How the Senate voted on bailout bill
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#1 Oct 2, 2008
COPY THIS PROPOSAL
HAVE EVERYBODY YOU KNOW FAX IT TO YOUR CONGRESSPERSON
TELL THEM YOU KNOW ABOUT THE ALTERNATIVE PROPOSAL
Assuming for a moment that we're being told the truth, and the problem is non-performing mortgages and NOT Credit Default Swaps......(although the coincidental urgency and the timing of CDS settlements on the Fannie/Freddie takeover in early October does seems strange)
and putting aside the transparent issue that the plan transfers direct control of $700 billion dollars to the president,(via the cabinet position), with absolute authority to use for ANYTHING....
Let's examine the needs and an alternative solution to 'the problems':
Enact legislation to reduce the interest rate on ALL mortgages by 1%, and reset all ARM's to either the interest rate at origination or 1% below origination, the time at which they WERE deemed affordable by the originating banks. In addition, ARM's are converted to 30 yr. fixed. While this may appear to reduce bank profits, a 1% profit reduction is preferable to a failure. And it's more probable that 80% of non-performing loans; (i.e. currently UNprofitable) would revert to profitable. In addition, the reduction on the 'fixed rate' would be more than offset by the 'change to performing' of the ARM's.
Enact a temporary moratorium on capital gains taxes for NEW investment.
1. mortgages are non-performing and foreclosing at an excessive rate. And banks are unable to value them. Most of this is due to the re-setting of ARM's to unaffordable levels.
A. The vast majority of non-performing loans become 'performing'.
B. The upward spiral of foreclosures stops.
C. Decline in property values stabilizes and begins to rise thereby INCREASING the value of BOTH performing AND non-performing loans.
D.The rise in value together with the change to 'performing' status, reduces the 'reserve requirements' of the banks thereby freeing cash for investment.
E. The average cost of a foreclosure action, as stated in a report by the JOINT ECONOMIC COMMITTEE of congress is $78,000. With over 2 million foreclosures expected for 2008, this proposal could effect a substantial reduction in what is a $156 billion dollar negative event.(the costs to the lenders alone being $100 billion). With that figure expected to more than triple over the next 3 years ( to 6.5 million), according to estimates by Credit Suisse, we're looking at a negative impact on the US economy EXCEEDING the amount of the proposed rescue package BY $500 BILLION dollars, and which is NOT addressed nor REDUCED by the rescue proposal.
2. Banks desperately need an influx of cash.
A. As 'performing' mortgages they now introduce an IMMEDIATE influx of cash to the entire banking system.(in addition to D above)
B. The moratorium on capital gains tax(Z) as mentioned would IMMEDIATELY, in a very conservative estimate, inject a minimum of $500 billion in cash INTO THE MARKETS.
A. The reduction of individual mortgage payment acts EXACTLY like the recently passed 'stimulus' package which created rebates. It does NOT cost the government OR the taxpayer one red cent. It provides this stimulus month after month for YEARS, and immediately increases the potential for 'discretionary spending' thereby injecting ADDITIONAL cash into, and boosting the economy.
B. The reduction in the mortgage payment is treated as a 'taxable' item for income tax purposes.
The tax generated by this is used to set up an FDIC type insurance program to protect future mortgages, creating an additional benefit to the banks in securitizing mortgages.(and has the added effect of reducing the use of UNREGULATED credit default swaps)
C. there will not be a 'devaluation' of the dollar, sparking an increase in oil prices as well as many other imports.
#2 Oct 2, 2008
ALTERNATIVE PROPOSAL page 2
This proposal also eliminates what was stated as the MAJOR problem so many times during the hearings and subsequent debates.
No one can determine the value of, or the cost of 'buying', the non-performing loans.
PERFORMING loans have an IMMEDIATELY determinable value.
This proposal also addresses the issue raised as to 'who' should bear responsibility and places the responsibility upon the 'creator' of the problem; rather than the taxpayer. The objection of 'people who couldn't afford mortgages'* is eliminated because the mortgage issuer made the determination that 'it was in fact affordable'(acceptable) at the time it was issued,(approved), and this proposal clearly makes it MORE acceptable by the reduction of the interest rate.*(although I believe The willingness of lenders to tolerate, and in most cases, encourage, huge increases in loan-to-value ratios added to the demand for housing, especially by people who normally might not have had the savings to enter the market).
THIS PROPOSAL HAS NO RISK TO TAXPAYERS.
This proposal also eliminates,(at least for the moment), the need to address 'executive compensation'. Although it should be noted that in a normally accepted business model, indeed, in most corporate structures, a reduction in compensation, or 'cut expenses'(not only executive), is generally deemed MORE acceptable than a reduction in business.
This proposal also creates a 'spread the risk' situation applying EQUALLY to all participants exactly equal to their participation; thereby neither penalizing nor rewarding any financial institution more than another.(and allowing the 'free market' to operate as it was intended)
While this proposal alone may not completely address the situation; it will clearly REDUCE the $700 billion figure. It also provides the time to institute EFFECTIVE regulations.
It also provides an IMMEDIATE effect as opposed to the statements by both the Secretary of Treasury and Federal Reserve chairman that the proposal before Congress WILL TAKE TIME to implement and eliminates the need,(and COST), for hiring an army of experts necessary to manage the rescue package, which is again, something requiring an excessive amount of time, if it's to be done in a competent manner to provide an effective result.(stated numerous times by both Paulson & Bernanke in the hearings)
We have in this proposal:
1. corrected the past problem
2. addressed the present problem
3. prevented the future problem
(Z) And to expand on a suggestion from Rep. Doug Lamborn (R)Colorado "how about a moratorium on capital gains taxes,(on NEW investment), which would encourage a 'flood' of private investment.(i.e. cash), into the system 'a la' Warren Buffet. Berkshire Hathaway alone has about $250 billion cash on hand. If it's truly a 'cash shortage creating credit freeze', as we're being told, this would also have an IMMEDIATE and MASSIVE effect. And I don't think it's necessary to list the other economic benefits of large scale investment in the US economy.
It doesn't cost anything, it's (a moratorium) on future taxes that don't exist,(and won't under the current situation), and it doesn't require a future tax burden (that will exist under the rescue plan) in order to work.
Additionally, this proposal addresses ALL objections,(i.e.: the changes they want to make), raised by the various Congressional factions.
NO RISK TO TAXPAYERS and
#3 Oct 2, 2008
Tom, love your proposals, except for one thing, people won't stay in these mortages, even at 0% int. They bought them hoping to make a quick profit on appreciation. They now know that there is no appreciation and will walk away, regardless of int. rate. According to ACORN, they want principal reductions, what does that tell you? It tells me that they're not interested in staying in their homes , they're interested in EQUITY.
#4 Oct 2, 2008
we have to stop this in congress they're raping a nation. As usuall Clinton and Schumer sold us down the river !!
#5 Oct 2, 2008
ACORN gave thousands of mortages to ILLEGAL ALIENS , as well as Wells Fargo and Bank of America !!! Now they'd like you to pay their mortages !!!!
#6 Oct 2, 2008
Hate to say it but scr_w the 'flip this house crowd'
This proposal,(which the entire Senate & the FED had for over a week):
was MEANT to help the homeowners and protect the taxpayers.
I believe it does so while addressing other concerns.
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