I agree. And I also agree with you about the shape of it. Start around $100K AGI with a small increase and have larger percentage increases as you go up. N.B. that I’m essentially imposing a tax increase on myself here.

It just shows what a couple of gutless-wonder politicians Obama and McCain are that they are discussing a $700B increase in federal spending without raising taxes to pay for it.

BTW, the headlines hit home at my house – WAMU services my mortgage and they’ve just gone belly up. JP Morgan is buying their thrift assets but as of this writing I have no clue who (if anyone) will be running their mortgage service operations! WAMU has my escrow account and my next property tax bill is due in a few weeks!

I think we want to be VERY careful before we do this. As an investor, I don’t want to have to guess the actual value of assets on the books. Dishonest companies can already cook the books enough.

We’d only have the word of the owners of the MBS of their worth.

With respect to the mortgage broker, Mark, I can see why regulations require them to mark to market. What if they can’t sell these securities and they have an urgent need for cash? I want to know the solvency of the company as it stands for the quarter. After all, you can still go out of business (taking any stock I own too!) if that need for cash emerges.

On the other hand, I do have to agree that the system isn’t perfect.

This is very insightful. Leveraging the future to satisfy some short term impulse describes the bankers and homeowners who precipitated this. It also explains the Iraq war and global warming. It’s a fundamental American flaw and this crisis was an opportunity to look in the mirror and examine our cultural values.

But no. The plan is to leverage our future again to avoid the pain of self-examination. WE can’t do it forever. One of these days the future will say “enough!” and we’ll have to face ourselves.

America has survived and benefitted from previous transformative moments. The bailout may spare the few and the multitudes varying degrees of pain, but maybe the bigger reason for the bailout is we will be avoiding a necessary societal adjustment.

The bailout will dilute our responsibility and ownership of our society.

That’s OK – it applies to this one, too.

There are lots of possible ideas out there. In reading the financial press, listening to interviews with economists, and perusing blogs, it becomes clear that there a ZILLIONs of ways we might go about this.

Yet somehow the White House has again manipulated Congress into following the White House narrative! Somehow they convinced the Congress that it was THIS idea – or nothing.

It’s incredible. I own cats – and we all know how cats are – very independent, and don’t like to be told what to do. But I’ve learned enough tricks so when I need to get them into their carriers to go to the vet, or put them in their room because someone afraid of cats is coming over, or get them to sit still to be brushed or clipped, they’re putty in my hands. I know the right buttons to push.

Congress is the same way – they posture and talk independence but the White House pushes their buttons and they’re meat puppets!

President Bush’s plan in a nutshell is hand a bucket full of money to the banks. In exchange America would get the titles to a bunch of empty houses that the banks have already foreclosed on, which we wouldn’t be able to sell for who knows how long. 5 or 6 years, maybe longer. My plan has two parts, an emergency assistance program and a long-term solution.

I suggest setting up a hot line for people who are in financial trouble, facing foreclosure. Their mortgage would be instantly frozen. No foreclosure. You would have to get a current appraisal, and if the appraised price is lower than the loan amount the bank would have two choices. They could agree the house is worth the appraised amount and set up a new loan for the lower amount. To sweeten the pot for the banks, the government would give them a 5% or 10% down payment. Or the bank could insist that the house is worth more and foreclose, but if they foreclose the owner would have a certain amount of time, 3-6 months, to find a new house. The foreclosure wouldn’t go against the homeowner’s credit since the banker was the one who refused to accept reality.

If your house appraised for less than the loan but your problem is credit card debt or something like that, you could refinance to the assessed value of your house and get rid of as much high interest debt as possible. The government would still give the bank a 5% or 10% cherry to encourage them to let you stay in your current home.

Of course, there are going to be people who can’t reach an agreement with the bank, or who just can’t afford their house. These people, along with basically any American taxpayer with a job (under a certain income) and a house (under a certain value), would sign up for a government buyout program. It would be similar to the program used after the flood of 93 but with a twist.
Say I live 50 miles from work. I would just have to find a house I can afford 25 miles from work or less. Then the government would pay off my mortgage and help me get a loan for the house I want to buy. This would give the banks money to lend to other people, cut my transportation cost in half, reduce not only our dependence of foreign oil but emissions, too. It would even improve traffic problems for everybody. Plus the government wouldn’t have to sit on the houses it buys. It could sell them immediately. I might get the buyout and end up buying a house from the government, so basically the taxpayers would only be out the 5% or 10% down payment for that house, instead of the entire amount of the original loan.

Special categories could be made for senior citizens and people on disability. They could move wherever they wanted to since they don’t have to worry about driving back and forth to work every day. Military families would get special consideration. Houses the government buys that are close to colleges or trade schools could be set aside for people who are unemployed that want to go back to school. Houses could also be used for emergency housing for people like Hurricane Ike victims. After all, there are always hurricanes, tornadoes, floods, and fires that destroy people’s homes, not to mention just plain homeless people.

