Abstract

http://ssrn.com/abstract=1273268
 


 



Stabilize Home Mortgage Borrowers, and the Financial System Will Follow


Lauren E. Willis


Loyola Law School Los Angeles

September 24, 2008

Loyola-LA Legal Studies Paper No. 2008-28

Abstract:     
To halt the Great Depression, the federal government nullified all clauses in contracts that pegged debt to the price of gold. By taking these contracts off the gold standard, debts were reduced by roughly 40 percent. Economist Randall Kroszner, now a governor on the Federal Reserve Board, examined the effects of this sweeping debt reduction and found that both stocks and bonds responded favorably. Investors and creditors decided that the elimination of debt overhang and the avoidance of threatened corporate bankruptcies more than offset the cost to creditors of receiving 60 cents on the dollar. And the taxpayer did not pay a penny.

This trick could only be performed once, now that gold clauses are out. So is there a way to eliminate today's mortgage debt overhang, staunch foreclosures, and restore liquidity and stability in our financial markets? Yes. We have not yet used our most potent weapon against the crisis: eminent domain.

Number of Pages in PDF File: 3

working papers series


Download This Paper

Date posted: September 26, 2008  

Suggested Citation

Willis, Lauren E., Stabilize Home Mortgage Borrowers, and the Financial System Will Follow (September 24, 2008). Loyola-LA Legal Studies Paper No. 2008-28. Available at SSRN: http://ssrn.com/abstract=1273268 or http://dx.doi.org/10.2139/ssrn.1273268

Contact Information

Lauren E. Willis (Contact Author)
Loyola Law School Los Angeles ( email )
919 Albany Street
Los Angeles, CA 90015-1211
United States
213-736-1086 (Phone)
213-380-3769 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 692
Downloads: 171
Download Rank: 101,414

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.234 seconds