Wake-up call for Malaysian Chinese voters!

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ANALYSIS By BARADAN KUPPUSAMY

MCA president Datuk Seri Dr Chua Soi Lek says Malaysians need a New Deal that is fair, democratic, transparent and inclusive to address today’s concerns and it should epitomise the core expectations of the people.



DATUK Seri Dr Chua Soi Lek has outlined a wide-ranging “New Deal” for Malaysians that include abolishing obsolete laws, relaxing the hold on the media, democratising the economy and liberalising the education system.

The MCA president urged Prime Minister Datuk Seri Najib Tun Razak, who was at the 58th MCA general assembly over the weekend when Dr Chua called for the reforms, to “take a giant leap forward” and offer the deal to all Malaysians.

“It should not allow the baggage of the past to be a millstone around the necks of our children and grandchildren,” he said to the applause of the delegates.

“Malaysians need a New Deal that is fair, democratic, transparent and inclusive of all Malaysians to address today’s concerns.

“It should epitomise the very core expectations of the people,” he added.

While proposing that outdated and irrelevant laws be repealed, he also proposed permission for public protests at designated places with a transparent police permit application system.

On the all-important economic front, he said cronyism and nepotism when awarding projects should be abolished and affirmative action based on needs and merits be extended to any group that is poor.

On education, the New Deal hopes that mother tongue languages would eventually be made compulsory in all national schools.

Dr Chua also called for Unified Examination Certificate graduates to be admitted into public universities.

On calls for English to be made compulsory, Dr Chua said it is time the Government set a time frame to achieve this.

He also proposed a one-off cash payment to poor Malaysian households to help them tide over the rising cost of living and a monthly allowance for the affected households – a move that many Malays and Indian households would also welcome.

His New Deal is within grasp and achievable for the younger generation who wants to see the country reform.

Dr Chua is banking on these reforms, in part already promised by Najib, to carry the MCA into the next general election and win the support of Chinese voters, who make up the majority in 46 parliamentary constituencies.

He is, in fact, eyeing the young voters.

The MCA performed dismally in 2008, winning only 15 parliamentary seats.

The DAP has since emerged as the champion of the Chinese community, a position once held by the MCA.

The reforms can help the MCA stand its ground against the DAP’s accusations that it did not fight for the Chinese community and had only kowtow to Umno all these years.

This is not true as cooperation with Umno and the Government had allowed the MCA to achieve a lot for the people over the years.

One example is the fact that 20,000 youngsters graduate annually from UTAR, a college conceived and built by the MCA.

While the Chinese are either sitting on the fence or supporting the DAP, Dr Chua warned that the country would see, not a two-party system, but a two-race system.

He said if the Chinese voters were blind to the realities of politics in the country, they would sit in the Opposition while the Malays form the Government.

Dr Chua said they were off on a tangent, on their own, nursing anger against the Government.

But, he said, the Government has become inclusive and has started political, social and economic reforms that were gradually transforming the country.

His overall message to the assembly delegates is – if they (the Chinese) refuse to see the reform direction the country is taking they would end up the losers.

Dr Chua has promised that if the Chinese voters, for some reasons, don’t give their support to the MCA and if its performance is worse than in 2008, the party will stay out of the Government altogether.

MCA proposes New Deal for Malaysians

Last updated on 3 October 2011 - 08:08am 

Pauline Wong newsdesk@thesundaily.com

Prime Minister Datuk Seri Najib Abdul Razak (right) greets MCA President Datuk Seri Dr Chua Soi Lek (3rd, left) after giving his speech at the party's 58th AGM today. At left is MCA deputy president Datuk Seri Liow Tiong Lai. BERNAMA 

KUALA LUMPUR (Oct 2, 2011): MCA has proposed a New Deal to snag voters and regain full support for the party, as well as for the Barisan Nasional (BN).

Party president Datuk Seri Chua Soi Lek urged Prime Minister Datuk Seri Najib Razak, who officiated the party's annual general meeting (AGM) today, to embrace this new deal, which will "give every Malaysian, their children, and grandchildren confidence and hope that their future is in Malaysia."

"The world has changed, and Malaysia cannot sit still when the world moves ahead with more progressive policies that do away with ideological dogmatism," said Chua, lauding Najib's push for legislative reform and the repeal of the Internal Security Act, among others.

