Plunging Toward Disaster

Like fools rushing into chaos, Paulson and Bernanke seemed at times to be almost tongue-tied when the Senators began probing for specifics.

The lack of creativity in the Senate and with both Paulson and Bernanke is appalling. It’s a kind of “our-way-or-the-highway.” The biggest error in the bailout as we see it is the lack of actual benefit to the American public. It’s been a discussion about Wall Street and the major financial institution with almost no defined financial benefit extended to those Americans who are experiencing mortgage problems and need relief.

Creative Solutions that Reward Everyone

Therefore, iVoteAmerica has an idea to put forward for consideration. It’s an idea that will allow all citizens, businesses, mortgage lenders and even foreign investors to participate. It’s a simple plan that allows everyone to have some skin in the game.

We need a temporary relief package (short term) followed by a national mortgage investment bond program that allows any American, any business and any financial institution to invest in the bailout so that every player has an opportunity for participation with upside.

Mortgage Investment Bonds (MIBs) would be managed similar to war bonds or other bonds issued as national investment instruments.

Minimum investment per taxpayer could be as low as $500 bond increments up to perhaps as high as $500,000. Each bearing an interest rate 1-3 points above the discounted rate extended to American homeowners.

Maximum amounts to financial institutions could be set at reasonable levels in the $25-50 million dollar incremental levels. For every dollar invested by Americans facing mortgage delinquency and potential foreclosure action, they would receive a multiple reduction in their mortgage principal balance, a lower interest rate in the 3-4% range and a tax reduction write-off.

We need a solution that doesn’t socialize the financial institutions of American. We need a solution that rewards average Americans if they will participate in the solution. We need to maintain the independence of the American economy. We need a solution that creates opportunity for average people and those sound financial institutions who will invest in the solution. We need a solution that rewards us without further mortgaging our country and it people. – iVoteAmerica

Each American individual, family and small business should be able to participate in the financial upside of any solution rather than simply financing Wall Street with no return on our costly investment.

This should not be an opportunity for American taxpayers to finance future financial growth of those people and companies who buy discounted mortgages while making homeowner’s pay the full principal balance of such mortgages.

No More Wall Street at the Expense of Main Street

Paulson and Bernanke are proposing a solution which will reward the next round of investors who will simply view homeowners as prey to be further slaughtered. Make no mistake about it…this is a very big, big, big business opportunity for the wealthy to benefit from; once again, that benefit coming at our expense.

At this writing, John McCain has just suspended his campaign in order to return to Washington to help create a solution. We’re not impressed, unless John can show us a solution that is creative enough to reward average Americans who have the most at stake.

Have any creative thoughts? Let us know and more importantly, let your representatives know.

The Fed is going to buy up all the bad debt with money supplied by tax payers and then discount the purchase of the mortages to a new set of buyers, yet to be named, by as much as 50-75%.

Yikes! The great American dream of homeownership may become the great American real estate devaluation. It appears, based upon early reports that the Fed may be about to create an RTC concept for residential homes and their mortgages.

What will this move do with respect to McCain and Obama and their positions on the economy and the housing crisis?

What about the fact that Ron Paul turned out to be right in his predictions and his numerous chatenings of Ben Bernanke in front of the Senate and the nation?

Should Ron Paul be America’s new write-in candidate for President of the United States? After all, it appears that he might be the only one who was will to actually tell the American people the truth. See Ron Paul in action. Here’s another example of Ron Paul telling the truth. And here is Still another.

What will you property be worth among the sea of foreclosures and discounted properties?

Should government butt-out and let the private sector fix the problem? Should the government be in the mortgage and real estate value regulation business?

George said, “Let’s play house!”

REALonomics Editorial

Syndicated from REALonomics.net, Friday, September 19, 2008

We now own what we cannot control. We are witnessing the Federalizaiton of the Financial Systems of America. Backed by a fickle Congress and flanked by Federal Reserve Chairman Ben Bernanke, President Bush and Treasury Secretary Henry Paulson, contrary to their former political beliefs that government should stay out of the private sectors of the economy, took measures today to endorse the Federalization of our money systems.

Q1 - What does this mean to the real estate industry?

