If I Had 700 Billion Dollars

Let me start this by saying that I am no economist (which I’m sure would have been very clear shortly anyway), I’m just an average person who is observing the financial goings on in my nation. Luckily, in America at least, you don’t have to know what you are talking about to have an opinion on it (see Kevin McCullough or Cooper Lawrence).

The topic of the day, and indeed month, seems to be whether or not we should bail out all the financial institutions that, through their own immoral, at best, behaviour has found themselves in a bit of a pickle that threatens to bring down the nation’s economy.

What I have found amusing during all of this is the people who were all for the “free market” and “de-regulation” that allowed these companies to get into this mess in the first place are now the ones screaming loudest for government intervention. Suddenly all of these fiscal conservatives have become downright socialist. What happened to the free market taking care of itself? I thought that the idea was that if a company couldn’t hack it, they should fail.

All of that aside, I’ve been doing a little (very little) looking at these bailout ideas. The most popular one seems to be the government spending $700 billion that it does not really have to buy the bad debt off of the people who so willingly incurred it in the first place. It seems to me that we are talking about rewarding people for stupidity at best, fraud at worst. I think I have a better idea.

My idea is, instead of giving the money directly to the banks, we funnel it through the homeowners who were given loans they never should have qualified for in the first place. Homeowners should be able to apply for a piece of the bailout money to be put towards paying off part of their current loan and then refinancing the lower amount at a new fixed rate that they actually could afford.

I know this is still rewarding people for doing something stupid, but in the cases of many of these debtors they really did not know any better. They were told that they should take out all that they could; after all home values are just going up, up, up! I know this happened because it happened to me; I’m just far too stingy to have fallen for it.

The last time I refinanced my home, the loan broker told me that I qualified for a much larger loan, which is horse-crap as over half of my monthly income (maybe a third of household) goes just to the mortgage payment. I would like to buy nice things, but not if I’m going to lose my home in the long run.

Keeping people in their homes is good for American, so I do not think that any bailout plan should not involve keeping Americans in their homes. Look around your neighborhood, there are the houses with ‘For Sale, Bank Owned’ signs in front of them, and they look like crap. They’ve been vacant for months and they look it; brown lawns, leaf covered ground, and just a general look of abandonment to them. They are eyesores, and the current plans look like they would all lead to more of that.

In the end, the banks will still get their money, and would still be saved whether they should be or not, but it could help more Americans get to keep their homes. The current plans don’t look to me like they are going to benefit the 99% of American home owners who are at risk of losing their homes to foreclosure, so why bother?

I’m sure my plan has flaws to it, but none of the plans suggested up to now can really be said to be perfect either. There are people who are much smarter than I am who could make this idea work, who could fill the holes, and work on the specifics.

If the government does not want to institute something that will help a large number of Americans, then screw it. Let the banks fail, the government can just take them over. The money in most people’s accounts is backed by the government anyway, so there is little risk to the average American if this happens. Alternately, a financial institution that was not stupid/greedy enough to get themselves into this mess in the first place will buy them up.

Remember, it’s supposed to be all about the free market, the market will regulate itself. If the market cannot keep itself in check, then maybe there should be some regulation again. It worked before.