View Full Version : Link to Alternative Plan
From another site that is quite diverse.
No plan is best, but if we have to pass something... (Begins with second post)
http://www.sherdog.net/forums/f54/support-nietzsches-brilliant-plan-850990/
For complete coverage of the Wall Street Crisis:
http://www.sherdog.net/forums/f54/wall-street-red-alert-846144/
Maybe I need a better marketing plan?
An ounce of prevention is worth a pound of cure.
No deal is better than any deal, but if we have to have one...
Here is how the government can prevent the foreclosure crisis from spiraling out of control, extending the housing slump into all corners of the economy.
You handle it on the local level. The federal government establishes the rules.
The homeowner has to get two or three appriasals from properly licensed professionals. Then they go to their local court and present the information to the judge. A new value is established for the home and a the existing mortgage(s) are adjusted accordingly. The homeowner will not get any equity in the home, but they will get the principal balance on the loan reduced to market value and the new interest rate will be a 30 year fixed rate loan at 7% interest. If there is a second mortage on the home and the value is less than the liens, the second mortgage is removed and is deemed worthless.
When the court process is finished, the local authorities enter the new information into the public records for that property and send out a notice to the bank about the changes. The bank then has 30 days to essentially deal with the re-financing of the home. The homeowner will have a new monthly payment, all other terms of the mortgage will remain the same.
Its as simple as that. It saves the market from a further glut of foreclosed properties. It sorts out the mess with second mortgages, the toxic waste. And it allows banks to move forward with predictable cash flows because people will be better able to make their payments. The market will imporove because a new valuation will take effect and the supply of homes for sale will go down. This will begin the process of recovery in the market as prices eventually being to rise again. The floor will be established.
Trickle up is the way to go.
Originally Posted by LavrentiBeria
Sounds reasonable, but something so complex would take too long to get approved and worked out.
It isn't complex. That's the beauty of it. It involves no cash outlay, two appraisals, a court appearance, and a letter to the lein holder.
All the government has to do is pass the law establishing the rules.
The other good thing is that this will sort out all the bad paper. Banks will be able to establish accurate balance sheets because the mystery of home valuation and mortgages will be adjusted to current market conditions.
It doesn't solve all the problems, but it minimizes them from compounding as more and more homes fall into foreclosure. The worst thing that can happen now is for an additional 5 million defaults to become realized. Homes without occupants just sitting there deteriorating, losing value, and serving no positive purpose isn't going to help anyone. Doing this would lessen the cost of fixing the other issues. The banks or holders of the mortages will be better off in this regard even though they have to take some losses in this program. Its a tough pill to swallow, but there is no way to get around it. Without this correction mechanism, the losses would be even greater
I still like my idea and there are all kinds of ways to refine it to make it even better.
It could be tied to a bailout of the bank who choose to participate. The idea is that the banks would issue additional shares of stock that the government would buy. This would provide the cash liquidity that is needed in the bank. The pricing issue would be solved because the government would pay market price fo the shares.
The corps that participate would be subject to the salary/bonus/compensation constraints and no dividends can be paid to stockholders. This would end when the compay bought back all the stock from the government at the existing market prices then.
Its a win-win situation that way.
No banks fail, foreclosures are minimized, capital and liquidity flow into the market place, the tax payers investment is protected, and there is a built in exit strategy that benefits both parites.
Originally Posted by fscottbaio
The problem is then where do you draw the line? Does the government nationalize any given industry that begins going under? If not, what then becomes the deciding factor? The automobile industry is a good contemporary example. They're having severe problems and are well on their way to getting federal loans. Should the government simply take over the industry and begin making government cars?
In case you haven't noticed, the automobile industry is getting their own bailout package.
There is a thread about it.
I don't think there should be any bailout, but if there has to be one, then we might as well try to make it as productive as possible. What is currently on the table is going to do more harm than good.
What I proposed is that the government own stock in troubled companies. This does not mean that they run them. When you buy stock, do they call you up to help with corporate decisions? The stock is an equity position that protects the taxpayers money. There is something of value that can be cashed in at a later date. Unlike the current Paulson plan which has the government buying assets that have no value from the banks, my idea is to buy a piece of the bank itself. That way, everyone's ships are sailing in the same direction.
Originally Posted by Reako
Problem with this is that if the copmany is that fucked, the government might need to take a 10% or more interest in the company and doesnt that give the government, a seat on the board?
Make it non-voting preferred stock.
All these technical problems are easily solved.
Again, I'm against a bailout and prefer that the market handle this, but if we are going to tinker, we might as well do it responsibly.
Originally Posted by fscottbaio
No, but it definitely represents a clear conflict of interest. If the government owed significant stock in specific companies, then it's pretty logical to assume that all sorts of corruption would then follow in which the government legislated clear advantages for the companies in which it owns stock.
And as for the automobile industry: that's exactly what I said.
Its funny you mentioned the conflict of interest issue. This would be the number one reason why there should be NO DEAL.
I think we already have enough corruption, artificial manipulation, and criminal behavior as it is. Just take a look at the original 3 page Paulson plan and think about all the transgressions upon the taxpayer contained in that turd.
Now congress is attempting to polish that turd. It can't be done. You can give it a bow tie, leather shoes, channel #5, and lipstick, its still a TURD
The next step, and let's make it a small one, is to pass a law that restricts the Federal Reserve. No competing currencies or abolition of the the Fed for now.
Their only function will be to increase the money supply by the rate of growth of the economy. That will be their ONLY function. They cannot interfere in the market in any way. They will provide the market with the correct quantity of money to facilitate the natural flow of capitalistic forces.
A bolder move would be to nationalize the Federal Reserve and make it part of the government. But it doesn't really matter at this point. What we need is sound fiscal policy from the Fed.
They will no longer be able to create business cycles, financial bubbles, or deal directly in the market. Thier actions are the direct cause of this crisis and its time to put an end to their artificial manipulations of the markets.
Capital Gains tax code revision:
IF you own a stock for a year or more and then sell it, you pay ZERO capital gains.
9-12 months: 5%
6-9 months: 10%
3-6 months: 15%
2-3 months: 20%
1-2 months: 25%
Less than a month: 30%
Another component has to be the gradual elimination of fractional reserve banking.
Since the main problem here is that the money supply is way to large, the US government should require the Fed to raise the reserve requirement on banks.
This power should be removed from the Fed altogether and be controlled by the sound monetary policy as well.
You have to start somewhere, so wherever the rate is now, increase it by 5%. Continue raising it every three or four months until stability is achieved. It may take a few years to accomplish this goal, but it will be well worth the wait.
Fractional Reserve Banking needs to be eliminated from our economy. Now is the time to begin the process.
Anyone alive in this place?
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