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| Home Front Economy |
| The Common Sense Fix for the Economy |
| 2008-09-30 |
| There is a guy named Dave Ramsey out of Nashville. He does a kind of a layman's approach to the economy. He has posted some simple guidelines to straighten out the economy. He has on his website a way to send the following pdf file to your Congressman. He does not take credit for this approach. He says he has culled this approach from people like Mike Huckaby and others. Ramsey appears on Fox as a economic commentator. Kind of like a Ben Stein of from the South. What do Rantburgers think of this approach? Reasonable or overly simple and naive? Years of bad decisions and stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following threestep Common Sense Plan. I. INSURANCE a. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity. b. In order for a company to accept the government-backed insurance, they must do two things: 1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage. a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes. b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while working with the borrower—again limiting foreclosures and ruined lives. 2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don’t do their jobs. c. This backstop will cost less than $50 billion—a small fraction of the current proposal. II. MARK TO MARKET a. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate. b. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing. III. CAPITAL GAINS TAX a. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing. b. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down. This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to stand up, speak out, and fix this mess. |
| Posted by:JohnQC |
| #8 "a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes." um, these would be the folks who bought homes they couldn't afford? Explain again why we need to save them from their own cupidity? |
| Posted by: Ebbomp McGurque5198 2008-09-30 20:11 |
| #7 DoDo is correct. Insuring the mortgages is won't be cheap, either. At it will cost a helluvalot more than 50 billion. |
| Posted by: Mike N. 2008-09-30 19:45 |
| #6 Insurance is the same as bailout. Re-writing the loan provisions will do nothing unless loan balances are reduced or mortgage rates reduced to below market. The core problem in subprime is that people bought homes who couldn't afford them. After Freddie and Fannnie lending rules were loosened up home ownership rates in the U.S. went from 64% to 68%. Those last four percent of U.S. households cannot afford their homes. I don't have any problems re-writing their loans as long as the lenders bear the cost. Taxpayers shouldn't. Eliminating the mark to market rule is good, but needs to include all mortagages. Even if mark to market is eliminatd for subprime, accounting rules (and common sense) require that they be marked down when they become delinquent. Eliminating mark to market for prime loans and non-delinquent loans is much more important because they are a bigger part of the market and their market values are being hurt by the flight to quality. Moving them back to amortized cost would restore many balance sheets and capital positions. Waiving capital gains taxes is a good idea. That could be expanded beyond mortgages and offered to purchasers of new equity in financial firms. Many will need to be recapitalized to be able to begin lending again. |
| Posted by: DoDo 2008-09-30 18:13 |
| #5 Congress also needs to repeal the Community Re-investment Act (Or at least the 1995 amendments). (See the "Burning Down the House" video) |
| Posted by: Frozen Al 2008-09-30 18:07 |
| #4 My Congressman John Duncan voted against the House bill. |
| Posted by: JohnQC 2008-09-30 18:02 |
| #3 I just forwarded this to my Senators and my Congressman. |
| Posted by: JohnQC 2008-09-30 18:01 |
| #2 Republican WHIP e-mail. |
| Posted by: Besoeker 2008-09-30 17:37 |
| #1 Excellent! This is precisely what congress must do. |
| Posted by: Besoeker 2008-09-30 17:31 |