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The Forum > General Discussion > Home Owners and Bank Protection Bill

Home Owners and Bank Protection Bill

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The Citizens Electoral Council Of Australia see; www.cecaust.com.au want new Bill enacted that stops banks foreclosing and let home owners/farmers pay reasonable reduced loan repayments.The logic being this is that panic makes our economy spiral backwards and assets then become under valued.

Lyndon H LaRouche, Jr.says that the US bubble is in reality $20 trillion and the crisis is far worse than the Great Depression of the 1930's.Australian home owners have an annual earnings to debt ratio of 175% compared to the US of 130%.

I would like some imput from readers on the pros and cons of such a Protection Bill and what the reality is concerning our economic security.Many of you may not be aware that banks when strapped for funds can call in a loan at a moments notice even if you don't default,and thus you will be forced to sell up your house in a very depressed market.

There are some who have already sold their assets in anticipation of a total collapse and thus be able to buy assets at bargain basement prices,but the fallout from this will destroy the lives of millions.The capitalised vultures and hyenas are already talking down the market.

Is this proposed Bill by the Citizens Electoral Council of Aust a good idea?
Posted by Arjay, Monday, 29 September 2008 10:23:12 PM
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No not a good idea I would not give value to either of your opinion givers.
In fact I am surprised a conservative could ask the question.
Yes the over valuation of homes is about right.
But how many bought and sold at a profit?
How many times did they do that? some own 5 homes now.
Who got the benefit of that profit?
Right now we are seeing requests that the very people world wide who put us in this place be bailed out by the rest of us.
A question for those in trouble.
Why have we as a nation more than halved building of welfare housing in the last 20 years ?
If we can not house our homeless why bailout those who suffer self imposed problems?
Posted by Belly, Tuesday, 30 September 2008 5:26:09 AM
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Arjay “want new Bill enacted that stops banks foreclosing and let home owners/farmers pay reasonable reduced loan repayments.”

That is lunacy and will not prevent anything.

The only outcome would be banks would no longer lend to home owners/farmers.

Ultimately you cannot protect people from their own folly (which such a bill seeks to do) by denying a Lender redress in the case of default by the borrower.

Such proposals skew the balance of rights against the lender, to the point that future borrowers will find it impossible to meet the requirements of the lenders and thus will not be able to borrow to buy property.

That would cause a collapse in home building and an economic recession far worse than anything thus far experienced combined with sky-rocketing house rental prices (due to no one being able to afford to move out from renting).
Posted by Col Rouge, Tuesday, 30 September 2008 8:36:22 AM
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Arjay, IMHO you should be pretty careful about what you believe,
that comes from the LaRouche movement. They seem more like a cult,
with some pretty wierd ideas.

Yes LaRouche predicted that the US financial system of ever increasing
debt and financial gymnastics was not sustainable and bound to crash,
but the Economist has been saying the same for years.

What actual solutions we should take is another story and that is
where LaRouche goes off the deep end, IMHO. I certainly do not
take him seriously and I don't know anyone else who does, apart from
a few of his devoted, cultish kind of followers. They will even
bring out their bibles to convince you :)
Posted by Yabby, Tuesday, 30 September 2008 2:45:53 PM
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What is happening in the US Markets has been foreseeable for years. Two years ago at a wealth management seminar in HK, in front of 200 people, I recall becoming locked in debate with the HSBC's HK Chief Economist, whom denied that the current situation would occur. I left wondering whether he was a fool or merely a sleazy salesman. He even said that Bank profitability would have no influence on the US economy!

The other matter we exchanged words on was "maturity transformation". That is, if interest rates fall, Banks still will have to pay interest on IBDs Term Deposits captured over the past four years, pressing squeezing margins.

Banks have made it clear that they wish to ignore the RBA. Herein, any bailout should go direct to home owners and not the Banks.

Moreover, given their chants of independence from Government; perhaps it is time, that is if Banks fail, was pulled, and the Banks allowed to fend for themselves.

O.
Posted by Oliver, Tuesday, 30 September 2008 6:42:19 PM
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Correction:

Moreover, given their chants of independence from Government over interest rates; perhaps it is time, if Banks fail, that the RBA's protection of "Lender of Last Resort" was pulled, and the Banks allowed to fend for themselves. (That is okay. Someone from oveseas will take them over and their debts securitised.)

Besides why should a capitalist want a socialist style bailout? Let the Free Market work. It is their right to inves, to win or loose.
Posted by Oliver, Tuesday, 30 September 2008 6:52:49 PM
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Oliver,

Its all very nice in theory, and if the US could just let the finacial institutions pay for the bad decision without adversely affecting everyone else, I would be right there with you.

