Thousands of victims of last month's earthquake throughout Taiwan have had their homes destroyed. They now face a common issue: how to pay off their mortgage. The government has offered low interest loans to victims, but most who lost their homes are people on fixed salaries who would be unable to bear the burden of two mortgages.
The government has asked lending banks and financial institutions to write off a portion of the total value of mortgages for buildings destroyed in the quake (about NT$13 billion worth), but this has met with disapproval from the financial sector and a number of scholars.
They have fiercely criticized the government, saying that this policy would increase the already high rate of non-performing loans (NPL), and could result in another financial crisis in Taiwan. Others have proposed that the government bear the burden of the mortgages or abolish business tax on banks (the tax has already been reduced from 5 percent to 2 percent), as a condition for banks to write off a portion of loans.
This writer believes that it would not be fair if the government were to assume responsibility for all mortgages, as this might mean that construction firms whose shoddy work contributed to damage might avoid prosecution and banks would escape the consequences of the quake unscathed (as they will still collect interest and principal on their loans). It is ridiculous that it is the victims who have been making mortgage payments and taxpayers who will bear the brunt of the financial burden.
According to statistics of the Central Deposit Insurance Company (
It is common knowledge that local financial institutions (including the credit divisions of farmers' cooperatives and credit cooperatives) are in the pockets of local political factions and unscrupulous financial groups who use them to serve their private interests. Politicians repeatedly dip into banks' funds during factional struggles, often exceeding loan limits and milking the banks dry. It is these people who are responsible for driving up NPLs to NT$180 billion. The government, for its part, is not interested in punishing these financial violations, but has instead pumped about NT$30 billion a year into attempts to bail out these corrupt institutions. The government's energy in keeping a lid on these financial problems is remarkable in light of its lackluster reconstruction efforts.
The greed of banking groups must also share the blame for current financial difficulties. The Ministry of Finance put forth the "Regulations Regarding the Handling of Non-performing Loans and Bad Debt" to help solve banks' problems, and even lowered the tax rate on banks from 5 percent to 2 percent. This will reduce tax revenues by NT$80 billion over the next four years. In other words, the government is using tax monies to subsidize bad debts. This measure will also increase bank profits by more than NT$130 billion over the same period.
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