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Author Topic: Who will buy the debt if banks collapse  (Read 28122 times)

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Baggyarse

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Re: Who will buy the debt if banks collapse
« Reply #15 on: February 13, 2015, 10:19:03 pm »

dtb thanks for replying, your the right person to question on these matters then. So the way I see it then based on your words is that you would expect another bank or in the case as I have suggested that the big 4 have fallen over and the government is struggling to stay effective. That the financiers of the fallen banks debt would then own the bank and its debt. That way the bank would keep its legitimacy and not breach its contract. As I understand it I have formed a contractual agreement between the bank and myself. If the bank   tries to change its identity/name it breaches its contract does it not.
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dtb

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Re: Who will buy the debt if banks collapse
« Reply #16 on: February 13, 2015, 10:37:40 pm »

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dtb thanks for replying, your the right person to question on these matters then. So the way I see it then based on your words is that you would expect another bank or in the case as I have suggested that the big 4 have fallen over and the government is struggling to stay effective. That the financiers of the fallen banks debt would then own the bank and its debt. That way the bank would keep its legitimacy and not breach its contract. As I understand it I have formed a contractual agreement between the bank and myself. If the bank   tries to change its identity/name it breaches its contract does it not.

Couple of great questions in there mate.

For aussie banks, we dont have bail in rules (yet) like euro is bringing in. What that means is the creditors of the bank (i.e. debt holders) rank above the equity holders - like any firm. If the banknis sold, the buyer buys the assets amd liabs and has obligation to the terms of the debt it has bought. As banks arent allowed to encumber assets (banking act),securitisation is a kind of loophole tho, debt holders have nonsecuroty over the banks assets - depositors included. If the bank is wound up the debt hilders get paid out before shareholders, theybdont own the bank ornassetsbof the bank as the debt is unsecured. All banks in aus have to hold a level of liquidity (cash) to allowmfornthese situatioms so that depositors can be paid back. Govt doesnt care too much about wholesale lenders to the bank as they are deemed sophisticated investors.

So the creditors wont end up owning the bank. The liquidators will sell the asseys, pay what debt they can. Anything left over (unlikely) goes.to shareholders.

For.your loan/mortgage. Yes u are right in that u have a contract with the lender. But the asset (being the mortgage) can be sold to anotjer bank. Happens all the time actually in a process called securitisarion.

Because your debt to buy a house is secured, ie u dont pay it back they can repo your house, the sale.of ure mtg meams that the buying bank nownowns the security. As a customer unwould need to be informed that your mtg os nownwith xyz bank, but the new bank cant chamge the terms of that contract, they can only buy it from the other bank. Eg if u have a fixed rate ln at a certian rate that mush still be honoured. But u will still be expexyed to servoce the loan or the new bank can repo your house.  Unfortunatelty therenisnlittlensay the customer has in whonowns thenmtg as long as thenotherntermsnin thencontraxt remain as before. Hope this makes sense. Sorry for typos, typing on my phone.
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Baggyarse

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Re: Who will buy the debt if banks collapse
« Reply #17 on: February 14, 2015, 12:40:17 am »

yes It's a bit to grasp at first, I will read a couple of more times yet. But the reason I'm not fully understanding is probably because I'm thinking in terms of a straight forward contractual agreement. I have no doubt that the bank has made provisions within the wording of the contract that will allow it to sell/transfer the mortgage the way you have described. Sorta pisses me off even more with the banks. Is it not enough to create a monetary system with more debt than money in the world to pay it off and then create interest on top of that. It was always going to collapse, but that's its purpose in the end I suppose. For these people that dont believe in world wide conspiracy you only have to study the monetary system to see that the system is fundamentally flawed at a basic level.
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Rugglesby

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Re: Who will buy the debt if banks collapse
« Reply #18 on: February 14, 2015, 09:46:19 am »

