To the surprise of very few who have been paying attention, the Wall Street bailout has had little positive effect on making credit available to businesses or individuals. The $350 Trillion in TARP funds already made available, plus the almost $1 Trillion in loans directly from the Federal Reserve, have only been used to replace capital already recognized as lost, or to buttress balance sheets in anticipation of the write-offs to come as the economy slides deeper into recession.
Also to the surprise of no one, every industry, trade group, union, state government, municipality, or anyone who knows a lobbyist has formed a long line in order to get “their share” of the bailout. And I continue to predict that the federal government will continue to write checks to every interest group possible before they do what I cynically believe they already know needs to be done: Make credit available directly to the American people and Small businesses via temporary government backing of basic credit facilities.
Since I wrote my first proposal, I have been trading e-mails with Peach Pundit regular and ControlCongress.com editor John Konop. We both share similar ideas about the need to drive the economy via consumer behavior. As such, we have worked to put together a plan to lubricate the wheels of the economy by making available sensible, properly leveraged credit.
An old axiom of government is that for every action, there is an equal and opposite over-reaction. This is the current situation in our credit market. Failure to regulate leverage has lead to a current environment where lenders expect to be over-regulated. Only customers with spotless credit are able to make purchases. Yet, due to the economic downturn, many people will have their credit blemished that may still have good jobs, down payments, and the ability going forward to repay loans.
There are many who share blame that got us into this mess. But we believe that the solution is in rewarding good future behavior. The blame game can continue until the end of time, but we must lay a foundation to get us back to a market-based, productive economy once again.
America’s economy is a credit based, leveraged one. We can not expect this to change over night and remain an economic super power. As such, we must return to the lessons learned in the wake of the great depression, which was largely caused by stocks being bought on margin without proper leverage: A borrower must have sufficient skin in the game, i.e. a proper down payment, if the lender has any chance to expect repayment. Thus, in this proposal, the borrower’s down payment of hard money is key to getting new loans. The other keys of credit include capacity, and income verification, an easy process that many lenders did away with during the last decade, is also prominent.
Credit scores, however, are not featured here. While credit scores made it too easy for many to borrow above their means in the past, we believe that they are likewise keeping many from being able to take loans now that they could afford to repay. Thus, if other conditions on these loan programs are met, past credit history is not part of this underwriting criteria.
The other key part of this plan is that it includes everyone. It is not a small, narrowly focused plan aimed only at those behind on their mortgage, or those who fit some nebulous definition that the government has decided should be a “winner”. Those that have played by the rules, and lived within their means, should be able to take advantage of any broad based stimulus package. To do otherwise would be punishing success and rewarding failure. That’s not the American way.
The plan includes the following parts:
Part #1—Home Refinancing: The federal government shall offer existing holders of federally-guaranteed mortgages (Fannie Mae, and Freddie Mac) the opportunity to refinance their primary residence at 4.0% on a 30 year or less fixed payment mortgage at 80% or less Loan-To-Value, or 4.5% up to 105% of home’s value. Any amount above 100% LTV can either be written down by 50% by the lender voluntarily, with the government guaranteeing an 8% second mortgage with a 10 year amortization to capitalize the remaining upside down balance, or the lender would have to subordinate it’s position to the government with a second (or third, in the case of an existing 2nd mortgage) position, with no guarantee, and an interest rate also capped at 8%.
The key to this plan being successful, and keeping people in their homes, would be to make these mortgages assumable. Based on the amount of money being pumped into the system, it is reasonable to expect that we will eventually turn from today’s deflationary environment into one of reasonably high inflation. As such, as 4 or 4.5% mortgage would provide significant value in an environment with even 6 or 7% interest rates, and would thus increase the value of homes that are considered to have negative equity today.
This plan should keep people in their homes, thus putting a floor under today’s low home prices. It would cut homeowner’s payments across the board, freeing up a massive amount of discretionary income to stimulate the economy. It would cleanse most toxic portfolios from banks’ balance sheets, and restore confidence in inter-bank lending. And given that these loans are currently implicitly backed by the Federal Government already, (and that the 30 year treasury is just above 3%), the additional cost to the taxpayer should be negligible.
