The Bailout Bomb

BULL MOOSE MAGAZINE - A PROGRESSIVE POLITICAL PUBLICATION WITH A SENSE OF HUMOR!

Give The Money To The People Directly

By JAMES F. HENRY

Bull Moose Magazine Publisher

All you have to do is read some of my previous hubs to know that I had serious misgivings about the Wall Street Bailout Bill, so I should be happy that the bill went down with a grade big thud when the House voted it down yesterday. The problem is that doing nothing is not likely to cure what ails this economy.

Now, I'm not an economist and actually got a D in the one economics class I took in high school. However, I think I've learned a lot since my teens, and over the past few days I've been thinking about alternatives to this $700 billion bail out bill. And I'm proud to say that I have an idea that makes sense to me.

Democrats and Republicans have been arguing for decades over the pros and cons of Trickle Down Economics, also known as Supply Side Economics and Reaganomics. The theory is that if you give money to the wealthy that they will allow money to trickle down to the masses. That, my friends, is the main reason why I changed my partisan affiliation from Republican to Democrat when I was 21. It can't work because of good old fashioned American capitalist greed. What reason do the wealthiest Americans have to let anything trickle down to the rest of us? That's why the rich keep getting richer, the poor get poorer, and the middle class gets the squeeze.

The notion that the American government should give $700 billion to Wall Street is supply side economics running amok. It implies that those Wall Street tycoons will suddenly decide to share their hard-earned bailout bucks with anyone but themselves.

As I understand it, the main problem is that many Americans received mortgages they could not afford with really lousy terms that caused rates to skyrocket. That's a gross generalization, but it's a working theory. It seems to me that another way to attack this problem is to find a way to get this money directly into the hands of the consumers who are the voters and who are really responsible for the collapse of the bailout bill yesterday.

Now, I can bet that all you Republican types out there are thinking, "Look at this! He's about to call for a massive tax cut!" If you are, I hate to break your heart. There is more than one way to get money into the hands of the people who need it. Here's my idea.

There are already in place home loan programs through the Housing and Urban Development department and USDA Rural Agriculture department that provide low interest loans to low and moderate income homeowners or first time buyers. These programs are designed to give a mortgage to people who otherwise would not qualify for a conventional bank mortgage. Why not fill those programs with an unprecedented amount of money, expand their eligibility requirements to help the most number of people, and give people a direct hand in staying in their homes?

Think about it. If Joe Homeowner is two or three months behind in his mortgage, the bank is already in foreclosure process. Joe goes to the local USDA office and fills out a mortgage application. His credit has taken its hits, but he's had a good payment history until his ARM just readjusted, and now he's sinking fast. The government floats him a mortgage, allowing him to refinance in a low interest 30-38 year mortgage, and the bank that was looking to take a property for foreclosure suddenly is not saddled with a property they really don't want in the first place. Wouldn't this accomplish the same thing? And wouldn't this ensure that millions of Americans stay in their homes instead of placing burdens on the homeless shelters of America?

I don't know how much money a program like this would need to have an impact, but I'm betting that it will be much smaller than $700 billion, and I'm also betting that U.S. Representatives and Senators will be getting hundreds of calls a day asking them to pass the bill! This is a way that Congress can help Main Street and Wall Street at the same time.

Bail Out Loan Poll

Does it make sense economically to loan money directly to distressed property owners?

  • Yes! Now someone's talking my language!
  • No! That's too damned socialist for me!
  • Not Sure
See results without voting

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Comments 15 comments

blogging2 profile image

blogging2 8 years ago from Florida

And those who bought cheap homes so they could continue to afford their mtg, no help for them? I agree with you that the "trickle down" plan is miserable the rich aren't going to let it go. And I also agree that the bail out is a bad plan, these companies have made millions, scratch that billions over the past years and I am sure their CEO's are not giving up their multi million dollar homes/cars/boats/yachts you get my point. Why should the tax payers (us) give them a dime? And how in the world did we get this messed up?