"Laws, policies, ideologies and beliefs that have outlived their relevance must be changed. If we do not do away with them or adapt to the times, they will act as stumbling blocks that impeded the progress of the country and its people.

In a wide-ranging speech, Chua in his opening address during the party's 58th AGM held at the MCA headquarters here, also reiterated the party's vow that it will not accept any government posts if it does not gain the support of the Chinese community.

"Delegates will pass a resolution that the party will not take up any government posts if the MCA does not fare better than in the 2008 general elections.

"Such a move is to respect the wishes of the voters, and should be construed as such and not as a threat to the voters," Chua said.

Chua had mooted the decision in April, when he announced that the party will refuse to take Cabinet posts if it does not turn the tide of support from the 2008 elections.

"Hopefully this decision will create greater awareness of the need for unity among MCA members, and that the survival and destiny of the party is in their hands," said Chua.

Elaborating on the new deal, the MCA president said it is for a fair, democratic, transparent and inclusive government.

"The government should listen more to concerned Malaysians who are now more vocal and politically conscious than before," said Chua, adding that there should be more channels for peaceful dissent, and that routes and places be designated for protests.

"However, organisers of demonstrations must ensure that it is peaceful with no threat towards human life or property," he said.

Chua also proposed that the government should work towards abolishing the Printing Presses and Publications Act.

"The MCA feels the press should have the liberty to exercise self-control, as there are already other laws such as the Sedition Act and the Official Secrets Act to check on any wrongdoing," he said.

Chua also called for the University and University College Act (UUCA) to be reviewed.

"MCA believes that the UUCA should be amended to allow students to be engaged in political activity to respect their rights as voters," he said.

Chua also touched on the economy, saying it must be made free from the encumbrances of cronyism and nepotism, corruption and unfair business practices.

"The rakyat wants a just society and a fairer business environment that emphasises on meritocracy, inclusiveness and transparency," he said, adding that "doing business should be simpler, minus all the red tape."

However, the new deal should not be seen as an attempt to rewrite the so-called Merdeka contract.

"I know there will be groups who will attack me for even suggesting it. But let us be bold and brave enough to rework it to make it more suitable for the times and to meet the aspirations of all Malaysians," he charged, adding that the government and the party should rise above narrow self-interests.

MCA seeks New Deal

Reports by FOONG PEK YEE, NG SI HOOI, EDMUND NGO, ELWEEN LOKE, FLORENCE A. SAMY, MAZWIN NIK ANIS, RUBEN SARIO, SIRA HABIBU, RAHIMY RAHIM, REGINA LEE and PRIYA KULASAGARAN > Photos by DARRAN TAN, AZHAR MAHFOF, SAM THAM, LOW LAY PHON and CHAN TAK KONG

KUALA LUMPUR: A “New Deal” based on fairness and bravery is needed to give the people confidence and hope that their future is in Malaysia, said Datuk Seri Dr Chua Soi Lek.

The MCA president said the New Deal must embrace everyone as well as erase policies and laws which are unjustified and considered stumbling blocks.

“The time to act is now. The New Deal should give every Malaysian, their children and grandchildren confidence and hope that their future is in Malaysia,” Dr Chua said at the opening of the MCA's 58th annual general assembly at Wisma MCA here yesterday.

Urging Prime Minister Datuk Seri Najib Tun Razak to take the giant leap forward and offer all Malaysians a new deal for the future, Dr Chua said Barisan Nasional should not allow “the baggage of the past to be a millstone around the necks of our children and grandchildren”.

Presidential address: Dr Chua delivering his keynote address at the MCA’s 58th annual general assembly at the party headquarters in Kuala Lumpur yesterday. — CHAN TAK KONG / The Star

“Malaysians need a New Deal that is fair, democratic, transparent and inclusive of all Malaysians to address today's concerns of the young and future generation. It should encompass political, social, economic and educational issues and epitomise the very core expectations and aspirations of the people at large.”

He noted that the aspirations of the younger generation might not be the same as that of the older generation.

He added that the Government and leaders must tailor their policies and programmes to the young.

“They must have faith that their aspirations can be met, and that we (Barisan) will facilitate those aspirations and not be a hindrance to them,” Dr Chua said.