These refinance loans would be made available to anyone who currently holds one of these mortgages, regardless of any other conditions.
Part #2—New home purchases: The federal government shall guarantee 80% of a new home mortgage if:
1) The mortgage is offered for 4.5% interest or less
2) The buyer is employed with a strong work history
3) The amount of the buyer’s monthly mortgage payment meets proper debt to income ratios
4) The buyer puts down 10% of the purchase price
5) The house meets all proper valuation checks
6) The borrower pays a 1 percent origination fee set in reserve against loses
7) Program available for refinance of non-government backed loans that do not qualify under Part 1
Similar to the refinance proposal in part one, and with many of the same benefits, this program has additional restrictions on qualification to ensure that we don’t repeat the cycle of the government mandating loans be given to individuals who cannot afford them, but does make it easier for those who have credit issues to re-enter home ownership if all other factors outside of credit history warrant.
Also, because of the proper Loan To Value requirements up front, there is no need to add the assumable feature to these “new” loans as an incentive to stay in a home with negative equity.
Part #3—New car loans: The federal government shall guarantee 80% of on a 7.5% or lower auto loans if:
1) The loan payment meets proper income to debt ratios
2) The loan term does not exceed 60 months
3) The borrower pays a 1 percent origination fee set in reserve against loses
4) The borrower makes a down payment of at least 10% of the purchase price
5) A 3% discount of the rate will be given if the car meets or exceeds 27.5 MPG (current CAFE standard) and SUV/Mini Vans meet 25 MPG or better (4.5% rate). And additional 1% will be given if the car is electric, diesel, or hybrid fueled vehicle (3.5% assuming the MPG hurdles are also met)
6) The maximum loan amount per vehicle will be two times the 2008 average transaction price, or approximately $47,000.
The low interest loans apply to consumers, businesses, and state and local governments and will encourage fuel efficiency, decrease reliance on foreign oil, reduce greenhouse gas emissions, stimulate the economy, fights inflation and support the auto industry.
Part #4 – SBA guarantees.
The equity requirements for all current SBA lending facilities will be immediately cut in half, so long as all SBA loans affected by this change still require a 10% minimum equity contribution.
These proposals should be temporary, but on the books long enough to give those still in financial difficulty, facing foreclosure, bankruptcy, or unemployment incentive to work through their personal financial issues, plan to start fresh with proper leverage and debt ratios, and maintain their optimism that the American Dream is still possible.
This is a direct financial solution to Main Street America. It represents the best of the American Spirit, where every taxpayer has the ability to receive some sort of direct benefit. Rather than giving money to “banks” or “industries”, it rewards average Americans. Most of the plans would have very little direct cost, and would provide benefits to the economy many times that.
The best way to get America working again is to invest in the American People. Let’s make it happen.
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Bowersville,
Isakson and Chambliss have not seen ANY bailout that they didn’t drool over, so give it a break about Reid.
Tea,
Denial about the situation is indeed nearly universal. Over the last 3 years in predicting this, I got called a gloom and doomer, but now those who wrote those things are grasping at straws in their desperation. The “growth” lie upon which this entire economy was built was really 40:1 leverage.
Luckily for the bankers and politicians the THEFT is so complicated, so grand, and so broad that the average Joe and Jane will never understand it. If they ever did, woe be unto the political and financial classes.
The minds of most cannot comprehend the level of greed, arrogance, and abrogation of law involved in Naked Shorting with Failures to Deliver (share counterfeiting to steal equity) or in “synthetic” CDO’s (“securitized” debt for which collateral(loans) did not even exist). They cannot understand how Wall Street managed to steal several multiples of GDP.
They are quickly coming to understand that the 401(k) movement was just the government delivering them, or more accurately forcing their funds, into the hands of Wall Street crooks. However, when the realization comes that even the “safe” investment options are now worth 10 cent on the dollar, well THAT might be something that unleashes the furor.
