Due to the issues in the current economy the Federal Government is spending hundreds of billions of dollars bailing out AIG and large banks throughout the United States. President Obama floated a plan for bailing out individuals who bought houses they could not afford with mortgages they could not pay. See Are you being bailed out? Furthermore the banks who are receiving bailout money are not using the funds to increase their lending. See One Reason the bailout payments aren’t working. Now even though I am not a politician, I would like to set forth my proposal for fixing the economy. 

 

There are several underlying factors that are negatively affecting the U.S. economy: the real estate meltdown, the credit crisis and unemployment. Rather than providing large bailout payments to corporations that are used to fund management bonuses and corporate retreats, or are held by the banks to shore up their balance sheets I believe the government should go directly to the source of the problem. Since the government has nationalized Fannie Mae and Freddy Mac these quasi government entities should make real estate loans directly to taxpayers at a fixed rate of 4%. The loans should be made only to those individuals who qualify for a new loan under current underwriting guidelines or to any homeowner who can show they have not missed a payment in the last 24 months. The loans should be for a person’s primary residence only.
 
This program would accomplish the following 1) it would stabilize home prices because people could borrow money to buy homes, 2) it would generate a large influx of capital to the banking system as current loans are refinanced under this government program, 3) banks would have additional funds from the paid off loans to boost their balance sheets and survive the recession, 4) it would reduce the mortgage payments paid by a majority of Americans, which would generate additional disposable income that could be used for consumption, 5) the additional consumption fueled by additional discretionary income, a refinance boom and new home sales would cause companies to ramp up production and hire more workers, thus reducing unemployment and further increasing discretionary income,  6) and, since the Federal Government is currently borrowing funds on a 30-year bond at 3.5% it would generate revenue for the Federal Government that could be used to reduce the federal deficit.
 
The government has enacted programs in the past such as VA loans, FHA loans, etc. to spur the economy and increase the home ownership rate in the country so this type of program is not revolutionary. The only difference between this plan and the current plan is that this one does not benefit large corporations who are lobbying for federal money. Also, the government would be holding good performing mortgage loans on behalf of the taxpayers who are paying for the bailout rather than the bad loans that the banks currently want to dump on taxpayers, while keeping the good loans for themselves.
THESE  ARE THE TYPE OF PEOPLE WE NEED IN GOVERNMENT! THE PEOPLE WE HAVE IN THERE NOW COULDN’T RUN A ROADSIDE STAND AND BALANCE THE BOOKS.  ( COMPUTER DETECTIVE)
 
I welcome comments and discussion on this proposal.
 
For additional Information please contact:
 
Robert K. Minniti, CPA, CFE, Cr,FA, CFF, MBA
Advertisements