The MCA president said there was a need for Barisan to sit down and work out the New Deal, stressing that such efforts must not be seen as an attempt to completely rewrite the so-called Merdeka social contract.

“I know there will be groups who will attack me for even suggesting it.

“But let us be bold and brave enough to rework it to make it more suitable for the times and meet the aspirations of all Malaysians.”

Dr Chua said the policies formulated immediately after 1969 must change with the times, pointing out that the world had changed.

“The new leadership of the MCA wants the New Deal to also embrace a government that is constructive and which can unite all races.

“We must always pursue the middle path, reaching out to a younger generation who may feel alienated.
“We want a nation that is fair, democratic, transparent and inclusive of all Malaysians.”

Dr Chua said the Government should listen more to concerned Malaysians who were now more vocal, active and politically-conscious than before.

“As leaders, we must always be ready to listen. Politicians should never pretend to know everything,” he stressed.

He said a caring government would take care of everyone's needs and expectations, from education and employment to security and law and order, as well as the impact of inflation.

“The Government's duty is to reassure all Malaysians that they have a rightful place in the country. All Malaysians will benefit as the country develops to become a high-income nation by the year 2020. The expanding economic cake should be shared fairly and equitably by all Malaysians.

“Bumiputras should not be jealous of the success of non-bumis, and non-bumis should also not be jealous of the progress of bumiputras. We are 1Malaysia.”

MCA calls for a new deal based on fairness (Update)

By FOONG PEK YEE

KUALA LUMPUR: A new deal based on fairness and bravery needs to be drawn up to give the people confidence and hope that their future is in Malaysia, said MCA president Datuk Seri Dr Chua Soi Lek.
"The new deal must embrace everyone and erase policies and laws which are unjustified and considered stumbling blocks," he said.

Prime Minister Datuk Seri Najib Tun Razak acknowledges the standing ovation from delegates at the MCA's 58th annual general meeting. 

“The time to act is now. The new deal should give every Malaysian, their children and grandchildren confidence and hope that their future is in Malaysia,” he said at the opening of the MCA's 58th annual general assembly (AGM) at Wisma MCA here .

Urging Prime Minister Datuk Seri Najib Tun Razak to take the giant leap forward and offer all Malaysians a new deal for the future, Dr Chua said Barisan Nasional should not allow “the baggage of the past to be a millstone around the necks of our children and grandchildren”.

“Malaysians need a new deal that is fair, democratic, transparent and inclusive of all Malaysians to address today's concerns of the young and the future generation.

"It should encompass political, social, economic and educational issues and epitomize the very core expectations and aspirations of the people at large.”
 
In a highly-charged speech Dr Chua said the coalition must rise to the occasion, rise above narrow self-interest and do away with “ideological dogmatism and laws, policies, ideologies and beliefs that have outlived its relevance in today's political landscape.”

 

Dr Chua and his deputy Datuk Seri Liow Tiong Lai welcome Najib on his arrival for the 58th MCA annual general meeting at Wisma MCA on Sunday

He noted that the aspirations of the younger generation might not be the same like that of the older generation, and that the government and leaders must tailor their policies and programmes to the young.

“They must have faith that their aspirations can be met, and that we (Barisan) will facilitate those aspirations and not be a hindrance to them,” Dr Chua said.

The MCA president said there was a need for Barisan to sit down and work out the New Deal, stressing that such efforts must not be seen as an attempt to completely rewrite the so-called Merdeka social contract.

“I know there will be groups who will attack me for even suggesting it. But let us be bold and brave enough to rework it to make it more suitable for the times and to meet the aspirations of all Malaysians.

“Let us rise above narrow self-interests. The time to act is now.”

Dr Chua said policies formulated immediately after 1969 must change with the times, pointing out that the world had changed.

Dr Chua and his deputy Datuk Seri Liow Tiong Lai welcome Najib on his arrival for the 58th MCA annual general meeting at Wisma MCA on Sunday 

“The new leadership of the MCA wants the New Deal to also embrace a government that is constructive and which can unite all races. We must always pursue the middle path, reaching out to a younger generation who may feel alienated.

“We want a nation that is fair, democratic, transparent and inclusive of all Malaysians.”

Dr Chua said the government should listen more to concerned Malaysians who are now more vocal, active and politically conscious than before.

“As leaders, we must always be ready to listen. Politicians should never pretend to know everything,” he stressed.

