A solution to our financial mess
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George Scortia
Published: October 1, 2008
Here is my solution to the crisis we find ourselves in.
The way I see it, if our elected officials give $700 billion to the banks and lending institutions and buy up their failed mortgages on houses that are worth less than what is owed, the cost will probably rise
to over a trillion. The guys next in line, such as the automobile manufactures, the credit card companies and other failing corporations, will expect the same.
We, the taxpayers, will be left holding the bill and our children and grandchildren will be affected.
My solution is simple. Middle class taxpayers who pay taxes year in and year out should finally get a break. Let’s say that the IRS looks at our last five or 10 returns. If we paid in money, they send a
check for that amount back to us. For those people who didn’t pay any taxes, to include the rich folks that used loopholes to get out of paying taxes, they would get nothing.
I would guess that we could get the economy rolling in a hurry by paying off our mortgages, buying American-made cars, investing the money, etc. The key to this prosperity is to spend that money on
products that would put our people back to work, not the Chinese or other foreign companies.
If this happened, the banks would suddenly be flush with money to loan, the economy would suddenly boom and all Americans who want to work would suddenly find themselves with opportunities. The
IRS would be deluged with money coming in from an economy running on all cylinders.
GEORGE SCORTIA
Lake Ridge
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Reader Reactions
Posted by ( rafaelva ) on October 03, 2008 at 11:02 am
Well, it appears they are going to do something, 451 pages worth of something.
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Posted by ( willow703 ) on October 03, 2008 at 10:34 am
rafaelva,
The best solution is not to do nothing. These bad debts are based on collateral that people work in & live in; commercial buildings & houses. Do nothing & those are empty; they & their surroundings fall apart.
County & municipal governments are already struggling to maintain just the lawns of houses in foreclosure. If nothing is done, the problem grows, government can’t keep up; properties be come infested with rats & other things that are a danger to the health of the community.
There is an old saying: Do something even if it’s wrong. You “may” be damned if you do, but you are “certainly” damned if you don’t.
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Posted by ( rafaelva ) on October 03, 2008 at 4:58 am
Willow, actually I agree Occum’s Razor doesn’t really apply or work in economics. At least not the way it is interpreted. “All things being equal”.
Occum’s Razor actually says, don’t add anything to the problem that is not necessary. Razor means to shave off all unrelated and unnecessary factors.
So the issue is “the credit markets have dried up”. Don’t look at the gloom and doom scenario, that’s adding
factors. So we need a fix for dried up credit markets.
The simplest solution, is do nothing.
The next solution is to feed a bunch of money into the banking system by buying up bad debt. I shudder at that one, because we are asking the same dumb people to handle a big influx of money, and to handle it intelligently.
NOT!!!
There is a third option, We the People, now own a controlling interest in the two largest mortgage investment entities in the World. Why don’t we use Fannie Mae, and Freddie Mac as the Vehicles to inject that capitol into the market place. That was the original plan back in the 1930’s.
It is kinda simple, the banks know if they are willing to take the initial risk, F&F;will buy any new mortgage instruments, the Mortgage Backed Securities market will know that F&F;are back in play, and now all the Securities they issue are backed by Prime Class A and A minus paper, and the Sub-prime Market is Dead.
All the other issues that Congress is trying to address are unrelated, they can be addressed by other legislation, hopefully by the next Congress and President.
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Posted by ( phdee ) on October 03, 2008 at 2:20 am
Promises, promises, promises of some doomsday event. Yesterday the W. St. markets declined. I hear the House is resisting the revised or Senate passed bailout. I am just waiting and waiting for doomsday - I’ve heard so much about what is going to happen. Tomorrow keeps coming, but no event. It’s like prayer: one keeps on praying and praying but nothing ever happens. You know, I think the whole financial mess is a big hoax - a big lie just to swindle the taxpayers. If you tell a lie long enough, people will believe it. (Hitler’s regime)
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Posted by ( phdee ) on October 02, 2008 at 5:47 pm
Chambley4: Considering how many bad loans and foreclosures there are, to blame it on loans to minorities could only mean that there are more minorities out there than what the Census claims. Why don’t you find a scxapegoat for society’s ills other than blaming minorities, hispanics, ullegals, etc.—These lending laws cam into being largely because the lending institutions blacklisted minorities when it cam to loans - would not make any. RFemember block busting?