All along the miniscule few folks who “got it” have been ridiculed and called wrong. Well, to a lot of folks it is getting clearer by the day how right we have been, even if the magnitude of the theft still overwhelms.
Anyone still in doubt needs to read Andrew Jackson’s farewell address – the full blown verson – in which he warned the people that this exact thing would happen if we allowed another central bank to arise.
Konop and Ic,
The debt extends to other consumer debt, not just homes. For example earlier this year it was reported that the Big 3 had 800,000 SUV’s coming off lease. Entirely too many were financed over 60 to 72 months. A lot of upside down car loans have been rolled forward into the last purchase, so that debt is impossible to sustain. Then there are the HELOCS…..commercial debt….and on and on.
Piling more debt on top of unsustainable debt ain’t gonna work.
Everything the Fed has done assures that interest rates will never be able to rise much above zero without bringing down the whole system.
All of you folks need to consider the Weimar Republic, for that is what you want the USA to become.
The 25 to 40 year olds will at least be able to recover.
The boomers and the present elderly won’t.
End of Story.
When will someone suggest ending the Iraq occupation lunacy – funded on borrowed money?
How about some CLUE that paying a huge % of GDP for the defense of mercantilist trade competitors is an anchor tied to American business?
Taft has it right. GOPers are still tied to the notion of empire.
Empires never work without tribute, something that Saxby and Bush seem to forget.
The Republican Party will never get over the damage of electing Bush twice.
Neither will America.
Icarus – I wasn’t referring to excessive with respect to the ability to pay, but that folks pouring everything into an excessive home isn’t good for them or for the economy, both a somewhat small and long term concern versus establishing stimulus direction here and now.
Indy,
I have been in similar situation before a few times taking over a situation with out of control toxic AR. What I did was originate new business with a low write off rate and controls while writing down my bad AR with the best deal I could get.
I also had to cut all fat out of the budget and run mean and lean.
You are right no mater what happens the write downs will continue. But if we can have people trade down on what they can afford it will be a softer landing and not destroy the job market. And eventually when good assets out weigh bad asset write-off weight we will see the economy will grow again.
As I said the plan will only help slow the bleeding it does not eliminate the toxic loans that need to bleed out of system. But you cannot argue this plan would soften the blow and create a stable foundation for growth if the controls are in place.
Ah, JK, “if the controls are in place.”
You have hit upon one of the scariest aspects of all of the bailouts. The breathtaking speed at which the Fed created $8 trillion and distributed it says that they have done so willy-nilly and that there is no possible way it could remotely be controlled.
The soft landing you prefer will be engineered by Obama.
The combination of massive bailouts for the banks, for the borrowers, and for the very people who perpetrated the fraud will wipe out those stupid enough to save with a fireball of inflation.
The last feeble filament between frugal people and this government is about to be severed.
What on earth will be the consequences?
I am a REPUBLICAN for I believe in free enterprise and the markets. I am a REPUBLICAN for I believe that the government that works best is closest to the people. I am a REPUBLICAN because I believe in fiscal responsibility. I am a REPUBLICAN because I believe in limited government.
I am the LAST REPUBLICAN.
I understand your dilemma and your wish to mitigate the damage, but even you don’t have a grasp on the enormity of what has happened and that it is beyond mere mortals now.
When we pick up the pieces, we need to heed Jefferson, Jackson, and Paul and abolish the Fed.
Indy
Trust me I understand the problem and do get how both sides play with the numbers to hide the issue. For example the real unemployment rate is about 12 % and that number will double if we do not do something. And that is an unemployment rate approaching the depression era.
I cannot believe no one calls out politicians or economist for comparing U-3 unemployment numbers created post 94 with historic U-6 numbers.
Finally the problem with the Obama/Bush/Congress is we are creating out of control spending without fixing irrational lending. If the controls had been in place with down payments and proper income to debt ratios for low interest rate lending we would not have the problems we have today.
The problem is both parties are wrong. They both wanted to lend money to people at traditional rates (government backed) with no skin in the game and no proper affordability checks.
