ThinkDeep

I’ve been watching this bailout bill and wondering what was going to happen.  I believe that something has to be done.  We cannot just leave things to work themselves out.  Long term that would work, but there is no need to go that route.  That would be like having a headache and not taking medication.  Sure, it will eventually go away, but there is no need to put yourself throughout the discomfort.

The devil is in the details.  It always is.  Even if we agree that something has to get done, there is not general agreement on what needs to be done. The problem I see is that the premise behind the current approach is to rescue the companies.  That is how it started.  The idea goes like this.  Debbie cannot pay her mortgage and is in foreclosure.  The house she lives is worth less than the mortage balance.  Under this plan, the foreclosure would go forward and Debbie would have to find somewhere else to live.  The government would buy the house for a price at least enough to cover the mortgage balance.  The government would keep the property until a later date when it could sell the property.  In this case, the mortgage company or bank gets out of a sticky situation.  Debbie loses her house.  The government owns a property that they over paid for.

Maybe the government can sell the property for more than it bought it for; who knows.

A better plan would be to renegotiate the mortgage itself.  Reduce the interest rate.  Extend the term.  If a combination of these things can get Debbie to a point where she can pay the mortgage, it can stablize the situation.  Not all mortgages can be saved this way.  I’m curious if anyone has done an analysis on how many mortgages can be rescued under such an approach.

The banks should not complain about this.  Is it better to take in slightly less in interest or to have a person walk away? In a case where foreclosures are only a small percentage of the total mortgages it might make sense to simply foreclose.  But this is a special situation as evidenced by the need for congress to get involved.

The one part of the current plan is that the Treasury Secretary gets to make all the decisions.  I would form a non-partisan advisory board which could include the Treasury secretary.  I would never want to put that much power into the hands of one person.

I sense that a bill will be passed this week.  They were close.  I hope that they do more than just tweak it.

I am curious if anyone thinks the presidential candidates should be more directly involved in this.

Often we hear that we should focus on the problem.  Don’t worry about who is at fault.  Well, not this time.  I’ve been looking at this supposed banking crisis and the corresponding 700 billion dollar plan to “rescue” these institutions.  It seemed weird to me.  We wake up one morning and all of a sudden we, the tax payers, have to put up 700 billion dollars or else?  I’m not sure if it was intentional but it seems like extortion.  How is different than the old neighborhood protection rackets?  I know the answer to that one.  It is on a much huger scale.

Let’s get back to who is to blame.  This one is easy.  Republicans.  And I have names for you.  But hold on a second.   I have some other ideas to share first.  The long held republican idea that the market will take care of itself has shown itself to be a failure.  New York mayor Michael Bloomberg said that if Democrats can understand that free enterprise creates jobs and Republicans can agree that regulation is needed, we can actually get somewhere.  I’ve been saying for some time now that the old ideas and ways of thinking need to be dumped in the trash pile.  I was surprised to hear over the last few days of Democrats saying that the market should be regulated but encouraged and supported.  We have half the equation.  It’s time for the other side to realize this as well.

Where did the regulation go?  Back in 1999, Senator Phil Gramm engineered legislation that removed regulation on banks.  It is this very deregulation that has been identified as the cause of the current economic crisis.  The head of the Securities and Exchange Commission, the guy who McCain recently said he wanted to fire, said so directly.

And if you were hibernating I can let you know that Phil Gramm is John McCain’s economic advisor.  So you want someone to blame?  There you have it.  McCain was asked if he would rule out former Senator Gramm as Treasury Secretary which he would not do.  Yikes.

I was never going to vote for McCain.  I’m not making this my reason for not voting for him.  But this further solidifies in my mind that the Republican thought process is fundamentally flawed.  And John McCain, believing in or supporting these ideas is equally flawed.  There are those who would still vote for McCain even if he were found in a compromising position with mules.  He’s a Republican and that’s good enough for them.  If you are one of those, this article is not for you.

I hope you can follow what I laid out.  These are my opinions and I don’t want to make the case that I am always right.  Do not take my word for it.  Please research what I have presented.  I hope that if you are undecided, you take this information into consideration as you make up your mind.

I am really struggling with the idea of borrowing money that my kids have to pay back.  Is there a way to let some of this go down in flames?  Shouldn’t Wall Street eat its lumps?  What’s next?  Will they want immunity from lawsuits?  Because you know that is what is coming.  After all, this is America.  Someone must be sued.  At this point I think they might want to follow the Japanese model.  Keep GDP up by using public infrastructure projects.  At least we will have something to show for it in the end.  Let Wall Street go down in flames.  Then, we WORK our way out of this rather than trying to make everyone believe that we can write some numbers on a piece of paper and everything will be right.  In many ways, this is just like 9/11.  Things are different now.