Are we in a recession yet? How will we know? Will things get as bad as they were during the Great Depression? What’s going to happen, and who’s to blame for getting us into this mess in the first place? Was it the greedy fat-cats on Wall Street that sold each other piles of what their dogs left behind? How about the Democrats in Washington who were convinced that their friends Fanny and Freddie should make sure everyone in America could buy a home, whether they could afford it or not. Or maybe it was the Republicans who wanted to deregulate everything they could get their hands on, thinking that we were all better off if Gordon Gekko could just save us all the trouble and watch over himself. We all have questions such as these that over time will be answered in a hundred different ways – one catered to the opinion of each individual author. Right now there are plenty of people offering their judgment about who we should blame for our problems, and over the next 100 years tons more people will do the same. I’m not interested in doing that. I want to figure out how we can solve our problems, and I’m asking you to help me.
Let’s look at what has been done so far. After much groveling by Secretary Paulson and Fed Chairman Ben Bernanke, and a bunch of worthless add-ons in the form of “pork barrel spending” and ridiculous tax breaks for random companies, Congress finally passed the Emergency Economic Stabilization Act of 2008. As everyone now knows, the main initiative set forth in this bill was the creation of the Troubled Assets Relief Program (TARP) – a $700 Billion bailout plan initially created to purchase Mortgaged Backed Securities (MBS’s). I don’t know about you, but if these assets are part of what got us into this problem then I’m not too happy about the government spending so much of our money on something that no one else wants to buy. If we are going to spend that much money on something, can’t we find a better investment then what the “financial experts” have all decided are worthless securities? So now after watching European governments give it a try, TARP is going to try purchasing preferred equity shares in various banks. This will help to provide immediate assistance to the lending institutions that are going through a liquidity freeze, but is it enough to help save the economy? Haven’t we forgotten something? We took care of the commercial banks and the investment banks, but isn’t there someone else we were supposed to help?
Let’s start from the beginning, how did this all start again? Oh, that’s right, people bought homes that they couldn’t afford and now they can’t make their payments. These properties are going into foreclosure and families are being evicted from their homes. To address this problem, it seems as if their plan is to purchase these mortgages from the banks and reduce the loan value. Since the banks wouldn’t voluntarily revalue them for fear of having to take losses, our taxpayer dollars will be given to the banks to make up the difference between the old and new value of the loan. But didn’t we already help the banks by purchasing the additional equity shares? And so now we are giving them more money, but this time we are getting nothing in return? I’m all for helping out the homeowners, but isn’t there a way to do so without just giving money to banks and having nothing left to show for it?
Well, maybe there is! I think I have figured out a way to help the homeowners and the banks, and maybe make a profit for the taxpayers at the same time. At very least it will cost us a whole lot less. This is why I’m posting this blog – to lay out my plan for all to see. Think about it, talk about it with your friends, pass on the word that this plan is out there, and most importantly tell me what you think. I have no grand delusions that I or my plan is perfect, but it is a better idea than the rest and it’s a good starting point. I’m counting on all of you to help me make this plan better. So let’s get started…