As I have said in the past many times, in the private sector (with no government guarantee) it should be deregulated as long as we have full disclosure and it is not fraud. And that means that SEC should investigate fraud ie situations like Madoff, Enron…..Instead of looking the other way until it blows up!
And if the government backs lending, deposits…..we need real controls and real regulations. I do not understand why rational person would advocate deregulations with tax payers on the hook.
…..In essence, U-6 covers everyone who’s either unemployed, whether they receive unemployment benefits or not, or might be working a part-time job but who really want to be working full-time (i.e., they’re underemployed).
On to the statistics then. In October, the “official,” U-3 unemployment rate was 6.5%. This is the highest unemployment rate we’ve seen since March 1994. However, the U-6 unemployment rate in October was 11.8%. This is the fourth month in a row that U-6 has been over 10%, with the lowest rate this year having been in February, at 8.9%. The last time U-6 was this high was in January 1994, when it was 11.8%. (Ironically, this is also the very first month U-6 was published.)….
http://dunner99.blogspot.com/2008/11/us-unemployment-rates-where-do-we-stand.html
I like the idea that a Taxas Rep. had – let the working people keep all there federal taxes for 3 months.
The Feds collect about a Billion dollars a month in payroll taxes. So instead of using the $350 billion to “bailout” every big company with their hand out, how about letting those of us who earned it, keep it! That would put BILLIONS of dollars back into our economy and back into small businesses right away!
I know why they won’t do this – Congress would lose the power to say who is “worthy” of the money. After all, if you own a business you should not get any money, only your employees should or the homeless guy out front. Which is what is wrong with our government!
If you like his idea, write you Senators and Rep. to let them know.
Umustbekidding
The problem with the idea is you are financing tax cuts again. And the revenue that it will create is short term and similar to using your credit card to create wealth.
That is why the old time real fiscal conservatives did not support spending or tax cuts unless the revenue paid for it ie PAY-GO!
I agree. I don’t think we should be spending billions of dollars we don’t even have. But the government has already made up it’s stupid littl mind and they are going to spend $750 billion. They have already spent a big chunk of that “pretend” money, yet nothing happened. It hasn’t helped. So, why not use the rest to help every American?, the ones that are actually paying these bills.
It makes me sick that our government spends money on useless crap everyday. They buy votes with our money instead of using the money for the basic necessities of gov’t function. If they would do what is asked of them and cut all the waste, we would be ok.
That same principle goes along with all the people who have to have everything and they want it now. They are in debt up to their eyeballs because they don’t budget themselves, just like congress – monkey see, monkey do.
UMust,
I feel your pain. And that’s what the “fraudsters” (Note: reaching out to IndyInjun here, trying to walk him back off the ledge) want you to do. Capitulate. Decide that the numbers are just so silly that it doesn’t matter what we spend the money on, or how we spend it. It’s just time to get “our” share.
I’ll take issue with the fact that we’ve already “spent” the TARP money. The TARP funds have been loaned to banks, and assuming the economy doesn’t completely implode into a fireball (just lost Indy again), has a reasonable liklihood of being returned, with interest.
That was, until this morning, when Bush has decided to define GM and Chrysler as financial institutions (as is explicitly required by TARP’s enabling legislation) and “spend” TARP funds on automakers, with little or no hope that these funds will actually be returned.
The $1 Trillion in stimulous spending? We may have a few nice new roads, but the goal of this is clearly to pump pork out of DC, not build projects based on merit or cost/benefit. That’s money that will be “spent”, and added directly to the balloon note that is our national debt.
Forgiving a few months of payroll and/or income taxes? Might have been a better idea a year ago, instead of mailing everyone a $600 check. It would have pumped money into the system quicker, and possibly helped head off some of our problems. Reality, though, is that these problems were baked in the cake, are structural, and are now firmly gripped in our credit markets. I remain convinced that our solution must take this issue head-on.
But I’ll also go back to the comments of Tea Party here. We are blessed to live in the greatest country on the face of the Earth. We can overcome this major, but temporary setback. Let’s all hang together, or otherwise, we will certainly all hang separately.