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But the reason I'm not fully understanding is probably because I'm thinking in terms of a straight forward contractual agreement. I have no doubt that the bank has made provisions within the wording of the contract that will allow it to sell/transfer the mortgage the way you have described.
OK, this one I do know a bit, I used to write mortgages and a lot of other legal documents. The mortgages are the charge/lien over the property, they infer the banks rights if you  do not honour the loan agreement. But of course there are things people never read. For example, you think you have a 25 year loan, no you have a deferred at call loan. All bank loans are at call, the money can be demanded back in a day, this is to preserve the banks liquidity. Short term loans are regarded the same as cash and are not long term assets on the balance sheet. If the loan is called, and you don't have the cash to repay it, the bank may use any, some or all the remedies available to it under the mortgage. You hear the term foreclosure, they won't use that one. A foreclosure means they take the property in lieu of the debt, they have that option but they don't. What they do is take over the property as mortgagee in possession, sell if for what they can get and the rest of the debt is still owed and they can pursue that any way they can.
I have seen people renting back their own homes once the bank has sold it to someone else, and the debtor is still repaying the loan as well. "Nobody has your best interests at heart!".
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graynomad

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Re: Who will buy the debt if banks collapse
« Reply #19 on: February 14, 2015, 11:53:19 pm »

Many moons ago when I bought my first house I read the loan document, it quite clearly stated that the bank could ask for all it's money back at any time for any reason.

That worried the crap out of me even then (80s), so we promptly paid the sucker off :)
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Baggyarse

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Re: Who will buy the debt if banks collapse
« Reply #20 on: February 15, 2015, 09:28:55 am »

 I thought this info was relevent to this thread.
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OzHippy

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Re: Who will buy the debt if banks collapse
« Reply #21 on: March 28, 2015, 09:35:54 pm »

A great YouTube video on big banks on brink of failure possibly starting Sept/Oct 2015

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Geek

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Re: Who will buy the debt if banks collapse
« Reply #22 on: March 29, 2015, 12:02:31 am »

That one is totally off the mark.  We are not at any short term risk of banks collapsing.  The banks all have significantly more capital than in 2008 and significantly safer holdings.  If you want to understand the financial crisis as well as why the various bogus explanations are bogus, read "Hidden in Plain Sight" by Peter Wallison.
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OzHippy

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Re: Who will buy the debt if banks collapse
« Reply #23 on: March 29, 2015, 07:19:44 am »

That is exactly what they said last time in 2008 - the economy is fundamentally sound just before the banks failed.  Interest rates too low and too much easy debt were to blame.  Well interest rates are at all time low and even negative in a number of countries. 

The housing market is back to where it was prior to the last crash, there has also been massive loans for automobiles etc.  Gov, private and business debt is much higher than it has ever been, PE stock to earning ratios are approaching all time highs again - as pointed out market volatility is crazy up 200-300 points in a day then the following week back down again.  Longest and strongest bull run ever without a correction, all based on printed money and low interest rates. 
A bit of cash in hand has no meaning when the underlying issue is tens of trillions of dollars in unfunded liabilities and derivatives.

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Geek

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Re: Who will buy the debt if banks collapse
« Reply #24 on: March 29, 2015, 08:38:55 am »

Nobody with a brain was saying things were okay in 2008. Housing in the US has not gotten back to where it was with the exception of select areas. Credit conditions are much tighter in terms of standards, but there is money available if you are a good credit risk.

Also to be clear, while there were a lot of problems in 2008, not one major commercial bank failed. The only failures were Lehman (an investment bank, not a commercial bank) and Freddie and Fannie, which were government creatures.
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OzHippy

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Re: Who will buy the debt if banks collapse
« Reply #25 on: March 29, 2015, 09:01:51 am »

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Nobody with a brain was saying things were okay in 2008.
There were only a handful (4-5) of economist in 2008 that were stating that things were about to fail, they were mocked and scorned by all including banks, stock brokers, politician and the media.  Today those exact same people who you say have 'brains' are predicting an imminent crash - only difference today is there is a lot more of them and economic situation is even more desperate.  Debt at all time high and Japan, China, ECB, UK all printing money - why because the economy is good!! 

Historically no country that has ever printed money has had a good result - to think things will be different this time is lunacy.  None of the issues that caused the 2008 crash have been corrected - just patched over with borrowed and printed money.
 