He said a caring government would take care of everyone's needs and expectations, from education and employment to security and law and order, as well as the impact of inflation.

Dr Chua, who called for more channels for peaceful dissent, also proposed that designated places and designated routes be allowed for protest and that the applications for police permits must be transparent.

On political transformation, Dr Chua said politicians should go beyond the politics of cohesion, threat, race and religion.

He regretted that there were one or two Barisan leaders who were seen as aloof, arrogant and abusive, and their attitude had not gone down well with the rakyat.

Dr Chua, who likened their behaviour to that of “big brothers” or bullies, said their behaviour would only heighten the people's anger and negative perceptions of the Barisan and the government.

The MCA chief also called on Najib to ensure that all frontline civil servants to emulate the police by learning at least two additional languages besides Bahasa Malaysia.

On education, Dr Chua called for a timetable should also be set for the authorities to make English a compulsory pass subject in the SPM examination.

He also called for mother tongue languages to be encouraged at all national schools and should eventually be made compulsory.

“If such initiatives are planned properly with a staggered timeline, they are achievable.”

Touching on the economy, Dr Chua said the award of projects should not be based on a “know-who” basis, and the expanding economic cake should be shared fairly by all Malaysians under the 1Malaysia concept.

He also urged Malaysians not to see each other as competitors but instead team up to compete with the world outside.

On the rising cost of living and many people not being able to make ends meet, Dr Chua proposed the government help them via special one-off monetary relief like cash handouts to the poor, senior citizens, pensioners, and assistance like school books, uniforms and transportation for school-going children.

The government, he added, should also consider some form of monthly allowance for the poor.

Dr Chua also cautioned the people of the Pakatan's practice - talk but don't walk the talk apart from being “consistently inconsistent”.

He reminded the people that the opposition's populist policies might generate the “feel good” factor; but they would neither address their needs nor generate high income or better living standards.

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The decline of the West

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Ceritalah by KARIM RASLAN

These worries are further fuelled by the ongoing global financial crisis and political paralysis that’s slowly undermining both the European Union and the United States.

HISTORY is written by the victors. Losers rarely get much coverage let alone a mention.
In Malaysia, unlike in Indonesia, the forces of political conservatism ultimately won power from our former colonial masters.

As such, the “left” – as PAS deputy president Mat Sabu discovered – has been forgotten, if not vilified outright.

However, interpretations of history change from decade to decade. Indeed, there is no one “history”.
Instead, there are many and generally, it’s the powerful that get to determine whose version of events should dominate.

What happens though when a once all-powerful nation begins to falter? How does it write or rewrite its history?

Such a shift can be seen in the recent explosion of writing on the supposed decline of Western – particularly American – power.

Historian Niall Ferguson has charted the process in Civilisation: The West and the Rest. Ferguson argues that the “West” (particularly Britain and America) was able to surpass others (such as the Chinese and Ottoman Empires) due to six “killer applications”: competition, science, property rights, medicine, the consumer society and work ethic.



Ferguson argues that the West perfected all six simultaneously, whereas “the Rest” developed only a handful or else let their comparative advantages in these fields stagnate.

His main thrust, however, is that the West’s current weakness stems from a loss of faith in its own civilisational values. In short, the West has failed to renew its commitment to its “killer apps”.

The West, therefore, ought to “recognise the superiority” of its own civilisation because it offers societies “the best available set of economic, social and political institutions”.

One may of course disagree with Ferguson’s thesis but his arguments are compelling.

His contention that the Islamic world declined because it closed its minds and borders is certainly persuasive, if unoriginal.

At the same time, Ferguson’s tome is a clear sign that there’s a growing trend amongst writers discussing (if not agonising) over the West’s “decline”.

These worries are further fuelled by the ongoing global financial crisis and political paralysis that’s slowly undermining both the European Union and the United States.

Indeed, the latest issue of the literary journal New Yorker includes a superb essay by Adam Gopnick, which claims that “declinism” has now morphed into a veritable literary genre – a pet topic for academics and pundits alike.

But is this really something new? “Cassandras” (named after the Trojan princess who foresaw her own city’s destruction at the hands of the Greeks) – the harbingers of doom and decline – have long been with us, even in times of great prosperity.