I don’t believe in the “our fair Share” attitude but if you EARNED the money, you should bealbe to keep it instead of the gov’t confiscating it and giving it out to whoever they feel is “worthy”.
We have lived our lives responsibly, saved money, never run up debt and now we are being trampled over. Irresponsible behavior is being rewarded. There is talk of “forgiving” 40% of peoples cridit card debt. That makes me mad! If that does happen, will the frivolous spenders have learned a lesson? NO. They will turn around and charge up the card again. I have seen this done by friends whos parents “help” them out. It is a never ending cycle.
But, hey, they are no worst than congress.
UMBK,
There is an answer, to the problem, but will have to figure it out yourself.
We frugal folks will simply ‘adjust’ to fit realities that aren’t exactly new, but have morphed into something we can no longer ignore.
One more thing – If payroll taxes were forgiven for 3 months, it is not just individuals that will reap the benefit. Businesses everywhere would. Think of all the money that will be left in the small business to be used for growth or to pay done debt. Americans can fix this problem. I have no faith in Congress. It is their “answers” that got us here.
that should be “pay down debt”
Konop,
If this were 1932 and the USA was a huge creditor, I could understand and support Keynesianism. The problem is that Keynes himself knew better than to suggest that deficit spending and stimulus could work in continuous, growing, and massive doses. He clearly advocated raising taxes and cutting spending when the economy was in recovery.
The problem is that the Keynesian remedy became an addiction that required ever-more potent and massive doses.
The patient is now dead.
It is way past time that folks quit living a series of unsustainable lies.
It is not folks like me who fear draconian adjustment. We have always lived very modestly and we know how to ratchet things down another notch or two. It is the average Boomers, X’er’s, and Y’ers who know only the go-go, “me” wailing, debt addicted society that has arisen that are in terror.
I have lived in a double wide before. It really isn’t that bad. I can do it again. Most on PP cannot say that.
The way out of this thing is the American way – hard work, the constitution, and collaborative effort. All of these bailouts and actions of government are undermining personal responsibility, truth, and the American way. I cannot cut on CNBC without hearing that we need to hide the truth (abolish mark to market accounting) in favor of even more pretending, cure excessive debt with even more debt, fix tight credit by lending to every wino and addict laying around – in short we need more of what caused the mess.
The sooner the lie is rejected and the inevitable is faced, the sooner we will be free of this mess.
The more responsibility and frugality is punished, the more folks will abandon it or take it underground.
IndyInjun
I am not advocating anything for myself. Most of my wealth I transferred over to cash type investments 4 years ago. Many of my friends thought I was crazy not to keep taking the ride. And know they call me like I am some sage investor. The truth is I am just a simple dot to dot guy. And if it does not add up I take a pass.
I warned them to not buy a home unless you can rent it more than your payment. Many laughed and could not understand why I did not move into the Mc-mansion neighborhoods. And now they have seen equity go up in flames.
Now if you are the last guy standing with cash a lot of money will be made in this down turn.
My job is to represent what is in the best interest of my stockholders’ bottom line. And I have made money in up or down times. As you know it is all how you position your business.
The recommendation I am making are what I think is best for most people. And I do think the plan does a better job of not using out of control spending with no controls like what is being proposed on both sides.
I do have tremendous respect you for your knowledge. And like you I took great heat for my positions on the economy and Iraq for speaking out early and often.
And my run for office I even put my family at risk for merely warning people about what was coming if we do not fix it. But at the end all I can do is look forward and hope people will listen this time.
I think you have a lot to offer but at times I think your knowledge gets clouded with the attacks you took warning people. I would have you on my team anytime helping with analytics to solve problems. And you are smart enough to know that a softer transition is possible without cold turkey.
The simpler solution is to just build a boat ramp on every street in this nation
“simpler” or “simpleton”?