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"In the financial world, the month of October is synonymous with stock market crashes.  So will a massive stock market crash happen this year?  You never know. The truth is that our financial system is even more vulnerable than it was back in 2008, and financial experts such as Doug Short, Peter Schiff, Robert Wiedemer and Harry Dent are all warning that the next crash is rapidly approaching.  We are living in the greatest debt bubble in the history of the world and Wall Street has been transformed into a giant casino that is based on a massive web of debt, risk and leverage."
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Gippsland-Prepper

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Re: Who will buy the debt if banks collapse
« Reply #26 on: March 29, 2015, 09:07:49 am »

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Nobody with a brain was saying things were okay in 2008. Housing in the US has not gotten back to where it was with the exception of select areas. Credit conditions are much tighter in terms of standards, but there is money available if you are a good credit risk.

Also to be clear, while there were a lot of problems in 2008, not one major commercial bank failed. The only failures were Lehman (an investment bank, not a commercial bank) and Freddie and Fannie, which were government creatures.


This link will shed some light on where things are financially! You are not allowed to view links. Register or Login

And lets not forget another real, yeah a real indicator how well the US economy is going, 47 million sheeples on food stamps! Surely things are not that fantastic that 47 million sheeples are dependant on the government for a daily feed!

And Obummer and his bean counters have been very busy falsely inflating the dying US dollar, by printing truckloads of money, each and every day. I really hope you are right and I am wrong, as that would mean the world economy held in place by the US dollar won't collapse! And all my preps were for nothing. But some how I doubt it, knowing sheeples greedy nature.
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Geek

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Re: Who will buy the debt if banks collapse
« Reply #27 on: March 29, 2015, 09:28:44 am »

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Nobody with a brain was saying things were okay in 2008.
There were only a handful (4-5) of economist in 2008 that were stating that things were about to fail, they were mocked and scorned by all including banks, stock brokers, politician and the media.  Today those exact same people who you say have 'brains' are predicting an imminent crash - only difference today is there is a lot more of them and economic situation is even more desperate.  Debt at all time high and Japan, China, ECB, UK all printing money - why because the economy is good!! 

Historically no country that has ever printed money has had a good result - to think things will be different this time is lunacy.  None of the issues that caused the 2008 crash have been corrected - just patched over with borrowed and printed money.
 
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"In the financial world, the month of October is synonymous with stock market crashes.  So will a massive stock market crash happen this year?  You never know. The truth is that our financial system is even more vulnerable than it was back in 2008, and financial experts such as Doug Short, Peter Schiff, Robert Wiedemer and Harry Dent are all warning that the next crash is rapidly approaching.  We are living in the greatest debt bubble in the history of the world and Wall Street has been transformed into a giant casino that is based on a massive web of debt, risk and leverage."


Again, let's be clear.  While few were predicting the turmoil we experienced, few were saying things were good.  As for failure, the "failure" was outside the banking industry.  Not one single major commercial bank in the US failed.

You say that we are more vulnerable than in 2008.  Based on what?  Perpetual doomsayers still saying we are facing doom?  Every major bank in the US has substantially more capital than it had in 2007-8.  The "massive web of debt" is less leveraged than it was at the time of the crisis and if you are saying otherwise, you are doing so without checking the financial statements of the major financial institutions which would show you the exact opposite.  Don't take my word for it, check the capital ratios of the major banks as of the end of 2007, just before the crisis, and as of the end of 2014, the most recently completed full year numbers.

As for debt, the amount of debt is higher for the government, but not for anyone else.  That debt can be brought under control by simply getting the budget under control, which I think will occur over the next couple years.  We've had our flirtation with socialism and a massive welfare state under Obama and it didn't work.  Lesson learned.

Now I am not saying that the economy is great, or that everything is hunky dory.  The central banks need to get things back to normal, and the housing recovery will probably take another decade in the US.  However, running around like Chicken Little, saying things that are simply not true, is not helpful to gaining any real understanding of what went on or what you need to really worry about.

If you want to truly understand the financial crisis in the US, read the book "Hidden in Plain Sight" by Peter Wallison.  Peter Wallison was  member of the Financial Crisis Inquiry Commission and his book is the clearest thing I have read on the subject to date.  I think it will be awhile before anything better comes along.  The book is available on Amazon for Kindle if you prefer reading it that way.
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OzHippy

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Re: Who will buy the debt if banks collapse
« Reply #28 on: March 29, 2015, 09:43:29 am »

You make a lot of straw man arguments.  First in 2008 the stocks were surging like mad and baring a few were all saying the economy was great, were at the crest of all time stock highs, and it was buy buy.