Clearly we are entering spooky waters wherein we dared never enter before. REALonomics believes the move by the government will paralyze the industry making home buying and selling incredibly difficult, if not impossible, in some already paralyzed markets. Home and commercial property values will assuredly decline even more, reducing the networth of the industry and its investor and home owner base.

Q2 - What does this mean to the mortgage industry?

Expect huge consolidations greater than the Bank of America’s absorbtion of Countrywide and Merrill Lynch. With this consolidation of the financial titans, mega titans will be created and essentially be required to submit to a new set of tightly regulated lending rules. It will be harder and harder to borrow and lend. This will create a over-regulation of the market and further drag on mortgage recovery.

Q3 - What does this mean to Americans?

Each of the more than 300 million people in America, including those born yesterday, will end up with at least a $100,000 debt hanging over their heads. This is the representative figure that is the accumulation of the current escalation of the national deficit and the new estimated $2 trillion dollar bailout of the financial markets.

The government bailout of the private sector of the market means that each of us was just handed a tax bill or, we might call it a “cash call” because we are collectively the new owners of the private problems of borrows and lenders.

Ron Paul (R, TX) was correct when he told Ben Bernanke, in essence, “you are going to bankrupt the American people with your money policies.”

The average American family is essentially, on paper, wiped out by this move and the impact on the real estate and mortgage industries was just extended to perhap a decade or even more.

Q4 - What does this mean in terms of the election?

This is the easy question and the answer is more finger pointing, more investigations, excessive government snooping (there needs to be some), lots of drama on the political stump and a great deal of harm to John McCain, who is already having difficulty coming out from the shadow of Bush’s foreign and domestic policies.

But it also means trouble for Barack Obama. He can forget about his national health care program for all Americans, he can forget about taxing anyone, much less those earning incomes above $250k and he can kiss his “no-new-energy-if-it-means-drilling-coal fired plants-and-nuclear-power” policy good by.

In essence the damage done to both candidacies is substantial and the next 45 days are going to be like the wild-wild-west as we run up to election time. Please vote in the iVoteAmerica.com Presidential poll…hundreds of others are doing so.

The most remarkable thing about today’s move to “take-over” is that it represents a profoundly fundamental shift in our capital market value system and establishes a whole new mechanism for creating a way to further tax the American people. Make no mistake about it, you just got taxed and to pay the tax bill you were forced to financed the payments over time. There was paperwork, no disclosure and no recource for any of us. All of this is taking place right before our eyes without much of a whimper or a voice of protest.

Oh, by the way…Alan Greenspan was wrong too when he proclaimed that subprime lending was “innovative” and “beneficial to consumers.”

Sound economics and the art of lending are predicated upon the borrower’s capacity to service the debt, pay it down over time and deliver return to the lender.

The concept of borrowing without capacity is foreign to all western economies and you won’t find it on any campus in America in Economics 101. Neither you nor many of your friends was ever taught the principle “you can have something for nothing.”

No One Whined about the Flow of Money

From about 2000 through 2005 greed was good to Wall Street and to the real estate and to the mortgage industries. No one whined about the money back then.

Even REALonomics, one the real estate industry’s few cutting-edge, truth-telling blogs has acknowledged in a recent post the roll the real estate and mortgage industries have played in the crash of the housing market. Refreshing honesty amidst a sea of excessive finger-pointing and blame gaming.

With today’s huge 500 point decline in the NYSE, the collapse of Lehman Brothers and the timely absorption of Merrill Lynch by Bank of America we have the first bright light in the housing market collapse.

The First True Glimpse of Light

Today’s calamity was a glimmer of light and good news. Today’s plummet was the true market telling us greed is bad.

Yes, this is a bright light! Finally, the healing can begin along with celebration of the release of the last hot air from a pumped-up pseudo market, held together by slick accounting practices.

If not next year then certainly the year after your home value will begin to increase again.

Politically, this means there is less chance the Federal Government will continue its bailout of collapsing institutions that have made greed their mantra.

Tomorrow may see an uptick in the market as the true, blue-blooded economists and investors who understand the balance between eithical lending and moral borrowing begin to buy into a new market that is finally vomiting the economic bacteria from the depths of its belly.

Let the healing begin!