Rome,
As a fisherman, I hate that one too…….Too much competition then for the best fishing spots. The GOPers would build the boat ramps and the Dems would furnish everyone with a sailboat, nevermind there is no wind. A gas engine is too politically incorrect.
Designing and redesigning the Georgia flag is a safer alternative to keep gold domers busy. It and Gator license plates.
JK,
The folks I worked for and work for value my blunt approach for pretty good reason. “Yes” men are like blow flies around cow paddies.
When I have sounded the alarm forcefully on several occasions, it was under penalty of firing, but when the chiefs verified that I was not blowing smoke, it cemented my position.
Of course, a lot of execs are put off by such directness and prefer to lose $millions while saving face and covering up the losses.
The toughest boss looks back from the mirror every day.
Politicians blow with the wind, that is why you make a lousy one.
While I agree that putting a floor under home prices helps a lot, the magnitude of the debt now precludes any paying any interest above low single digits to the end of time. Debt service at anything like normal interest rates is impossible. That is why Bernanke took a huge risk I could not understand by taking them to 5%. The problem is that frugal folks won’t stand by and be stolen from like this.
God help anyone in DC politics if the masses come to learn what synthetic CDO’s are.
Me. I figure that bonds of Georgia and its local governments are a screaming BUY right now. The Feds will be forced to bail out the states, thereby subsidizing the states’ tax-free financing and the expense of their own. Won’t that be WONDERFUL? I relish that conundrum.
“I like the idea that a Texas Rep. had – let the working people keep all there federal taxes for 3 months.”
Rep. Gohmert also put forth to suspend federal taxes for a full year. Either one of them would be fine to do under the present system, and here’s why:
The Federal Government doesn’t NEED our taxes.
The American people are finally waking up to that fact. The Feds just turn to the Fed anytime they want to spend money, and the Fed creates it out of thin air and loans it to them. Why do they need our money at all?
The fact is, under the present system, THEY DON’T. When you can print $1 trillion in a day and “inject” it into the economy, why do you need to take a year to remove said cash from my wallet?
To be honest, that’s why I’ve come to the conclusion that supporting the “Fair Tax” is ludicrous. Not because I oppose most of its language, but because its foundation is faulty – it assumes that the Federal government actually needs our money. As we’ve now seen, it doesn’t – not under a fractional reserve system with paper Notes based on empty promises.
I’ve got an idea – forget the Fair Tax, the Flat Tax, the Income tax; support the NO Tax!
Or maybe just go back to what the Constitution originally required:
To translate: “No income tax, no property tax.”
Do that, as the Framers required, and we’ll get back to what conservatives CLAIM to believe in: Limited Government.
“Now if you are the last guy standing with cash a lot of money will be made in this down turn.”
Unless the value of your cash approaches nil.
Which the Fed is trying desperately to do right now.
Value, Schmalue. The dollar will always be worth something to someone.
Simon,
Goggle search “Weimar Republic” and one finds a woman feeding currency into a furnace, so your point is well taken, BUT…….
Indy
As you know during the Great Depression people who had money did very well. The key was low debt to income ratio.
Taft
You seem like someone pushing for a real hard down turn. I care more about my country than being right.
Konop, I don’t know why you insist on keeping trying to insult me. I am not “like someone pushing for a real hard down turn.” I am someone explaining to certain somebodies (a) why “a real hard down turn” is coming whether I push for it or not, and (b) why the cure for a raging inferno isn’t to just throw less gasoline on it than others recommend, it’s to douse the daggum thing and get rid of the arsonists who caused it.
You see, I care more about my country than about sugar-coating reality.
Does embedding work for peons like me?
I guess not.
Hyperinflation Part I:
http://www.youtube.com/watch?v=coXFygRP3oE
“The dollar will always be worth something to someone.”
Konop is exactly right, the depression wasn’t so bad for people who had money. The same holds true now, debt to income ratio being king.
I hear you on the synthetic CDOs, but my g-d man, have you in your life time ever seen such huge investments in buying debt, insecure false bubble debt, with so many slices in the pie being bad debt? Who in their right mind would do that? I hear about Madoff too. But who would take their total self worth of $20-30-50 million plus mortgage there home to continue to invest all in the one man, Madoff?