There are so many ways this idea helps the economy. It would spread the wealth to real estate agents and moving companies. Home improvement companies and hardware stores would see a jump in business. The idea of just handing over a pile of money wrapped with a bow to those greedy bankers who shouldn’t have approved so many of their loans in the first place and then kicked so many people out on the street really pisses off the average working man, but I think everybody would go for this plan. Even people who already live close to work and don’t qualify for the buyout could sell their house to somebody who does and move wherever they want. Plus the house that’s too far from my job might be right next door to someone else’s job.

As an added bonus, I think if your house appraises at $100,000 but mortgage is only $80,000 you can either use the extra money to increase the down payment for the new house or use it for home improvement or buy a new car, send your kids go college, anything. After all, shouldn’t we be rewarding the people who deserve it?

We would need somebody to cover the money aspect and somebody to handle the actual real estate side. This would give Fannie Mae and Freddy Mac something to do. After all, we own them now; we might as well get our money’s worth. HUD would be able to handle the housing side just fine. After all, it is in charge of housing and urban development, which this proposal is really all about.

I’m willing to admit I might not know what I’m talking about. This might be completely unworkable. All I know is the government already has the basic format for running a buyout. I was flooded in 93 but the flood this year was just something I watched on TV because I got the buyout from the government and moved high on a hill. Why can’t the government do something similar? After all, even if Bush’s bailout goes through, the average taxpayer will still be struggling to make their mortgage payment unless the banks let some of the bailout money trickle down to them. People just can’t afford to go to work with gas prices so high, and you know gas prices aren’t going to go down any time soon. This proposal would basically cut people’s transportation cost in half, with would free up money to spend on home improvement or increased savings or whatever.

Anyway, I think this idea is better than President Bush’s. Right now we need something new and unique, not the same old same old. While giving a butt load of money to giant Wall Street banks might keep the economy gimping along it won’t really help the average taxpayer, but this would directly improve the lives of everybody, giant Wall Street bankers included.

I can see what you mean that the loans have real value and it does not make sense to be forced to write them down to zero.

This lobbyist thing appears to be in the 1st Amendment. The right to petition. I personally think that the right to petition should be just that: write up your petition, put it in the mail and send to your government. It should have nothing to do with how much money you got to spend or how much influence you got. I think lobbying in its current form should be outlawed. None of those dinners, private jets, trips, congressmen and government officials taking cushy jobs on K Street. But that’s me. The US Supereme Court may be of a different opinion.

“But none of that means we have to buy into the current plan. There may be alternative plans. Or maybe we just bite the bullet, let the financial institutions fail, endure a recession, and use a few hundred billion to provide better unumployment conpensation or health care to the millions of laid-off workers. That still might be cheaper than the current $700 billion plan, and avoids the problem of bailing out rich fat cats.”

I like your plan better than the 700 billion dollars bailout, imagine what 700 billion can do!

Bush again tried to push a sell, just like selling the Iraq war, It is so absurd that the 700 B. plan is so vague and he tried to push congress to sign it. This is the biggest abuse of so called “freedom and democracy”.

What’s even more absurd is the corrupted bribery here in the States has another name for it —- the lobbyist!

I have read similar statements from Robert Reich, although he does think a need for the government to give loans to help the banks.

Is the Bush government panicking?

If nothing is done will it lead to a long deep recession or a short one?

Barbara: We can and are holding the loans. We need to maintain a certain amount of capital on our balance sheet in relation to the loans we’ve made per federal regulations. This limits the amount we can lend. We sell loans in order to be able to lend more money. Also, writing off loans means that we show no value for them on our balance sheet. The home owner still pays us. We cannot arbitrarily foreclose on a homeowner.

Michael: I think that you are on target. A temporary reprieve from the “mark to market” rule will allow time for the market to settle and value the assets properly. Yes, investors are scared, there has been a declining trend in home value. Giving time for that trend to flatten and the overall economy to recover will create an environment where investors can open up their wallets with a bit more confidence. There will be losses on some of the existing loans in light of lower housing values and a slower economy… but investors will be able to assess the risk more accurately and value the assets with a higher degree of certainty. There is some value to these assets. It’s not as much as the original investors had hoped, but there is some.

Alex: I agree with Peter that your assessment of the law of supply and demand is accurate. Paulson’s plan to inject money is a step toward socializing the system by creating a floor. Assets do need to be valued accurately and investors will realize losses. That’s part of life in the market place. I’m sure there will be profits to be made in the future.

In my opinion, giving the market time to settle down will avoid an economic catastrophe and allow all of us to thrive in the future.

Mark England
salt lake city
utah
801 359-2259

Seems as if accountability is only for the “little people”.