Second - check the list of banks that failed. You are not allowed to view links. Register or Login
The 2008 financial crisis led to the failure of a large number of banks in the United States. The Federal Deposit Insurance Corporation (FDIC) closed 465 failed banks from 2008 to 2012.[1] In contrast, in the five years prior to 2008, only 10 banks failed.[1][2]

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2010 newspaper.  Banks are failing all over the US - it's the equivalent of $2,000 for every man, woman and child in the country in bad debt. See where they are and download the data
Failed banks in the US have become such a regular event that many have stopped noticing them. But the effects live on.
Last week, regulators shut down six banks in Florida, Georgia, Illinois and Kansas - making 138 US failed banks this year alone in the wake of the US sub-prime and housing crisis. So far.

Number of banks in the US have gone from 18,000 to less than 7,000 and most now belong to one or two of the so called to big to fail banks.  Massive consolidation due to failure.
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Gippsland-Prepper

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Re: Who will buy the debt if banks collapse
« Reply #29 on: March 29, 2015, 09:45:26 am »

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Nobody with a brain was saying things were okay in 2008.
There were only a handful (4-5) of economist in 2008 that were stating that things were about to fail, they were mocked and scorned by all including banks, stock brokers, politician and the media.  Today those exact same people who you say have 'brains' are predicting an imminent crash - only difference today is there is a lot more of them and economic situation is even more desperate.  Debt at all time high and Japan, China, ECB, UK all printing money - why because the economy is good!! 

Historically no country that has ever printed money has had a good result - to think things will be different this time is lunacy.  None of the issues that caused the 2008 crash have been corrected - just patched over with borrowed and printed money.
 
You are not allowed to view links. Register or Login
"In the financial world, the month of October is synonymous with stock market crashes.  So will a massive stock market crash happen this year?  You never know. The truth is that our financial system is even more vulnerable than it was back in 2008, and financial experts such as Doug Short, Peter Schiff, Robert Wiedemer and Harry Dent are all warning that the next crash is rapidly approaching.  We are living in the greatest debt bubble in the history of the world and Wall Street has been transformed into a giant casino that is based on a massive web of debt, risk and leverage."


Again, let's be clear.  While few were predicting the turmoil we experienced, few were saying things were good.  As for failure, the "failure" was outside the banking industry.  Not one single major commercial bank in the US failed.

You say that we are more vulnerable than in 2008.  Based on what?  Perpetual doomsayers still saying we are facing doom?  Every major bank in the US has substantially more capital than it had in 2007-8.  The "massive web of debt" is less leveraged than it was at the time of the crisis and if you are saying otherwise, you are doing so without checking the financial statements of the major financial institutions which would show you the exact opposite.  Don't take my word for it, check the capital ratios of the major banks as of the end of 2007, just before the crisis, and as of the end of 2014, the most recently completed full year numbers.

As for debt, the amount of debt is higher for the government, but not for anyone else.  That debt can be brought under control by simply getting the budget under control, which I think will occur over the next couple years.  We've had our flirtation with socialism and a massive welfare state under Obama and it didn't work.  Lesson learned.

Now I am not saying that the economy is great, or that everything is hunky dory.  The central banks need to get things back to normal, and the housing recovery will probably take another decade in the US.  However, running around like Chicken Little, saying things that are simply not true, is not helpful to gaining any real understanding of what went on or what you need to really worry about.

If you want to truly understand the financial crisis in the US, read the book "Hidden in Plain Sight" by Peter Wallison.  Peter Wallison was  member of the Financial Crisis Inquiry Commission and his book is the clearest thing I have read on the subject to date.  I think it will be awhile before anything better comes along.  The book is available on Amazon for Kindle if you prefer reading it that way.


Geek last time I checked the vote on here what will bring on SHTF, the majority voted for a financial collapse. So trying to convince members on here otherwise is like wanting to open up a piggery in the Middle East!    :-X
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