Indeed, according to Gopnick, the phrase “decline of the West” was used as early as 1918 by the German historian Oswald Spengler.

Nor were such fears of decay exclusively Western: writers and historians such as Ibn Khaldun, Tun Sri Lanang and Sima Qian have dwelt on similar themes as they charted the rise and fall of civilisations.
Moreover, the mere fact that these books are available across the globe suggests the depth and breadth of such concerns.

At the same time they also reveal a passionate commitment to the idea of renewal and reform. Ferguson is clearly a believer in the West’s capacity to re-invent and re-energise itself.

For us in Malaysia, these books – and there are countless others in airport bookshops – reinforce the sense of a world shifting on its axis, of a power alignment that prioritises China and India over Europe and the United States.

We are faced with the challenge of adapting to these newly (re-)emerging powers whilst not forgetting the strengths (or “killer apps”) that made the Western nations great such as the emancipation of women, democracy and religious tolerance.

And it is in this realm that we need writers and historians such as Ferguson and Gopnik – figures who’ll both commend and condemn with equal weight, stepping aside from mere politics.

The new geo-political landscape will demand prodigious powers of concentration and leadership. Mere rhetoric will be useless.

Malay ultras and/or an obsession with bangsawan politics won’t help us in coping with either China and/or India.

History requires candour and honesty. It also demands a degree of openness.

We need to be willing to accept the idea that there are many versions of the truth.

Our narrow-minded views on history hamper us as we chart our way forward.

You need to know yourself in order to plan for the future. Self-knowledge is critical.

I would argue that it’s only when we as Malaysians can start to engage about our collective history with the same vigour and honesty as our counterparts in the West then we’ll be ready to deal with the challenges outlined by these writers.

History – our many histories, Malay, Chinese, Indian, Dayak and so forth – requires objectivity and honesty. If we can’t deal with the past, how can we face the future?

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A "great haircut" for U.S. growth

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A "great haircut" to kick-start U.S. growth

By Jennifer Ablan and Matthew Goldstein NEW YORK 

(Reuters) - More than three years after the financial crisis struck, the U.S. economy remains stuck in a consumer debt trap.

It's a situation that could take years to correct itself. That's why some economists are calling for a radical step: massive debt relief. Federal policy makers, they suggest, should broker what amounts to an out-of-court settlement between institutional bond investors, banks and consumer advocates - essentially, a "great haircut" to jumpstart the economy.

What some are envisioning is a negotiated process in which cash-strapped homeowners get real mortgage relief, even if it means forcing banks to incur severe write-downs and bond investors to absorb haircuts, or losses, in some of the securities sold by those institutions.

"We've put this off for too long," said L. Randall Wray, a professor of economics at the University of Missouri-Kansas City. "We need debt relief and jobs and until we get these two things, I think recovery is impossible."

The bailout of the nation's banks, a nearly trillion dollar stimulus package and an array of programs by the Federal Reserve to keep interest rates near zero may have stopped the economy from falling into the abyss. But none of those measures have fixed the underlying problem of too much U.S. consumer debt.

At the start of the crisis, household debt as a percentage of gross domestic product was 100 percent. Today it's down to 90 percent of GDP. But by historical standards that is high. U.S. households are still more indebted than their counterparts in Austria, Germany, Spain, France and even Greece - which is on the verge of defaulting on its government debt.

Tens of millions of U.S. citizens remain burdened with mortgages they can no longer afford, in addition to soaring credit card bills and sky high student loans. Trillions of dollars in outstanding consumer debt is stifling demand for goods and services and that's one reason economists say cash-rich U.S. companies are reluctant to hire and unemployment remains stubbornly high.

Take Donald Bonner, for example, a 61-year-old from Bayonne, New Jersey, who lost his job working on a dock in June. Back in March, he attended a "loan modification" fair held by JPMorgan Chase in New York. He has lived in his home since 1970, but was on the verge of losing his job. After falling behind on his $2,800-a-month mortgage, he sought to reduce his monthly payment. Bonner says the bank denied the request on the grounds that he is ineligible because his income is higher than the minimum threshold set by the Federal government for loan modifications.

"They keep asking me for additional documentation," Bonner said on Friday. "It seems to me there is never enough documentation and it has to be renewed every month. It does make you wonder with all this bailout money these banks have received, they don't want to lend the money."



