The Bailout Bomb

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.