Debt workout 101 - part 13
It is frightenning, dangerously polarizing and ultimately counterproductive to read article after hysterical article about the loss of patience in the Eurozone, etc. etc.
Creditors need to get real, cair na real as the Brazilians. The borrowers can't pay, certainly not at par and not on time, live with it.
The current Eurozone bad loan problem has its origins in excessive lending by surplus country banks in 2006-2007-2008. But pity not the creditors, nobody forced them to lend.
Creditors who made bad credit decisions should be prepared to absorb losses when borrowers suspend payments and require a debt restructuring. That's what bank capital is there for, to absorb losses
What was the consitutionaility of making bad loans to borrowers whose credit-worthiness the creditors misjudged?
Are we on the way to a solution, or are we getting mired deeper into the problem?
Mariana Abrantes de Sousa
PPP Lusofonia
ECB diverges fom Bundesbank orthodoxy http://ppplusofonia.blogspot.pt/2012/09/ecb-diverges-from-bundesbank-orthodoxy.html
It is frightenning, dangerously polarizing and ultimately counterproductive to read article after hysterical article about the loss of patience in the Eurozone, etc. etc.
Creditors need to get real, cair na real as the Brazilians. The borrowers can't pay, certainly not at par and not on time, live with it.
The current Eurozone bad loan problem has its origins in excessive lending by surplus country banks in 2006-2007-2008. But pity not the creditors, nobody forced them to lend.
Creditors who made bad credit decisions should be prepared to absorb losses when borrowers suspend payments and require a debt restructuring. That's what bank capital is there for, to absorb losses
What was the consitutionaility of making bad loans to borrowers whose credit-worthiness the creditors misjudged?
Are we on the way to a solution, or are we getting mired deeper into the problem?
Mariana Abrantes de Sousa
PPP Lusofonia
ECB diverges fom Bundesbank orthodoxy http://ppplusofonia.blogspot.pt/2012/09/ecb-diverges-from-bundesbank-orthodoxy.html
A double dose of patience and common sense needed all around.
ResponderEliminarSome of the comments we hear and read are inflamatory and would be considered racist if they referred to people from another continent.
All for K.I.S.S. in banking !
ResponderEliminarNicholas Brady and others are on the right track when they say we need simpler regulation in banking.
Get back to basics, make basic banking intermediation self-sustainable. Limiting leverage should eventually "un-squeeze" net interest margins.
Rewards should go to the banks, and bankers, with good credit underwriting skills which add real value to the economy by improving the efficiency of resource allocation at the macro level, not those with oh-so-clever programmers using risk assessments outsourced to BASEL or rating agencies.
Perhaps then we can avoid the disastrous consequences of the (cross-border) credit bubbles without having to impose capital controls.
It is consistent to defend the Euro while restricting their participation in the bailout of the creditors.
ResponderEliminarIf Finnish banks did not overextend themselves in financing the overleveraging of the borrowing countries, let other creditors assume the sacrifices in proportion to their original excessive credit exposure.
Finand is following a time-testd small creditor's strategy: try to become a free-rider and let the borrower and the big creditors do all the heavy adjusting.
The Bundesbank recalls the German aversion to debt, as in Goethe's play Faust.
ResponderEliminarBut there is an "apparent lack of understanding of the reciprocal relationship between debtors and creditors is more damaging. No one can run persistent current account surpluses without somebody else running up deficits."
YES, if only the Bundesbank had demonstrated a more prudent "aversion to credit" and kept the German banks from becoming so overleveraged and overextended, we might not be in this fine mess, albeit with fewer Audis, BMWs and submarines.
Nobody forced the creditors to lend.