But, if the banks and financial institutions fail, leading to general economic collapse, then people's superannuation, life savings, jobs, homes are all at stake.

Everyone else

Do all of you people who seem happy for the economy to go down realise that it is eminently possible the rest of us will go down with the ship.

Also, lets not forget that the housing bubble and bad loans were as much the fault of the millions of people who borrowed money they could not afford to pay back, as the lenders.
Posted by Paul.L, Tuesday, 30 September 2008 7:10:54 PM
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I was presented with this petition from my factory neighbour.His debt is 5 times mine and he is under serious stress.If he sells he will still be mortaged to the bank.In Australia unlike the US the banks can sell up your mortaged property and hound you for the rest of your assets.

The demise of the US has serious ramifications for us all.They account for 25% of the world's economy.We are being re-assured that our banking system is better regulated and more stable than the US,but the reality of our balance of payments deficit is similar to the US pro rata and our debt to earnings ratio is 35% higher than the US.

Stability and reassurance are the key words,since panic will be our death nell.The present downward spiral needs a circuit breaker and even Malcolm Turnbull admits that we are in unchartered waters.As the banks try to recoup their loses,they are destroying the very fabric which supports them.There needs to be a balance struck whereby the banks must realistically must suffer loses caused by their own poor judgement.Banks do not produce things of tangible worth,they are but the gate keepers of the medium of exchange.
Posted by Arjay, Tuesday, 30 September 2008 7:37:44 PM
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*In Australia unlike the US the banks can sell up your mortaged property and hound you for the rest of your assets.*

Arjay, thats exactly one reason why Australian banks are so much
safer then US banks. In the US, if people overpay for a house,
they can hand in the keys if values drop, causing the present
problem of a collapse in their financial system.

Yes, our current account is bad and we need to borrow around 120
billion a year, as Aussies don't save much. Why do they not
change the tax rules, to give people an incentive to save?

*There needs to be a balance struck whereby the banks must realistically must suffer loses caused by their own poor judgement*

You will find that is already happening. Those companies that went
too far, like Alco finance etc, have paid the price. Others, like
GE finance, are leaving Australia with their tail between their legs.
Its those who tried to introduce the US system here, that are
paying a price.

Our most cautious banks recently, ie Westpac and Commonwealth,
are coming through all this pretty well. David Morgan of Westpac
had predicted it would happen, it was just a question of when.
That's why I own some Westpac shares :)
Posted by Yabby, Tuesday, 30 September 2008 8:45:52 PM
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Paul.L

"Also, lets not forget that the housing bubble and bad loans were as much the fault of the millions of people who borrowed money they could not afford to pay back, as the lenders."

The people given low-doc loans were conned. The repayment terms were initially affordable but were always set to be increased, a fact not pointed out to the recipients at the time they took the loans. The lenders were definitely at fault and should be held to account.
Posted by Bronwyn, Wednesday, 1 October 2008 1:19:55 AM
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No Arjay, not a good idea.

Last time I looked Bills are supposed to be tabled in the Parliament, and come from Members thereof. The events of last week in Canberra should have focussed attention upon that fact.

It is of course reasonable for suggestions in respect to public policy to come from elsewhere than the Parliament. Your opening post, and indeed the topic title imply that the CEC has drafted a Bill, which, of course, if the Parliament wished, it could adopt. Such Bill would be a package deal. I have but one question. Has any Member of either House been elected upon a Citizens Electoral Council of Australia platform? I think not. However, should a package deal be adopted as proposed by the CEC, it would tend to enhance its credibility electorally.

Citizen initiated referenda are the central plank of the CEC's platform. Of necessity, the future introduction of such would involve alteration of Section 128 of the Constitution, the rules laid down in which constitute the peoples' last line of defence against bad law.

The very last thing needed by Australia at present is electoral 'outsiders' proposing alteration to the Constitution. What is most needed is elected 'insiders' acting fully in accordance with it.

Citizen initiated referenda, whilst superficially appealing to a disillusioned and betrayed electorate, are a recipe for the overthrow of Parliamentary democracy in favour of whoever effectively controls the media. Don't kid yourself that it will be the citizens.

Such criticism does not address the proposal of the Bill itself, however, which I see as being proposed as a remedy to a 'straw man' scenario. You say:

"Many of you may not be aware that banks when strapped for funds can call in a loan at a moments notice even if you don't default, ....".

This may be true with respect to overdraft loans, but the majority of home loans are contracts; contracts which, if you are not in default in repayment thereof, cannot be called in.

