What's wrong with this suggestion?

DualFrontDiscs

Hello,

First time poster in this forum Would this work?

A) Divert a % of annual mortgage repayments from the banks directly to Government.
Extend mortgage 'lifespan' for the duration of the diversion.

Okay, so it affects the banks income, temporarily, but it could be a time defined scheme, with bank mortgage revenue simply 'time shifted' out a few years. And the banks have schemes in place for their liquidity.

If the plan above could replace the increases in income tax, then in would be net pay neutral, leaving people with the money they have to spend in the economy.

So what's wrong with that?

DualFrontDiscs.

Welease

I assume the problem is based on neither being fully capitalised..

We need to borrow X to capitalise the banks
We need to borrow Y to run the country..

If you take Z from the banks in terms of redirected funding and give to the country (i.e. Y- Z).. Then you still need to borrow X + Z to fund the banks..

In essence.. we still need to borrow the same amount its just an accounting exercise..

hatrickpatrick

^^^^ So therefore we should just let the banks fail, just like any other private sector company which ****s up.

I've actually been thinking of the idea that banks should be non profit organizations which are solely concerned with providing their service rather than raking in profits.

DualFrontDiscs

Welease wrote: »

I assume the problem is based on neither being fully capitalised..

We need to borrow X to capitalise the banks
We need to borrow Y to run the country..

If you take Z from the banks in terms of redirected funding and give to the country (i.e. Y- Z).. Then you still need to borrow X + Z to fund the banks..

In essence.. we still need to borrow the same amount its just an accounting exercise..

It's all an accounting exercise though, right? And X and Y are different types of funding too, right?

This way, the deficit is addressed by the diversion of mortgage repayments and the bank debt is 'time shifted', but still secured. The impact of the 'time shift' is a liquidity one, addressed by existing measures.

No 'haircuts', no reduction in moral hazard. The whole system is a virtuous circle, or at least not a vicious one, no?

DFD.

Dotsie~tmp

DualFrontDiscs wrote: »

It's all an accounting exercise though, right? And X and Y are different types of funding too, right?

This way, the deficit is addressed by the diversion of mortgage repayments and the bank debt is 'time shifted', but still secured. The impact of the 'time shift' is a liquidity one, addressed by existing measures.

No 'haircuts', no reduction in moral hazard. The whole system is a virtuous circle, or at least not a vicious one, no?

DFD.

There are huge losses in the global banking system. They cant stay up in the air forever.

Welease

DualFrontDiscs wrote: »

It's all an accounting exercise though, right? And X and Y are different types of funding too, right?

This way, the deficit is addressed by the diversion of mortgage repayments and the bank debt is 'time shifted', but still secured. The impact of the 'time shift' is a liquidity one, addressed by existing measures.

No 'haircuts', no reduction in moral hazard. The whole system is a virtuous circle, or at least not a vicious one, no?

DFD.

But you can't just "time shift" the fact that the banks do not have working capital.. In order for them to exist, and put credit into business's and the economy they need to be fully capitalised (and the markets need to see this).. So if you take away a portion of the income they need via mortgages, then that income needs to be replaced with something else.. which as we own the banks.. we need to borrow..