Wednesday, March 04, 2009

The crisis: an alternative proposal

Isn't it quite obvious that pouring more billions into the banks' black hole is not working? The Spanish Trade Unions have come up with a different idea.

For those of you who are lucky enough to read and understand Spanish, the biggest Trade Unions in Madrid, UGT and CCOO, along with the Spanish consumers' association, have come up with the following proposal. Rather than showering the banks by throwing trillions into a black hole with no-questions-asked, in a fashion so Anglo-Saxon the Daily Mail would be proud of, their idea is instead to use public money to minimise the horrendous effects of repossessions.

This is what they think. Each time a mortgage holder is threatened with eviction and repossession, triggering shockwaves of depression, despair and family breakdown, the Government should step in, give the banks what's owned and turn the house or flat into a council home to be then immediately rented out back to the evicted former owners. That way, hefty sums would still be handed out to the banks, but with an immediate trickle down effect that would at least minimise some of the most brutal social effects of the crisis.

Once the threat of eviction has been seen off, and those unpayable monthly instalments are adjusted to the more reasonable council rent levels, the families themselves would presumably have more cash available to spend, which would be a good way to kickstart demand again.

Like Simon Jenkins writes today in the Guardian, reiterating a point he had made before, "[i]n a recession you boost demand", adding that:

"What the economy needs is not rescued banks but raw spending power. It needs people to pour into shops and showrooms, estate agents and restaurants, hotels and DIY stores. Even were banks lending it would be no substitute for spending to recharge the economy. Only spending power, from the bottom up, will eventually refloat the banking system, not public subsidy".

Instead, what has happened so far in the UK is that "the government has borne all the costs of nationalisation and gained none of the advantages".


James Dowden said...

It's a great idea, but it needs a few amendments to avoid the public being taken to the cleaners by the banks:

1) The government should redeem the mortgage at £70 in every £100 to avoid frivolous repossessions -- the lender must lose something to ensure that repossession is a last resort.
2) The value of the mortgage at repossession should be capped at its initial value to avoid excessive bank charges being imposed on the public.
3) Blacklisting of repossessees must be made illegal: it is far from necessarily a reasonable indicator of risk, and it can only delay economic recovery.

Anonymous said...

Our government would NEVER consider something like that.
Because they treat us like children.
The banks can cry for help and be treated with whatever they say they need.
But as far as ordinary people are concerned, the Government and or the BANKS know better...
Oh yeah