Are you talking about property values in relation to loan security clauses permitting call-ins?
Posted by Forrest Gumpp, Wednesday, 1 October 2008 6:31:43 AM
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Oliver “Let the Free Market work. It is their right to inves, to win or loose.”
I wholeheartedly agree

PaulL “financial institutions pay for the bad decision without adversely affecting everyone else, I would be right there with you.”

When it ends up the taxpayer baling out banks,

The “tax payer” is “everyone else”.

Regarding “Also, lets not forget that the housing bubble and bad loans were as much the fault of the millions of people who borrowed money they could not afford to pay back, as the lenders.”

No one can ever protect people from their own greed and foolhardiness?

Back in 1987 I recall a family who borrowed $2 million to put into a rising stock market super scheme (before it became popular), secured against family houses.

The plan was the investment would grow and reinvest dividends etc and they would use profits from their family business to finance the loan interest.

By 1989 they were over half a million down on market value (25%) the bank obviously required them to repay part of the loan to reduce the leverage back to the loan agreed %, the only way of doing that was to sell the investments at a 25% discount or sell their homes.

Oh and their family business (making knitted ladies garments) fell into a deep hole along with a lot of other TCF small businesses at the time.

They ignored the advice of their accountant/tax agent back in 1987 to avoid leveraged share investments because of the market volatility.

So, would they share with me their leveraged profits had their scheme had gone the other way?

And therefore, should I, joe taxpayer, be expected to bale out the foolhardy idiots above,

I think the answer is “NO” on both counts
Posted by Col Rouge, Wednesday, 1 October 2008 8:37:30 AM
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Bronwyn “The people given low-doc loans were conned.”

I refinanced a couple of years ago to a low doc loan

I chose low-doc because the nature of my annual income is volatile (a problem when doing full-doc) but I was comfortable with the amount I would pay and have further access to alot more, immediately should I need it for any investment opportunity which might present itself.

“The repayment terms were initially affordable but were always set to be increased, a fact not pointed out to the recipients at the time they took the loans”

For low-doc, I pay a half % above fully-documented, like, I presume, everyone else on low-doc.

I was not conned, as you suggest, the half % differential between low-doc and full doc is a fixed differential.

So, what you claim is, patently, not true.

“The lenders were definitely at fault and should be held to account.”

Too often people caught up in their own “spin” and omnipotence, will eagerly accept the benefits but whine about what are, after all, discoverable and potentially avoidable consequences.

No one forced them to borrow!

Anyone who borrows money without reading and fully understanding the terms of the loan agreement is an imbecile.

In fact for my loan agreement I had to sign a legal declaration that I did fully understand the terms or had sought independent legal/financial advice.

You cannot get fairer than that.
Posted by Col Rouge, Wednesday, 1 October 2008 8:50:54 AM
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Paul L.,

Thanks for your comments.

China and Japan are sitting on huge USD and other currency reserves, if Trump et al. go to the wall (they wont), but if it does escalate, some Chinese CCCP members (ironically), the Russian MAFIA and the Japanese Zaibatsu/Keiretsu can buy major US assets. The debt/loans would be transferrred/internationalised and paid-off to a new party.

Also, it is worth bearing in mind, the Great Depression was caused by (trade) protectionism in reaction to collapse of Wall Street, not the fall in share prices.

Ultimately, we want Market Capitalism, not State (Corporate) Capitalism, which is the opposite pole to Commununism, i.e., not the Corporatism, as occurred in Germany and Italy in the 1930s-1940s.

While the super/insurance institutionals in Australia have been loosing on ASX, instead, they could have made gains on the Euro Dollar stocks in recent years. The Boards have been protecting each other, not investors' super.

On the other hand, the US might be looking over maps of Iran and North Korea?

Greetings, Col.

O
Posted by Oliver, Wednesday, 1 October 2008 4:03:26 PM
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Yabby,

Interesting comment about Westpac. It has learned a lesson. It nearly went under twice in recent decades, 1974 and 1992. Poor liquidity management and bad lending respectively.
Posted by Oliver, Wednesday, 1 October 2008 4:19:42 PM
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Oliver

Yabby`s comment about Westpack is interesting I agree.

Yabbs is involved in live animal exports so he would have a heads up on their accounts that go direct to promote it.

1.
Give Now for Ramadan
Support Muslim families worldwide.
Find a cause today!
www.GlobalGiving.com

Its very luctrative especially if you disregard animal cruelty.

Bank: Westpac

JazakAllahuKahirun

May Allah Subhanahu Wa'Ta'ala reward you for your donation and contribution on the Day of Yaumal Qiyamah. "Aameen".

I will leave it to Yabbs to inform you about Westpacks other activities.

You can do that cant you Yabbs.
Posted by People Against Live Exports & Intensive Farming, Sunday, 5 October 2008 6:42:37 PM
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