A greedy fool on both counts, that’s who.
Every one can keep looking back and hauling those to blame as you see it to the guillotine if you wish. But as you do, Rome is burning. I threw my little $.02 in because I hear not one complaint about the $750 billion that is coming from the Democrats, no complaints about GWB giving the auto folks $17 billion, Paulson asking for the rest of the $750 at $300 billion.
If Keynesian policies are wrong, they are wrong for everybody, including Obama. But I hear not one peep. Some of you folks have your own agenda and its seems to be more revenge than solution.
Bowers,
I have been incendiary on all of those things too, and so has Taft.
Numerous Peachpunditeers absolutely torched Chambliss on them.
More than just finances are at stake here. Our entire society is on the brink. As I see it, the ONLY way to get to the sort of mutual trust and cooperation it will take to rebuild America after this fall is draconian punishment of the Wall Street fraudsters for all the world to see.
As it now stands, as you pointed out, only a FOOL and in this instance the US Government, turns its entire future over to PROVEN thieves and financial arsonists.
Saxby is such a FOOL, even worse, for I and others specifically warned him in advance of voting for TARP that it gave unlimited authority to Paulson. $85 billion of the first $125 billion in bailout funds went to pay BONUSES, and over the next 2 weeks the idiot Saxby was left making a show of his ‘indignation’ that his cronies enriched themselves.
There is zero chance of avoiding a financial disaster, only the chance to break the chain of idiocy known as Keynesian economics, reforming our society, and ending the hold of 2 utterly corrupt parties on the government.
Bush and company have worn their boots out kicking the can down the road. It has become leaden with calamity.
Indy:
What draconian punishment do you suggest? Shunning, or is the punishment meted out to Micheal Milken more what you have in mind?
Good luck prosecuting the 100,000 plus senior bankers, analysts, insurance executives, think tankers, regulators and others that sat in plush offices collecting a quarter mil annually in their complicity. Prosecuting this fraud will require either retroactive legislation or a whole new standard of guilt, neither of which have my support.
Dave B. -
Much will be accomplished when the average American withdraws his money from 401(k)’s because of the universal fraud. Shunning it will be.
If things go the way it seems here, this meltdown and the fraud is epochal. During similar times in history, death has been widely meted out to the perpetrators. If one thinks about it, the punishment has to be very harsh to deter future instances, given the $millions, even billions, that have been stolen.
Your 100,000 seems high for those with their necks literally on the line. My guess was 30,000. Personally I would give most of them a minimum of 10 years, with life sentences for the worst.
These people robbed everyone else of their futures and they might be lucky to escape with their lives. That is how great the damage they have caused and that is how great the mob reaction might be.
FYI
Treasury’s New Plan – 4.5% Mortgage Rates
Homeowners may soon enjoy mortgage rates as low as 4.5 percent if the Treasury Department has its way.
According to The Wall Street Journal’s on-line addition late Wednesday, the department is discussing a plan that would use Freddie Mac and Fannie Mae to push banks to make mortgages available at more than a full percentage point below the current levels for a 30 year fixed rate mortgage.
The plan under review might lower rates to the 4.5 percent range and would be in addition to a program announced last week wherein the Federal Reserve will purchase up to $600 billion of debt either issued or backed by Freddie Mac, Fannie Mae, Ginnie Mae, and the Federal Home Loan Banks. That program is already having an effect on mortgage rates which have dropped and caused investors to pay more attention to the stocks of banks and home builders.
Probably in response to the earlier new program and the lower rates, mortgage applications jumped a record 112.1 percent as seasonally adjusted over the previous week according to the Mortgage Bankers Association.
The Journal reported that the government would encourage banks to issue new mortgage loans at lower rates by offering to purchase securities backed by the loans at a price equivalent to the 4.5 percent rate; funding the program by issuing Treasury debt at 3 percent.
http://www.mortgagenewsdaily.com/12042008_low_mortgage_rates.asp
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