I am in that group that will get no help anyway but my daughter's children's children will be paying this off if they approve it, so maybe I am jaded.


crashcromwell profile image

crashcromwell 8 years ago from Florida Author

My focus would be on the properties that are in distress. If there is a person who bought a cheap home and they are not having trouble paying their mortgage, I think we would be better served by putting money where it can do the most good. This crisis is rooted in the fact that banks are taking properties through the foreclosure process and selling them for far less than they would otherwise be worth, often I'm sure losing money in the process. If property values can stabilize, it will have a very positive effect, and maybe some of those cheap properties to which you referred will actually start to develop equity.


blogging2 profile image

blogging2 8 years ago from Florida

The problem is "cheap" is relative, and I never said anything about not having trouble paying the mortgage. I am just personally tired of struggling and getting no help from the govt. because I am doing the right thing. Which includes my husband working 2 jobs and for 7 companies as an IC, I work from home doing what I can, etc. Our property value has decreased since purchase but there will be no help there it was our fault for buying...

If we are just playing with numbers anyway, what about this option: Take every loan out there, (since we are talking about the mtg crisis right now), if property values have declined lets say 10% due to economy inflation etc, reduce every loan by that amt. People should then be able to make their payments because the value would be equviliant with the area? Just a thought...

I don't mind working for what I earn please don't get me wrong, but I am tired of bailing out everyone else with my tax dollars... It is kind of like when I was young I lived in Charlotte for a time. When we would go to the basketball games of the Hornets, kids who had "Improved their grades" got to be the sweat wipers. Yes sounds gross now but was really cool then! Why were they rewarded for having been bad and then gotten better? I was never offered anything like that even though I had perfect attnedance, honor roll, etc.

And as a side note this bail out is not for the economy we will recover from this without a bail out, I don't think we can recover from the ramifications of adding that much debt while we are in the state we are in already. IMHO


Storytellersrus profile image

Storytellersrus 8 years ago from Stepping past clutter

Interesting Hub, crash.  I am doing some research myself, at http://hubpages.com/hub/Where-did-12-trillion-go?

The problem as I witness it here in Colorado is that the houses have been in foreclosure for so long that the tenants have deserted the house and being deserted for months and months, it falls into disrepair and costs mega bucks to get it back in shape.  One local house was left with its windows open and drenching rains warped the floors- it was a $600,000+ house, too.  Disgruntled buyers who thought they'd bought a deal had to sink a $100,000+ into it to make it livable.

The bail out doesn't address the shape of the homes we taxpayers will be saddled purchasing.


Make  Money profile image

Make Money 8 years ago from Ontario

You are right crash, money doesn't trickle down. The bailout should be a no go. I like your idea. You should send it to your representative.


crashcromwell profile image

crashcromwell 8 years ago from Florida Author

Blogging2 - I didn't mean to infer that you were having trouble making your mortgage payments. In fact, the way I read your initial comment I thought you were speaking hypothetically, and I responded in kind.

I hear what you are saying about bailing people out. I kind of look at this like getting older - I don't like getting older, but I like it a lot more than the alternative, which is death. We may not like to have to bail out anyone, but consider the economic fall out that would occur if absolutely nothing is done. Maybe it's all political smoke in mirrors and the economy will right itself without this enormous bail out. If that's the case, then great! We've just saved the taxpayers tons of money. On the other hand, if some form of government intervention is required, because no other entity has the resources to take on such a task, the amount we invest could be much less than the long-term impact on the economy. I don't have a crystal ball, so I can't guess which way the future will go.

I do firmly believe, however, that you stand a much better chance of helping the people if you help them directly.

