Page 1 of 1 pages
We face two problems immediately - how to restore the financial institutions funds needed for normal lending to business and consumers, and how to keep people who have trouble paying their mortgages in their homes. Why not bail out the homeowners, with a “housing voucher” program designed to make up the difference between an “affordable” payment and what they are contractually supposed to pay?
The mass of subprime homeowners - many minorities, almost all low or moderate income families - would be made secure in their homes. The lending organizations would have their capital restored as the “bad mortgages” became “good mortgages” with government-assisted repayments assured. People in trouble could apply to the housing voucher agency, submitting information on their family income based on their income tax forms and updated to allow for becoming unemployed or sudden burdens for health services. The agency could estimate an “affordable” amount for the family to pay on that basis, and write a voucher to make up the difference. There would be no “Wall Street bailout” but a bailout of low and moderate income homeowners, and the benefits would “trickle up” to the financial institutions immediately as their loans would be restored to full value.
The taxpayers could eventually be repaid if the terms of the mortgages were extended to include repayment of these advances. There would be no need suddenly spend $750 billion because the government’s spending on the vouchers would be spread over the duration of the mortgages, while the restoration of liquidity to the banks would be immediate and require no dubious attempt to value “toxic investments” for governmental purchase.
Actually, with a guarantee of government-supported payments, the government could require the interest on “subprime” loans to be renegotiated downward to the “prime” rate.
This emergency response to the “credit crisis” could be the first step in establishing a “right to housing” program, in which the government could subsidize new mortgages for low and moderate income families under restrictions to prevent abuses and excess interest. It could also take over the rental housing voucher program which now exists on a miserably underfunded level, since people whose jobs move may need rentals rather than home ownership. At the same time than financial institutions could be more carefully regulated so they don’t exploit the borrowers or encourage overcommitment.
Posted by allenbarton on Oct 3, 2008 at 2:05 PM
These are good ideas Allen, its so simple and obvious. What I like the most about it, is that we wouldn’t have had to add all that extra pork in order to cram it through, everyone wins.
I’m constantly amazed at how this government sees fit to award the benefits of socialism to the supposed champions of free market capitalism (ie, CEO’s gigantic companies, banks, what have you), but suddenly becomes deeply ideological when we talk about offering help to the average Joe. What are they so afraid of?
Anyway… now that we live in a post-bailout world, we’ll just have to sit and wait. My sense of this thing is that congress has only staved off the inevitable collapse of the whole show… which admittedly congress seems to be aware of… but I’ll be surprised if they can muster the political will to ever actually re-regulate the finance system. You need a swarm of lobbyists to ever move anything through congress, and the “average Joe lobby” isn’t all that powerful these days.
sigh.
Posted by diciteco on Oct 4, 2008 at 5:18 AM
Of course it’s too late now that the bailout got the rubber stamp, but I’ve got a question that I know Wall Street wouldn’t answer.
Why don’t they actually delve into the mortgages they hold, the toxic debt they claim they don’t know its worth, and sort the good mortgages from the bad?
The answer is that they were buying mortgages as investments rather than have any interest in managing the mortgages as banks used to do in the good old days (about a decade ago).
I would have told the banks to sort out their mortgages and either work with the owners of homes or take the loss. Bite the bullet Wall Street and take responsibility for the mortgages you bought.
But water under the table, the bailout is on.
A side note. There is/was an email going around claiming that if the $700 billion were to be distributed to all American adults then it would be about $350,000 per adult. Well, being a skeptic, I did the math. It actually would be $3,500 per adult. That’s still no small potatoes. Imagine what the economy would be like with a stimulus package like that?
Home owners could catch up on late payments, people could pay down debt, others would stick it in the bank, and many of course would go on a spending spree. Paying debt and mortgages or putting it into savings would end up freeing up the credit crisis as banks would have more money. The spending spree portion would stimulate the rest of the economy.
But Washington and Wall Street would never allow us to solve the economy using our money, we’re too dumb.
Posted by Jon B on Oct 4, 2008 at 6:52 AM
<blockquote>The marriage of American capitalism and democracy has always been a Pamela Anderson and Tommy Lee affair
Posted by scorp on Oct 5, 2008 at 9:54 AM
Ah Scorp,
Just as I predicted in another post, you returned to partis-insanely blame the Democrats. AND with repeated Republican talking points, which I’ve already heard numerous times.
So, let’s address the talking point concerning the Community Reinvestment Act. Show me the statistics of those helped and their foreclosure rate. Until you can do that, just stating a talking point you got somewhere else is nothing but propaganda AND a lack of skepticism on your part to any old talking point thrown your way.
Oh, and the scorp crew can’t wait to pick you up on election eve, we suspect with tears in your eyes.
Posted by Jon B on Oct 6, 2008 at 7:08 AM
Hey Scorp,
It was about six months or so ago that you were so sure that stocks were just fine based on p/e ratio. I told you “no” that p/e was a lagging indicator and that the market was due for a downward correction. I said it was a bubble. I based this on the fact that I argued that the housing market would take it down.
See the thing about p/e, is that you have to have honest companies and CEOs providing honest data. But your free marketeers were of course BSing their stockholders and all Americans for that matter.
I told you so and you didn’t believe me. As I sit right now watching CNBC the Dow is down 530 points dropping to about 9,800. Back when we were discussing the market it was up in the 13,000 area. I’d call that a downward correction.
