our arms and we will land softly. You are going to splat. There is no hypothetical. Forgiving debt is never without consequence. The debt just does not magically disappear. The law of economics requires payment. That payment may come in the form of $10/gallon milk but you will pay.
• jhay78

  

  Not only would it encourage more borrowing, it would encourage more reckless borrowing. If both lenders and borrowers know that the government can always bail them out, then why engage in fiscally responsible lending/borrowing? Having the freedom and taking the risk of engaging in economic activity also includes the freedom to fail and fall flat on your face, and that's not always a bad thing.
• I Wear Pants

  Ok so reckless borrowing is a problem then. Why haven't we and why didn't we make more regulations regarding that? ("make regulations" in this case could involve getting rid of regulations that encourage reckless lending as well as new ones to discourage it)
  
  And if not this, what do we do to make it so "Whereas according to Nobel Prize-winning Economist Joseph Stiglitz, the credit card debt situation faced by many United States citizens is similar to `partial indentured servitude', where `an individual with debts equal to 100% of his or her income could be forced to hand over to the bank 25% of his gross, pre-tax income for the rest of his life, because the bank could add on 30% interest each year to what a person owed." doesn't happen?
• Cleveland Buck

  

  I Wear Pants;899098 wrote:Key word was "if you thought". It was a hypothetical scenario. I'm asking if you're opposed to the idea in general regardless of whether it would help (not saying you believe it would).
  
  As in, if this would help the economy (emphasis on "if") would you still be opposed to it because you believe people should "pay their own damn bills"?
  
  
  Didn't the government take over all the FAFSA based loans? I think that's the ones they're talking about forgiving not private loans from other lenders.
  
  And I think the only debt they are talking about forgiving is the student loan debt but talking about having other mortgages refinanced at lower rates to discourage people from defaulting on them/lowering the number of foreclosures. Which could help banks as they'd have people paying money (may be lower payments but lowered payments are still higher than no payments from people defaulting).

  Federal student loans are still assets on some banks balance sheet. The government doesn't have any money to lend and students don't borrow directly from the Federal Reserve. If you wipe those out you are removing assets from that bank. If the government forces banks to refinance at lower interest rates then they are taking away interest they would have made. Even if many of those would end up being foreclosures, they still exist on their balance sheets. It's not like our banks are healthy. Any hit to their balance sheets will send them back to the Fed pay window with their hands out. So the choices are to either have the government pay the banks for the assets by borrowing money through treasury bills that the Federal Reserve will likely have to print money to buy, or the government doesn't buy these assets and the banks run to Bernanke for another bailout where he puts freshly printed money on their balance sheets. Either way it does nothing to help fix our economy and the more money that flows from the Fed the faster the demise of the dollar comes.
• Cleveland Buck

  

  I Wear Pants;899134 wrote:Ok so reckless borrowing is a problem then. Why haven't we and why didn't we make more regulations regarding that? ("make regulations" in this case could involve getting rid of regulations that encourage reckless lending as well as new ones to discourage it)

  Consumer borrowing and spending is our economy. It is an illusion that is coming to an end, but everything you hear from the government they haven't learned their lesson, so they want to promote reckless borrowing and lending. More regulation wouldn't solve anything anyway. The only regulation you need is to allow insolvent banks to fail and allow bankrupt consumers to fail. That will put a stop to the recklessness.
  

  I Wear Pants;899134 wrote: And if not this, what do we do to make it so "Whereas according to Nobel Prize-winning Economist Joseph Stiglitz, the credit card debt situation faced by many United States citizens is similar to `partial indentured servitude', where `an individual with debts equal to 100% of his or her income could be forced to hand over to the bank 25% of his gross, pre-tax income for the rest of his life, because the bank could add on 30% interest each year to what a person owed." doesn't happen?

  Let them file for bankruptcy and learn their lesson.
• I Wear Pants

  So you'd say "fuck it, we no longer will be an economic power"?
  
  Because that's what letting so many banks and consumers fail will do.
  
  I'm not saying endless bailouts will avoid that but I'm not reserved to accept it like you are. I'd rather try to avoid it.
• Manhattan Buckeye

  The bill would be the ultimate moral hazard, rewarding people for making poor choices while people that didn't are on the hook is bad policy. Like majorspark mentioned a more equitable solution would be just give each American "X" dollars and tell them to pay off their debt, or if they have none good job and spend it on what you want. Of course no one would support such insanity.
  