DEBT JUBILEE

The idea of substantial debt restructurings and a haircut for bondholders has been raised by financial pundits, including Barry Ritholtz and Chris Whalen, two popular analysts and bloggers.

Renowned economist Stephen Roach, currently non-executive chairman of Morgan Stanley Asia, has gone a step further, calling for Wall Street to get behind what others have called a "Debt Jubilee" to forgive excess mortgage and credit card debt for some borrowers. The notion of a Debt Jubilee dates back to biblical Israel where debts were forgiven every 50 years or so. In an August appearance on CNBC, Roach said debt forgiveness would help consumers get through "the pain of deleveraging sooner rather than later." (here)

But it's not just the liberal economists and doom-and-gloom financial analysts calling for a great haircut. Even some institutional investors, who might suffer some of the impact of debt reductions on their portfolios, are seeing a need for a creative solution to the mess.

"If there is something constructive that can be done it should be," said Ash Williams, executive director of the Florida State Board of Administration, which oversees $145 billion in public investments and pension money. "You don't want to reward bad behavior and you don't want to reward people who were irresponsible. But if there is a way to do well by doing good, then let's take a look at it."

To be sure, consumer debt levels have been coming down since the crisis began. The Federal Reserve Bank of New York reported in August that outstanding consumer debt has fallen from a peak of $12.5 trillion in third quarter of 2008 to $11.4 trillion. (NY Fed report: tinyurl.com/3uuvk8d) That's a sign that consumers are getting less indebted.

But U.S. households are still carrying a staggering burden of debt.

As of June 30, roughly 1.6 million homeowners in the U.S. were either delinquent on mortgages or in some stage of the foreclosure process, according to CoreLogic. And the real estate data and analytics company reports that 10.9 million, or 22.5 percent, of U.S. homeowners are underwater on their mortgage -- meaning the value of their homes has fallen so much it is now below the value of their original loan.

CoreLogic said the figure, which peaked at 11.3 million in the fourth quarter of 2009, has declined slightly not because home prices are appreciating but because a growing number of mortgages are entering foreclosure.

The nation's banks, meanwhile, still have more than $700 billion in home equity loans and other so-called second lien debt outstanding on those U.S. homes, according to SNL Financial.

Debts owed by American consumers account for almost half of the nearly $9 trillion in worldwide bonds backed by pools of mortgages, car loans, credit card debt and student loans, which were sold to hedge funds, insurers and pension funds and endowments.

And that doesn't include the $4.1 trillion in mortgage debt sold by government-sponsored finance firms Fannie Mae and Freddie Mac.

Kenneth Rogoff, professor of economics and public policy at Harvard University and former chief economist at the International Monetary Fund, has said the ongoing crisis should be called the "Second Great Contraction" because U.S. households remain highly leveraged. He says the high level of consumer debt is what distinguishes this from other recessionary periods.

COMPETING INTERESTS

For those in favour of a radical solution, there are a lot of headwinds.

Any debt reduction initiative must confront the issue of "moral hazard" - the appearance of giving a gift to an unworthy borrower who simply made unwise spending choices.

Institutional investors who own securities backed by pools of mortgages are reluctant to see struggling homeowners get their mortgages reduced because that means those securities are suddenly worth less. Any write-downs that banks are forced to take could imperil their capital levels.

Banks and bondholders, meanwhile, have competing interests. This is because mortgage write-downs depress the value of the securities in which mortgages are pooled and sold to investors. Big institutional investors like BlackRock have long argued that any meaningful principal reduction on a mortgage must also include a willingness by banks to take their own write-downs on any home equity loans, or second liens, taken out by the borrower on the property.

The banks continue to hold those second liens on their balance sheets and so far have been reluctant to mark down the value of those loans, even though the borrower often has fallen behind on their primary mortgage payments.

In other words, bondholders are taking the position if they must suffer losses, so must the banks.

"Institutional investors, pension funds and hedge funds all have fiduciary obligations and they can't necessarily agree to haircuts solely because it may be good social policy," Sylvie Durham, an attorney with Greenberg Traurig in New York, who practices in the structured finance and derivatives area.

Tad Rivelle, chief investment officer of fixed-income securities at TCW, which manages about $120 billion of which $65 billion is in U.S. fixed income, doesn't support a big haircut. But he says he can see why some economists and consumer advocates would favor debt reductions and debt workouts as way of dealing with the financial crisis and freeing up more money for spending.