Jim


crashcromwell profile image

crashcromwell 8 years ago from Florida Author

Storytellersrus - Yes, it is sad but true that when people are on the verge of losing their homes to a bank, a level of vindictiveness kicks in and they make sure that the property is worth much less than it would be if they were going to stay in the property long-term. But in a way, that fact makes my idea more compelling. Instead of setting people up for such a scenario, wouldn't it make more fiscal sense to keep people in their homes?


crashcromwell profile image

crashcromwell 8 years ago from Florida Author

Make Money - Yes, I just sent an email to my Congressman Tom Allen, who is in a self-imposed fight of his life, trying to unseat Senator Susan Collins, a so-called moderate Republican. I'll be curious to see if I get a response from Congressman Allen's campaign about this idea.


pgrundy 8 years ago

I like your idea. I also wonder why the government can't require banks that made 'creative' mortgages on overpriced homes to step in a rework them on conventional terms at the actual current value of the home. If the issue is the rapidly tanking value of homes, why not readjust at the bottom? This would upset people who are current on conventional mortgages and ALSO have falling home values, but you could include them with a tax benefit or no cost optional refi or some incentive to offset their anger at 'irresponsible people'. This would also require the banks and lending institutions to take the losses and fail or not, one by one, instead of the punishing the taxpayers, and it would put a floor under mortgage backed securities which is needed to get anyone to buy the turkeys.

The truth is there is lots of guilt to go around, so just blaming the buyers or just blaming the lenders and then trying to punish them will, at this point hurt us all. The challenge is to find an equitable fix that works. Handing over $700 billion to the former CEO of Goldman Saks no questions asked seems, well, insane.


Chef Jeff profile image

Chef Jeff 8 years ago from Universe, Milky Way, Outer Arm, Sol, Earth, Western Hemisphere, North America, Illinois, Chicago.

I am wondering if the Bull Moose magazine is a direct descendant of Teddy Roosevelt's Bull Moose Party? T.R. is one of my childhood heroes, so i would be pleased to know his legacy carries on.


crashcromwell profile image

crashcromwell 8 years ago from Florida Author

Pam - I'm pleased that you like my idea because I respect your knowledge on the banking industry, as is strongly evident in your related hubs on this subject.

Chef Jeff - You are right on my friend. I did my master's research on the Presidential Election of 1912, which featured Teddy Roosevelt as the standard bearer for the National Progressive "Bull Moose" Party. He is, by far, my favorite President. Now, Republicans will claim that he was one of their's for most of his career, and that is true. However, Roosevelt was a renowned trust buster, environmental advocate and supporter of women's rights (he supported their right to vote in the 1912 election, although the 19th amendment was still several years out.) By today's standards, he'd probably be a Democrat.

His speech before the Progressive Convention in Chicago was one of his greatest, in my opinion. "We stand at Armageddon and do battle for the Lord!" was his battle cry. That's also where I got the title of my novel "Antiquity Calais: Standing at Armageddon."

Oh, T.R., we could use you now!


Paraglider profile image

Paraglider 8 years ago from Kyle, Scotland

On the grounds that nothing is fair, I'd agree that it would do no harm to direct the money (or at least the new promisary notes!) to the people at the bottom of the food chain for a change. But you'd have to couple that with some form of benefit for the middle people who have no (or manageable) debts and even some small savings. The net tax payers in other words.


crashcromwell profile image

crashcromwell 8 years ago from Florida Author

I believe Barack Obama's plan to cut taxes on all income under $250,000 would cover that concern.


Constant Walker profile image

Constant Walker 7 years ago from Springfield, Oregon

Good hub, Crash. You should send your idea directly to Obama.


AEvans profile image

AEvans 7 years ago from SomeWhere Out There

Crash, I have seen our neighborhood and I believe the money should go to the Americans and not bail out all of the banks as they are the ones who funded and and was in tight with many who wrote the bad loans. It was greed merely greed, Our HOA in Arizona has 1200 homes (middle class homes) new development 450 are foreclosed some of those were my neighbors and they were definitely not bad borrowers , some of them refinanced there properties or had loss of jobs due to the economy. The banks should reduce the mortgages to the value of the home today, lower the payment and allow people to keep there homes instead of trying to destroy there lives and credit.

The investors were also responsible for the downfall of the market on the West Coast so turn it around give it back and if the banks made bad deals let them close and good riddance.:)

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