Archive for December 4th, 2004

The mortgage holders protection bill: Another revolutionary folly

December 4, 2004

The Venezuelan National Assembly has been considering and is close to approving a Bill for the protection of mortgage holders, which if approved as it stands, will certainly undermine the health of the Venezuelan financial system and introduce new distortions into the country’s economy.


The Bill has as its basis the 2000 Constitution which defines housing as an integral part of the social security system.  Thus, it aims to protect mortgage holders who are individuals for their principal place of residence.


 


First, the law states that the Banco Nacional de Ahorro y Prestamo will acquire all of the mortgages issued under government program, which may also acquire those issued by banks with their own resources. This will de done once all of those mortgages are recalculated by the issuing banks, according to the current Bill.


 


The Bill establishes that it is mandatory for banks to have at least 15 to 18% of its credit portfolio in mortgages for the main residence of individuals. The Bill also establishes limits to the monthly payments that a debtor can make, limiting it to between 5% and 20% of the monthly income.


Under the new bill, any debtor that is behind in payments in violation of the contract may stop any proceedings by the bank against his home by paying 50% of the current debt.


 


The most remarkable aspect of the Bill is that it establishes that the maximum interest rate that may be charged will be a “social” interest rate, defined according to the prevailing lending rate of the banking system (TAPP). If that rate is less than 20%, the rate will be 65% of the rate. If that rate is between 20 and 40% the prevailing rate TAPP will be multiplied by (0.65 -(TAPP-0.20)). If the TAPP is above 40%, the social interest rate will never go above 18%., but in no case may the sum of principal plus interest exceed 25% of the income of the holder of the mortgage.


 


Finally, the Bill suspends all legal procedures involving mortgages until the banks have adjusted all calculations retroactively to the above social interest rates and those who hold mortgages under conditions unfavorable when compared to the new legislation will have their mortgages adjusted.


 


Clearly, the bill would be extremely negative in all of its aspects for the Venezuelan banking system and has a perverse retroactive aspect to it that will hurt future earnings of the banks. Moreover in the end, this subsidy, which is aimed at protecting the population in general, will likely benefit those that already have homes, have good incomes and are a good credit risk for banks and not those that would need the mortgages the most.  They are the ones that could easily remortgage their homes and make money out of these subsidize interest rates. Incredible!

The mortgage holders protection bill: Another revolutionary folly

December 4, 2004

The Venezuelan National Assembly has been considering and is close to approving a Bill for the protection of mortgage holders, which if approved as it stands, will certainly undermine the health of the Venezuelan financial system and introduce new distortions into the country’s economy.


The Bill has as its basis the 2000 Constitution which defines housing as an integral part of the social security system.  Thus, it aims to protect mortgage holders who are individuals for their principal place of residence.


 


First, the law states that the Banco Nacional de Ahorro y Prestamo will acquire all of the mortgages issued under government program, which may also acquire those issued by banks with their own resources. This will de done once all of those mortgages are recalculated by the issuing banks, according to the current Bill.


 


The Bill establishes that it is mandatory for banks to have at least 15 to 18% of its credit portfolio in mortgages for the main residence of individuals. The Bill also establishes limits to the monthly payments that a debtor can make, limiting it to between 5% and 20% of the monthly income.


Under the new bill, any debtor that is behind in payments in violation of the contract may stop any proceedings by the bank against his home by paying 50% of the current debt.


 


The most remarkable aspect of the Bill is that it establishes that the maximum interest rate that may be charged will be a “social” interest rate, defined according to the prevailing lending rate of the banking system (TAPP). If that rate is less than 20%, the rate will be 65% of the rate. If that rate is between 20 and 40% the prevailing rate TAPP will be multiplied by (0.65 -(TAPP-0.20)). If the TAPP is above 40%, the social interest rate will never go above 18%., but in no case may the sum of principal plus interest exceed 25% of the income of the holder of the mortgage.


 


Finally, the Bill suspends all legal procedures involving mortgages until the banks have adjusted all calculations retroactively to the above social interest rates and those who hold mortgages under conditions unfavorable when compared to the new legislation will have their mortgages adjusted.


 


Clearly, the bill would be extremely negative in all of its aspects for the Venezuelan banking system and has a perverse retroactive aspect to it that will hurt future earnings of the banks. Moreover in the end, this subsidy, which is aimed at protecting the population in general, will likely benefit those that already have homes, have good incomes and are a good credit risk for banks and not those that would need the mortgages the most.  They are the ones that could easily remortgage their homes and make money out of these subsidize interest rates. Incredible!

Weil hits the spot on Nobel Peace prize for Chavez

December 4, 2004

I did not want to mention the possible nomination of Hugo Chavez for the Nobel Peace Prize. I did not know whether to make fun of it or cry about it. After all, he is as qualified for that award as he is for the Physics or Chemistry award. But then I saw Weil’s cartoon which hts the right spot inis saying something about it



DNA molecular structure of those that are proposing President Chavez as a candidate for the Nobel Peace Prize.

Weil hits the spot on Nobel Peace prize for Chavez

December 4, 2004

I did not want to mention the possible nomination of Hugo Chavez for the Nobel Peace Prize. I did not know whether to make fun of it or cry about it. After all, he is as qualified for that award as he is for the Physics or Chemistry award. But then I saw Weil’s cartoon which hts the right spot inis saying something about it



DNA molecular structure of those that are proposing President Chavez as a candidate for the Nobel Peace Prize.

Spending US$ 1.8 billion in jet fighters

December 4, 2004

I really don’t see why this country needs to buy these fighter jets. To defend against whom? To defend what? To attack what? To have the same people who run the F-16’s to the ground run them? To fly them at what cost per hour? Can’t hospitals use this money? Can’t Misiones use this money. US$ 1.8 billion so that men can play war games?


But since some readers know so much about these planes, maybe they can tell us whether they are worth as much as the purchase order says. Whether these are competitive international prices or not.  I should buy a scanner so that when I get stuff like this I can post it easily. Here is what the purchase order says for these planes which have already been bought:


 


-40 Mig 29M (single seat)                                        USD 1.332.000.000


-10 Mig 29M2 (two-seat)                                          USD   339.660.000


-Fuel  Drop tanks (ventral, underwing, pylon for


  Underwing fuel drop tanks)                            1lot   USD   11.115.000


-Launchers and Racks                                                USD   75.882.000


-Ground Airfield Support Systems


(for two air bases)                                                      USD    12.583.750


-Tools, Ground Test Equipment and Ground


Servicing Equipment                                                   USD    31.993.000


-Spare parts for five years                                           USD    16.563.060


-Spare RD-33 3M Engines                            10 pcs     USD    34.000.000


-Pilots Outfitting                                                          USD         920.000


-Technicians Outfitting                                                 USD          15.000


-Pyrotechnies (???)                                                      USD        674.530


-Training Aids                                                                USD    6.850.000


-Operations and Maintenance                                      USD   2.2000.000


-Training                                                    five years   USD   27.980.000


-Engineering Services                                five years    USD   6.144..825


 


Total                                                                            USD 1.898.572.365


 


I did not know whether to mention or not the nomination of Hugo Chavez for the Nobel Peace Prize. I did not know whether to make fun of it or cry about it. After all, he is as qualified for that award as he is for the Physics or Chemistry award. But maybe Weil’s cartoon is the best way to say something about it.

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