Barry Ritholtz, director of equity research at Fusion IQ and a popular financial blogger, said the standoff between the banks and bondholders is untenable and doing a good deal of harm. An early critic of the bank bailouts, Ritholtz says bankers and bondholders are all in denial and both need to get far more pragmatic.

"They'd be bankrupt if not for the bailouts," says Ritholtz of the banks' position. "For their part, bondholders need to understand that we're not earning our way out of this mess and should eat losses now before they get nothing."

TIME FOR A MEDIATOR?

Given the standoff, there's a sense nothing will happen unless federal policymakers make the first move. The Fed reports that 71 percent of household debt in the U.S. is mortgage-related.

But so far Washington policymakers seem more content to rely on voluntary measures. The two main programs set up by the Obama administration to reduce home mortgage debt - the Home Affordable Refinance Program and the Home Affordable Modification Program - have had limited success.

To date, the U.S. Treasury Department reports that those voluntary programs have resulted in 790,000 mortgage modifications, saving those borrowers an average of $525 a month in payments. Many of those modifications, however, were for borrowers paying high interest rates, not ones underwater on their mortgages.

In fact, Bank of America, one of the nation's largest mortgage lenders, said it has offered just 40,000 principal reductions to its borrowers.

U.S. administration sources told Reuters that they support the concept of carefully targeted principal reductions for underwater borrowers. But these sources, who did not want to be identified, say the administration cannot mandate banks and bondholders to accept any principal reductions absent Congress authorizing the procedure.

The sources point out that federal authorities don't have a "magic wand" - even at Fannie Mae and Freddie Mac, the government-backed home-loan titans.

These sources explain that even though Fannie and Freddie are effectively owned by the federal government, they are controlled by an independent regulator, the Federal Housing Finance Agency. And it's up to the FHFA, and not the administration, to approve any principal reductions on home loans involving Fannie and Freddie.

An FHFA spokeswoman declined to comment. The agency has repeatedly taken the position that its first job is protect taxpayers' return on investment in Fannie and Freddie rather than reducing mortgages for underwater borrowers.

CLOCK TICKING

The fear of some economists is that the economy may be going into a double dip recession. That means precious time is being lost if a negotiated approach to debt reduction isn't taken now.

But the banks also have their own big debt burdens to deal with. Next year alone, U.S. banks and financial institutions must find a way to either pay off or refinance $307.8 billion in maturing debt, compared to the $182 billion that is coming due this year, according to Standard & Poor's.

This maturing debt for U.S. banks comes at a time when they must start raising capital to deal with new international banking standards and are facing the possibility of a new recession that will crimp earnings. (Bank of America story: link.reuters.com/sys63s)

Beyond bank debt, hundreds of billions of dollars in junk bonds sold to finance leveraged buyouts also are maturing soon. S&P says "the biggest risk" comes in 2013 and 2014, when $502 billion in speculative-grade debt comes due.

Still, there are still plenty of economists who say the concern about consumer debt is overdone and that doing anything radical now would only make things worse. One of those is Mark Zandi, chief economist of Moody's Analytics, who says a forced write-down or haircut of debt "would only result in a much higher cost of capital going forward and result in much less credit to more risky investments."

He said significant progress has been made in reducing private sector debt, and draconian debt forgiveness measures would be a mistake. "Early in the financial crisis I was sympathetic to passing legislation to allow for first mortgage write-downs in a Chapter 7 bankruptcy, but the time for this idea has passed," says Zandi.

Still, the notion of a debt write-down and bondholder haircuts will probably be around as long as the unemployment rate stays high and the housing market remains depressed.

Indeed, it has been two years since the notion of a "Debt Jubilee" made it into the popular culture when Trey Parker and Matt Stone used it for an episode of the politically incorrect cartoon "South Park." In the episode aired in March 2009, (here), one of the characters used an unlimited credit card to pay off all the debts of the residents of South Park to spur the economy.

At the time, the idea seemed like just a funny satire on the nation's economic mess. But now it seems like no joke at all.

(Reporting by Jennifer Ablan and Matthew Goldstein; Additional reporting by David Henry and Joseph Rauch; Editing by Michael Williams and Claudia Parsons)