Monday, October 03, 2011
Wall St and the Banksters need a haircut
That is the call from an increasing number of economists who see the need for mortgage debt relief to start the recovery of the rest of America.
More than three years after the financial crisis struck, the economy remains stuck in a consumer debt trap. It's a situation that could take years to correct itself. That's why some economists are calling for a radical step: massive debt relief.We bailed out Wall St. so they could afford the bailout of Main St.
Federal policy makers, they suggest, should broker what amounts to an out-of-court settlement between institutional bond investors, banks and consumer advocates - essentially, a "great haircut" to jumpstart the economy.
What some are envisioning is a negotiated process in which cash-strapped homeowners get real mortgage relief, even if it means forcing banks to incur severe write-downs and bond investors to absorb haircuts, or losses, in some of the securities sold by those institutions.
"We've put this off for too long," said L. Randall Wray, a professor of economics at the University of Missouri-Kansas City. "We need debt relief and jobs and until we get these two things, I think recovery is impossible."
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