reply to post by NightSkyeB4Dawn
I agree. Most of the solutions posted here are just regurgitations of what others say. Many of these things that are mentioned should be done.
However, most of the proposed fixes will do very little to fix things. For the most part they should be a part of how things need to be done after the
system is fixed. Below is something I have been proposing repeatedly for many months. During that time, I have not gotten a serious reply either for
or against my proposal. I have not seen a proposal of my breadth being proposed by anyone else in the world. I also think it is the only way to put
this mess behind us and start moving forward. So here goes,once again.
Everyone wants to let the system fail. You do realize that means every bank goes bust, every dollar in the bank is gone (unless you want FDIC to pick
up the bill, which mean taxpayers). With no money and no credit, then will be no jobs, no food, no clean water, nothing. A collapse to the system,
while it would give banks there just deserves, would mean unimaginable suffering for all people. That includes everyone; no matter how well off you
may be in your current situation.
In crafting a solution we need to look at what got us here. In general you can blame the debt based money system. To solve this alone would mean
changing the monetary system 100%, which would be great. However, in changing the system you have the same problems that we have today: People cannot
repay their debts and without forgiveness, a new money system will not do them any good and will leave us in the same situation as we face now.
Basically if you want to revitalize the economy, you need to handle the personal debt situation. People can't spend money they don't have, banks
can't lend to those who can't repay them. Those who can get credit these days do not need it. So we are caught in a classic catch-22. The only way
out without sending us back to the 19th century, is to bail out either the banks or the people. I prefer a solution where you bail out the people.
This will ultimately help the banks as well.
What I propose is to set up a government bank. This bank would buy all outstanding consumer debt at mark to model values. They would also become the
first source for future consumer loans. Once they buy all the debt they turn around and make it affordable for the debt holder to repay their
obligation. This may mean some debt forgiveness and lowering interest rates, whatever it takes.
I figure if done on this large scale basis, then they could buy all the debt for an average of 85-90 cents on the dollar. The banks and other lenders
would then pretty much be made whole and they could pay back the previous bailout funds. At this point you ratchet down the reserve requirements etc
and limit the kind of loans they can make in the future. I see a future where they concentrate on business loans and consumer deposits. You also keep
them under close scrutiny so this does not reoccur. There would be some banks that would still fail despite this, so let them fail.
As for the consumer, all of a sudden they have room to breathe. I think to meet my mandate of debt affordability you would have to write down the
loans to an average of 65-70%. This leaves a hole of about 20% which the government bank would recoup through future interest payments. The government
bank would essentially be funded with 0-1% loans from the FED unless we come to our senses and let the government print their own money.
For example a homeowner has a $200,000 loan. Gov. bank would buy it for $180,000 and modify it to $140,000 with a 4% interest rate. Over a 30 year
period the government would get paid back over $240,000 with interest, yielding a profit to the government of about $60,000. Meanwhile the payment for
the homeowner drops to $750 per month from about $1125 per month. So the government wins, the consumers win and the banks give up these future profits
for their past malfeasance. In return the banks, at least most of them, can continue operations as viable institutions, albeit in a more limited
Only obstacle in making this a profitable or break even endeavor for the government is the fact that people will want to move and some will still
default on the lower payments. To solve this there would have to be some profit sharing agreement on resales, until the original principal is earned
off. You would allow the consumer to keep enough to facilitate a move. For the foreclosures the government would take possession and then write the
new mortgages which change the outcome to the government very little.
If you don't want the government bank to be ongoing, then at some point, you resell the mortgages/debt to the private market, thus recouping most of
the money. You could also let the banks resume normal lending once all the debt has been bought by the government.
Only reason this will not work is people being stuck on principle, as it could be looked at as anti capitalist. However there is no solution,
including letting the banks fail, which will not require massive investment from the government one way or the other. Given that, we might as fix it
right and at the lowest long term cost to taxpayers. This proposal achieves this goal and will act as a permanent solution rather than band aids that
everyone else proposes.