> Some economists, among them Baker, are skeptical whether the scheme will succeed: "I am not sure that this is the best way to help low-income people. If lenders think this can happen again they will charge very high interest rates to low-income borrowers," Baker said.
If you were a bank that had just been pressured into forgiving a bunch of loans, how likely would you be to make new loans to the same class of people?
Considering that many of those loans are predatory in nature, that may not be a bad thing.
Even if we have not had any such bailouts for the underclasses in Mexico, delinquency rates for all sort of credit are so high that the banks have accepted this as the cost of doing business, and passed those costs to the subset of customers that actually care about paying off debt. This is how I still pay ~30% on my credit card after 20 years of solid credit history with the same bank - entry level ones charge ~50%!!! Or how a few years ago there was this brilliant advertising campaign for "the first single-digit mortgage in market" (9.97% or so).
In trying to apprehend reality as closely as feasible, it will not do to make assumptions like "all actors have constant (or even he same lognormal function describing) marginal utility" or "ignoring transaction costs and taxes."
This is most crucial in understanding behavior in vastly asymmetric situations (e.g. A Croatian making $100 a month vs a bank). Of course, much of our consumer tech industry is founded on this sort of asymmetry, so the concept is not out of reach; yet, we of the technical mindset often are too quick to use the lens of a convenient simplifying abstraction when it comes to political questions of economic incentives...
You say "the situation is complicated" and "this is not fair", but how exactly do you think this measure will fail? From a distance it sounds like it would boost the economy by allowing people to prosper, while debt is written off mostly by private entities, not the tax payers directly. Even if it was, it might still be a win.