  Student loans are a problem, but they result from escalating college costs and devaluation of the degrees. If the government really wanted to stave off this trend they'd investigate BIG EDUCATION and ask why costs have soared past inflation rises. I'm not overly optimistic on that and as long as the education industry overwhelmingly favors one political party, which happens to control the WH.
• I Wear Pants

  Manhattan Buckeye;899276 wrote:The bill would be the ultimate moral hazard, rewarding people for making poor choices while people that didn't are on the hook is bad policy. Like majorspark mentioned a more equitable solution would be just give each American "X" dollars and tell them to pay off their debt, or if they have none good job and spend it on what you want. Of course no one would support such insanity.
  
  Student loans are a problem, but they result from escalating college costs and devaluation of the degrees. If the government really wanted to stave off this trend they'd investigate BIG EDUCATION and ask why costs have soared past inflation rises. I'm not overly optimistic on that and as long as the education industry overwhelmingly favors one political party, which happens to control the WH.

  I wouldn't be optimistic about that even with the Republicans in control. College costs have been skyrocketing for a while now. Fucking ridiculous.
  
  I paid $170 for a shitty black and white book printed on dictionary-esque paper that didn't even have a damned binding. It was loose leaf and I had to put it in a binder. Oh yeah, it's a "custom edition" for my school so I won't be able to sell it back. Fuck you very much.
• O-Trap

  

  I Wear Pants;899230 wrote:So you'd say "fuck it, we no longer will be an economic power"?
  
  Because that's what letting so many banks and consumers fail will do.

  If such an action was on the table, I'm willing to bet far fewer banks or enterprises will operate under the assumptions that lead to them needing bailed out.
  
  If I was offered $100K to walk a high wire, and I knew there was a safety net beneath it to eliminate any risk of walking said wire, I would have no reason not to walk it. However, if I was offered the same, but the net was not there, then I would have to be responsible for evaluating my own risk, and living (or dying) with the consequences, but I would know that going in.
  
  Remove the "bailout" safety net, and let's see how many banks would still be as risky with their financial enterprises as they've been to date. My guess is that fewer walk the high wire, or if they do, they take considerably more precaution.
• I Wear Pants

  And if your guess is wrong and the banks and those that run them are all just irrational, greedy fucks willing to gamble away our economic standing? What then?
• O-Trap

  

  I Wear Pants;899313 wrote:And if your guess is wrong and the banks and those that run them are all just irrational, greedy fucks willing to gamble away our economic standing? What then?

  People with that mentality don't typically ever get to be large enough to have an effect on our financial standing, because they usually dick themselves over before they're big enough for the Fed to give a shit whether or not they fail.
  
  First, if they gamble it away, then it's their own jobs and asses going broke as well.
  
  Second, the law of the market would suggest that a slew of irrational fucks in an industry creates a void of economic responsibility ... a void that, if filled by someone who fits the bill, will make that someone a lot of money. You can bet your ass someone will step in quickly.
  
  To suggest that everyone will simultaneously gamble it away would also ignore the competitive edge to minimizing risk.
  
  If, beyond that, they all got syphilis and went crazy, then we're going to fail, and no amount of propping it up with twigs is going to prevent that.
• majorspark

  

  I Wear Pants;899313 wrote:And if your guess is wrong and the banks and those that run them are all just irrational, greedy fucks willing to gamble away our economic standing? What then?

  The same can be said of the federal government. If a private entity grows to the point it is too big to fail, then the government referee's should step in and break it up.
• I Wear Pants

  majorspark;899326 wrote:The same can be said of the federal government. If a private entity grows to the point it is too big to fail, then the government referee's should step in and break it up.

  Quite right.
• majorspark

  

  majorspark;899326 wrote:The same can be said of the federal government. If a private entity grows to the point it is too big to fail, then the government referee's should step in and break it up.

  Just to add to this the problem with the federal government is they do not want to be the referee. They want to be the coach.
• Glory Days

  

  Manhattan Buckeye;899276 wrote:Student loans are a problem, but they result from escalating college costs and devaluation of the degrees. If the government really wanted to stave off this trend they'd investigate BIG EDUCATION and ask why costs have soared past inflation rises. I'm not overly optimistic on that and as long as the education industry overwhelmingly favors one political party, which happens to control the WH.

  now take this for what its worth, but one of my economics professors explained the reason for high tuition etc is because of the increases in student loans and other money out there. i am no financial guy, but somehow the schools arent making the same amount of money from a student who gets loans or other assistance compared to the student who pays cash so they have to increase it. atleast thats the way i remember it being explained to me.