bailout??
So now we are looking at paying the top 10 % 700 billion dollars....this is a very big number and some people don't have an idea of how much money that is. So to start i thought i might put it in perspective.
if you work for minimum wage all year 40 hours a week you bring home 10,712. a single billion would pay for 93,353.25 (rounded to the nearest hundredth) minimum wage workers for a year. to put this into further prospective. according to bls.gov (bureau of labor statistics) there are approximately 1.9 million people working in the us at or below minimum wage. this bailout would pay for all their salaries (actually i rounded up to 2 million) for 32 years. One last approximation for you to consider. The war in Iraq has cost us less than this bailout will.
the way this "bailout" is looking to be termed is just plain a bad idea. basically the mortgage backed securities that are running all our businesses into the ground are going to be bought by the us government, then supposedly these securities will be sold when everything stabilizes. Basically the government wants to open a company that wants to buy failing products and try to sell them off later.
this is very close to writing yourself a check for a credit card that is overdue. there are good points and bad points to this. the good point is America's credit rating is pretty high. and our money is only really worth what everyone thinks it is. With nothing really backing our currency we can only compare our currencies buying power with that of other nations, and since other nation are going through very similar issues ( because we sold them the same bonds we sold here[ great America tactic "we eat shit you eat it too). the bad part is were bailing out people who had bad bisnuss practices and leaving the consumer out to dry.
some people are now asking how will this bailout help the consumers who were taken by these mortgages? well the real answer is not much. The government is claiming they cant renegotiate the mortgage contracts because all the people who own the securities would need to agree and at this point tracking down all the pieces is going to be next to impossible. the problem being that if the government was to renegotiate the contracts without all stakeholders consent then they could be sued by the paper holders who did not give consent.
Now the first thought that i had was the telco immunization that happened a few months back. The telco's broke the law by tapping wires without a warrant and the government said they could not be suide for this if they had a note from the government (quite a nice little loop there huh?) anyway why dont they do the same thing for mortgage contract renegotiation?
but there is an even more interesting way to run this bailout. and it starts with the question, why doesn't the government just buy all the mortgages? well the reason is because the current idea of buying the securities will allow the us to buy the contracts at a discount, but the problem is without renegotiating the contracts the investment is still bad. but since the government doesn't need to make a profit, they just need to brake even on this deal there is a more simplistic solution.
issue loans to pay off current mortgages that are in danger of foreclosing. then issue the new loan on better terms. terms that aren't meant to swing a profit but simply pay off themselves, and the infrastructure needed to issue them. This is not to say that some homes will be foreclosed on but lets break this down a bit more. So lets say you got into one of these bad loans. Your bank is going to foreclose on you and kick you out. One of the steps to the process would be to submit the foreclose to the us treasury. They review the case and decide you meet such and such guidelines. The treasury then issues you a new loan and pays off the bank of original issue. Now the mortgage on your home is on a reasonable payment plan and the bank has made a good investment since they got paid.
This allows us to circumvent the original issue of too many hands on the securities for your mortgage, since those people got paid off and a new mortgage is issued. Now under the new terms the government could also issue securities for the better loans and have the costs covert on the back end if they want, or they could simply hold all the risk and pass the whole were a government not a business so we don't have to turn a profit savings on to the consumer by lowering their interest rate, or extending their loan to lower payments.
now here is the real trick of it. if we do this for say a time frame of 3 years, the banks have extra insurance on their mortgage lending, knowing that if the house is foreclosed on it will more than likely be paid off by the government allows them to hand out more loans. which means more people can buy them, which means demand goes up, which means the sluggish housing sector currently anchoring down our economy can be lifted and the gears start moving again.
this of course would be a much more simplistic solution with a bit more administrative overhead, and would not allow congress to write a blank check to the financial community, which although many say otherwise, allot of them wish to do to help stave off the financial sectors lobbyists.