Your boy Bush is going to watch election returns with the Dow BELOW the day he took office. The CEO president I believe they used to call him. And look at your ravaged party ideals, the free marketeers using the government to try to save their wreckage. Is there going to be a bank in America left that is not part of the government by the time your Republican administration leaves office?
Posted by Jon B on Oct 6, 2008 at 7:43 AM
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Reader Comments
We face two problems immediately - how to restore the financial institutions funds needed for normal lending to business and consumers, and how to keep people who have trouble paying their mortgages in their homes. Why not bail out the homeowners, with a “housing voucher” program designed to make up the difference between an “affordable” payment and what they are contractually supposed to pay?
The mass of subprime homeowners - many minorities, almost all low or moderate income families - would be made secure in their homes. The lending organizations would have their capital restored as the “bad mortgages” became “good mortgages” with government-assisted repayments assured. People in trouble could apply to the housing voucher agency, submitting information on their family income based on their income tax forms and updated to allow for becoming unemployed or sudden burdens for health services. The agency could estimate an “affordable” amount for the family to pay on that basis, and write a voucher to make up the difference. There would be no “Wall Street bailout” but a bailout of low and moderate income homeowners, and the benefits would “trickle up” to the financial institutions immediately as their loans would be restored to full value.
The taxpayers could eventually be repaid if the terms of the mortgages were extended to include repayment of these advances. There would be no need suddenly spend $750 billion because the government’s spending on the vouchers would be spread over the duration of the mortgages, while the restoration of liquidity to the banks would be immediate and require no dubious attempt to value “toxic investments” for governmental purchase.
Actually, with a guarantee of government-supported payments, the government could require the interest on “subprime” loans to be renegotiated downward to the “prime” rate.
This emergency response to the “credit crisis” could be the first step in establishing a “right to housing” program, in which the government could subsidize new mortgages for low and moderate income families under restrictions to prevent abuses and excess interest. It could also take over the rental housing voucher program which now exists on a miserably underfunded level, since people whose jobs move may need rentals rather than home ownership. At the same time than financial institutions could be more carefully regulated so they don’t exploit the borrowers or encourage overcommitment.
These are good ideas Allen, its so simple and obvious. What I like the most about it, is that we wouldn’t have had to add all that extra pork in order to cram it through, everyone wins.
I’m constantly amazed at how this government sees fit to award the benefits of socialism to the supposed champions of free market capitalism (ie, CEO’s gigantic companies, banks, what have you), but suddenly becomes deeply ideological when we talk about offering help to the average Joe. What are they so afraid of?
Anyway… now that we live in a post-bailout world, we’ll just have to sit and wait. My sense of this thing is that congress has only staved off the inevitable collapse of the whole show… which admittedly congress seems to be aware of… but I’ll be surprised if they can muster the political will to ever actually re-regulate the finance system. You need a swarm of lobbyists to ever move anything through congress, and the “average Joe lobby” isn’t all that powerful these days.
sigh.
Of course it’s too late now that the bailout got the rubber stamp, but I’ve got a question that I know Wall Street wouldn’t answer.
Why don’t they actually delve into the mortgages they hold, the toxic debt they claim they don’t know its worth, and sort the good mortgages from the bad?
The answer is that they were buying mortgages as investments rather than have any interest in managing the mortgages as banks used to do in the good old days (about a decade ago).
I would have told the banks to sort out their mortgages and either work with the owners of homes or take the loss. Bite the bullet Wall Street and take responsibility for the mortgages you bought.
But water under the table, the bailout is on.
A side note. There is/was an email going around claiming that if the $700 billion were to be distributed to all American adults then it would be about $350,000 per adult. Well, being a skeptic, I did the math. It actually would be $3,500 per adult. That’s still no small potatoes. Imagine what the economy would be like with a stimulus package like that?
Home owners could catch up on late payments, people could pay down debt, others would stick it in the bank, and many of course would go on a spending spree. Paying debt and mortgages or putting it into savings would end up freeing up the credit crisis as banks would have more money. The spending spree portion would stimulate the rest of the economy.
But Washington and Wall Street would never allow us to solve the economy using our money, we’re too dumb.
<blockquote>The marriage of American capitalism and democracy has always been a Pamela Anderson and Tommy Lee affair
Ah Scorp,
Just as I predicted in another post, you returned to partis-insanely blame the Democrats. AND with repeated Republican talking points, which I’ve already heard numerous times.
So, let’s address the talking point concerning the Community Reinvestment Act. Show me the statistics of those helped and their foreclosure rate. Until you can do that, just stating a talking point you got somewhere else is nothing but propaganda AND a lack of skepticism on your part to any old talking point thrown your way.
Oh, and the scorp crew can’t wait to pick you up on election eve, we suspect with tears in your eyes.
Hey Scorp,
It was about six months or so ago that you were so sure that stocks were just fine based on p/e ratio. I told you “no” that p/e was a lagging indicator and that the market was due for a downward correction. I said it was a bubble. I based this on the fact that I argued that the housing market would take it down.
See the thing about p/e, is that you have to have honest companies and CEOs providing honest data. But your free marketeers were of course BSing their stockholders and all Americans for that matter.
I told you so and you didn’t believe me. As I sit right now watching CNBC the Dow is down 530 points dropping to about 9,800. Back when we were discussing the market it was up in the 13,000 area. I’d call that a downward correction.
Your boy Bush is going to watch election returns with the Dow BELOW the day he took office. The CEO president I believe they used to call him. And look at your ravaged party ideals, the free marketeers using the government to try to save their wreckage. Is there going to be a bank in America left that is not part of the government by the time your Republican administration leaves office?
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