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  • 07-02-2011 4:48pm
    #1
    MagicSean
    Closed Accounts Posts: 9,897 ✭✭✭


    Just out of curiosity, what would be the result if the government hadn't recapitalised the banks and instead paid off a percentage of the private mortgage portfolio held. So instead of buying useless shares they would be paying off a chunk of the private debt held by citizens. The way I see it the banks would get their cash and wouldn't be nationalised. As well as that, citizens would have a nice chunk taken off their mortgages and could renegotiate for lower payments over the same term thereby reducing their monthly expenses. I'm sure there's a downside to it though.


Comments

  • #2
    whatstherush
    Registered Users, Registered Users 2 Posts: 669 ✭✭✭whatstherush


    Where do depositors withdraw their money from if a bank has no capital?


  • #3
    MagicSean
    Closed Accounts Posts: 9,897 ✭✭✭MagicSean


    They'll still have received the same amount of money but it will be in payments as opposed to investment.


  • #4
    Godge
    Closed Accounts Posts: 21,727 ✭✭✭✭Godge


    There would have been a transfer of wealth from those who could not afford to get a mortgage or those who had prudently managed their money to those who had borrowed more than they could afford to pay back.

    That would have meant it was slightly more fair than what happened but not hugely.

    Think of two people on the same road who bought their house at the same time. Three years later, one remortgaged, building a huge opulent extension with designer kitchen and all the extras, the other decided against that seeing it as too much risk. Why should the second now bail out the first?


  • #5
    whatstherush
    Registered Users, Registered Users 2 Posts: 669 ✭✭✭whatstherush


    k_mac wrote: »
    They'll still have received the same amount of money but it will be in payments as opposed to investment.

    Yep, but the money lent out as mortgages, was borrowed from the bond markets. So the bank has to repay those loans. End effect, bank still up shít creek, people owe less on mortgage.

    If you look at like this, the reason the banks have to be recapitalized is that, they have nonperforming developer loans that will never be paid off, so have a massive hole in balance sheet. If the recapitalization money was used for mortgages, you are using it to pay off performing loans, while your still stuck with the shít developer loans.


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