Economy

I would like to address the problem we are having with the economy. There has been much too much socializing of our country over the past couple of decades and the problems that have arisen this past couple of weeks is just the latest part of that socialization process.

The government has slowly been inserting its tentacles into every part of the lives of the American people and now it has started the process of socializing the corporations as well. Most people would have scoffed at the idea of the government taking over private corporations, saying things like you are a conspiracy theorist or worse. I am here to tell you that it is not a conspiracy, it is being done right out in the open.

Would anyone ever have thought that taking over a private mortgage company or a private Insurance company or a private Bank would have ever been possible in this country? Not I!! But, that is exactly what has happened over the past couple of weeks and it is not even close to being over. Wait and see, the 700 Billion the government is talking about "loaning" AIG is nowhere near the amount that is needed to handle the magnitude of the problem we are facing. This country has gotten fat and happy on debt, and the check has come due. But, what does the government do when the check comes? It puts the check on a credit card to pay later.

The government got us into this mess with the formation of Fannie Mae and Freddie Mac, the two largest mortgage purchasers in the country. Then it went a step further in the demise of the mortgage market by forcing these two companies to ease the loaning requirements so that low income earners could afford to purchase a home. I don't know about you, but there is a reason they are called low income earners. Because they don't make enough to make ends meet, not to mention afford a mortgage. Then what does the government do, they guarantee these same mortgages with your and my money. And just to play partisan politics for a moment, yes, this was a Democratic implemented idea. The two top financial advisers for Obama come for these two companies. Just some food for thought!

Now, on to my idea for solving this problem with the least pain possible for all concerned. I am not saying that there will be no pain because the people who took out these bad loans need to feel the hurt so they will learn the lesson that comes with poor decisions. But there should not be any rewards for the heads of the companies who knowingly participated in the present crises.

First, all the loan that are presently in default or in the process of bankruptcy should all be temporarily suspended of legal action. Second, all homes associated with these loans, those in legal status as well as those current on their payments should have new appraisals done. Third, all loans should then be rewritten at the present market value at an interest rate 0f 6.5% or less if the home is still current in it's payments. Fourth, the banks that hold these loans will take a substantial paper loss due to the fall in the value of the homes vs. the amount owed on present loans. These banks should then show the government the amount of the loss and justification for the loans approved in the first place. Upon verification of the loss being due to no negligence of the bank, the government will agree to reimburse the banks the amount of the loss with the agreement that as the bank starts to make profits, part of their profits are returned to the government for the reimbursement of their loss. This would not be a bailout, but a loan that would be required to repaid.

Concerning AIG, this company is way too large and has its tentacles in too many areas of the world to allow to fail all at once. I think the government should apply the same strategy as with the banks but with added security in place to ensure the repayment of the loan. I think it will be much more than 700 Billion to help AIG, but by having the mortgages they presently hold in their portfolio renegotiated, we can lower the amount of their debt substantially. We would then have a board of financial overseers from the private sector approve all money being loaned to AIG for the relief cause. They would be responsible the ensure that the money being approved for AIG is going to the best use to ensure the stabilization of the company. AIG would then be required to start sell parts of its assets so that it can repay the loan to the government. This loan will have an interest rate of no less than 8.5% above prime and would have a repay clause of no more than five years. This will give AIG the breathing room necessary for the company to get itself back on track.

The government should immediately cancel the Capital Gains tax. It should also immediately lower the Business tax to somewhere around 9 percent. In addition, it should also lower the Federal Income tax for the next three to five years. By implementing these tax relief efforts as well as utilizing the above mentioned assistance for the mortgages companies, banks, and Insurance companies, we will see an immediate influx of wealth into our economy. This influx will stimulate growth and will also attract Business back to the United States with the promise of a more business friendly atmosphere. Yes there will be a time of pain between the time the plan is implemented and the effects are felt, but, has there ever been a time when a lesson was learned that there was not some effects felt. I say no!

This crises we are in can be solves and we can come out of it stronger than when we started, but, the government has to allow the economy stabilize and correct itself as it has always done. We do not need bigger government or socialization of our country, we need to government to start doing the people's work instead of working for its own self interest.

As always, thank for reading and I look forward to your comments. Earl