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Posted by ( raywilliams ) on October 02, 2008 at 4:28 pm
“Is this the darkness before the dawn or is it just another storm?“
willow, I tend to believe this is the darkness before dawn, and the sun is rising a bit later each day.
I won’t even bash Bush on this post but ignoring a budding problem for five years is not a sign of good leadership.
It has long been preached we should maintain 3 to 6 months of living expenses for emergency situations, such as potential job loss. Many of the 100,000 people that lost jobs in September were white collar workers who never expected their ride to come to a halt.
Most Americans don’t have 6 weeks of emergency money in their bank account. I see it every day in my business. We do a $500 service call and its either credit card or we wait weeks for payment.
While I am against the bailout, I understand the financial workings of America and therefore understand something needs to be done. As noted earlier, my vote would be to purchase the good debt and let the banks deal with their bad debt, but that ain’t gonna happen and we all know that.
Congress should hold out for the best deal, even if it takes another week.
willow, with you and I apparently being the “senior posters” on this site, or at least more senior than most, we don’t have the money issues the younger kids do. And oh yes, I was poor when I was in my 20s and 30s. And while I don’t plan to ever be poor again, I understand what they are going through, or at least fearful of.
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Posted by ( willow703 ) on October 02, 2008 at 1:20 pm
Rafaelva,
Occam’s Razor only works if all things are equal.
There are many people living in a house with a mortgage they can’t afford, I live in a house on which the mortgage has been paid. There are many people who can pay their mortgages because their earnings are now sufficient. Events are putting the jobs of many of those people in jeopardy. The same events are shriveling the retirement accounts of those people.
Do nothing & millions will lose everything. Act now & millions will lose something. Which is better? I guess it depends on whether one is more equal or less equal.
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Posted by ( rafaelva ) on October 02, 2008 at 10:58 am
So, let’s apply Occam’s Razor to this whole mess.
“All things being equal, the simplest solution is the best”
DO Nothing.
Simply said, we have an equal amount of Stupidity,Greed, and Ambition in play here.
Occam’s Razor implies that the more entites (factors)you add to a problem,
the more complicated it becomes, and
the less likely for any successful resolution.
Let’s put Hanlon’s Razor into play
as well.
“Never attribute to malice that which can be adequately explained by stupidity.“
We are plunging around looking for evil people with evil motives. The truth is it was a bunch of greedy people with stupid motives. Lets not compound the issue (Occam’s Razor again), by asking a bunch of Stupid
Ambitious people to fix it.
We are under the idea that there are a bunch of evil genius’s sitting up on Wall Street, plotting evil. We are giving a lot of intelligence credit to them. I would say they were smart, they found a new way to make a lot of money, they weren’t too smart, because they didn’t foresee the long term affect. This applies to government as well. Here we find a crowd of handwringing stupid people, with their ambitions suddenly in danger. They will stoop to anything if it keeps them where they are, elsewise they may actually have to Work for a living.
Another variation on Hanlon’s Razor applies, call it Hubbard’s Rule:
“Genius may have it’s limitations, however, stupidity is not thus handicapped.“
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Posted by ( Chambley4 ) on October 02, 2008 at 7:45 am
The reason for the current financial mess is rather simple - affirmative action lending.
Clinton added bank examiners not to ascertain financial soundness but to ascertain that banks gave loans to minorities that couldn’t pay the note under the guise of “affordable housing”
The current bailout is nothing more than a “reparation payment”. Simple as that.
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Posted by ( willow703 ) on October 02, 2008 at 6:10 am
Ray, What we have here is a lack of understanding.
Most of this problem is the result of the failure of mortgage-backed securities because people got mortgages they couldn’t afford &, eventually, couldn’t pay, massive foreclosures resulted & credit dried up.
Too many people believe that, when they take out a mortgage to buy a house, they become the owner of the house. In fact, the holder of the mortgage is the owner until the mortgage is fully paid. The only thing the buyer owns is debt.
If the government buys the mortgage debt, the government (we, the people) owns the houses or other buildings upon which the debt is based.
These buildings now stand empty. As the holder of the mortgage, the government has the authority to rent, lease, or sell either the building or the mortgage.
I may again become a landlord, but I don’t have a manager for my property
& don’t have much faith in any potential
manager.
Is this the darkness before the dawn or is it just another storm?
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