Because of time limitations (only 24 hours in the day) I am very grateful to Vilhjalm A. and Gandri for putting down in words exactly what I have been pondering about what Johanna Sigurdardottir calls the “definite solution to finally meet the required needs of Icelandic households”.
From Vilhjalm A. (translations mine ):
Finally the government has come out with their version the of the “skjaldborg” – the fortress around Icelandic homes.
Here’s what the government proposes to do:
- special solutions for those with low income or have suffered short term drop in wages
- solutions for people with two homes
- lower limits on penal interest rates
- on foreclosure, the market value of homes will be withdrawn from claims
- people will be able to live in their home for 12 months in spite of bankruptcy or foreclosure
- the limits on collection fees lowered
- rules on tax claims write offs reviewed
- moderate write offs tax free
- large write offs taxed
- effects of price indexation limited
The average employed working Icelander with a mortgage gets ….. just about nothing. No reduction / write-down of the mortgage principal. No way to negotiate with the banks, except by filing a lawsuit against them.
But if you own TWO homes, congratulations, you get relief – just give back one of the houses!
Oh my! This is going to be costly. How should we finance the rebuilding? - Johanna and Steingrimur at the household debt cliff drawn by Halldor Baldursson
See the critical article by Samtök lánþega blog, entitled “Ekki neitt !” (Nothing!):
http://gandri.com/?p=885
There is nothing on previously defined solutions for mortgage adjustments.
There is nothing there on actions to force financial institutions to abide by the laws.
There is nothing there about interpreting unclear contractual obligations in the favor of consumers, as is clearly stated in Icelandic law that it should.
There is nothing there about actions to stop collection methods based on contracts which have been judged illegal by Icelandic courts.
There is nothing there about speeding up those court cases awaiting a Supreme Court’s decision.
There is nothing on the ideas of individual MP’s about the so-called “key-bill”.
There is nothing there on the ideas of individual MP’s about lowering the statue of limitations on individuals from 10 years down to 4.
Vilhjalm A again:
In the meantime the banks are happily handing out huge loan write-downs to businesses and granting themselves salary bonuses.
I don’t think it’s possible any longer to pretend that the government has some secret plan or motive to help the average Icelander. And the do-nothing strategy is not the result of ineptitude, either. It’s looking more and more likely that the real intention of the government is to reduce the need for imports by depriving the average person of almost all available discretionary spending, first by increasing taxes on everything and second by making them spend almost all their money on paying off loans to the banks. You can’t spend what you don’t have.
Finally my own two cents: The way they presented these “solutions” does not bode well for the Social Democrats or the Left Greens. Sure it is a step in the right direction, but the focus is on soothing the pain for those who overextended themselves during the good times, a strange emphasis for the so-called “welfare” government. It might be possible that there has developed a siege-mentality within the government after the monumental tasks it has faced since assuming the responsibility to clean up in the economic disaster area. But by calling this a definite solution and pretending like this is going to put things to rest regarding the massive household debt Icelanders are facing because of the collapse of the krona, the government appears out of touch.
Related posts:
Vilhjalm A.
1 year ago
I haven’t see much discussion of these new proposals, probably because there is nothing to discuss, since the government hasn’t offered anything.
According to another post on Samtök lánþega, Árni Páll Árnason, félagsmálaráðherra, said on a radio show that the proposals were completely adequate. He also said that if more were done, then that would amount to the government giving people money, and that’s certainly not possible.
So there you have it — the government thinks that giving any substantive relief to debtors is “giving money to people.”
And in a news article Árni Páll Árnason said that there wasn’t any plan to allow homeowners to just turn in the keys to their houses because that would have a very negative effect on the housing market and would make it very difficult for low-income people to get loans for houses.
Apparently Arni Pall hasn’t noticed that the housing market is already in deep trouble (basically it is “frozen” with no one selling or buying unless they are forced to) and that low-earners are not buying much of anything except necessities, let alone houses. His solution to the housing problem is to keep everyone locked inside their over-valued houses and paying most of their available money on debt service.
Anyone with half a brain can see the hypocrisy and cruelty of the government’s policy. They won’t give money to ordinary people, but on the other hand they will allow the banks — which are either still owned or partially subsidised by the government — to give all these write-offs without even taking an equity position in these businesses (ie exchanging debt reduction for ownership).
Moderate mortgage debt-relief would only cost 300-500 billion ISK, and the yearly “loss” would be very small — this is nothing compared to the many hundreds of billion ISK the banks have been giving away.