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article imageOp-Ed: Solution to the Economic Crisis?

By Mark Alexander     Sep 30, 2008 in Politics
As of writing, the U.S. Government financial bailout of its economy is hung up in the legislative process. Is politics getting in the way of helping Americans? Could there be an easier solution to appease all involved?
The U.S. economy is in crisis. To that end, there is no doubt. The world economy is sure to follow, to some degree or another, for when the U.S. sneezes, the rest of the world tends to catch a cold.
On the table we have a $700 Billion bailout proposal engineered by the one and only George W. Bush. As I understand it, this proposal buys the defaulted mortgages from the banks allowing them to take the losses off their books so they are again solvent enough to lend more money to Americans. I'm no financial wizard or economist, but isn't this a "good money after bad" approach?
There is no doubt that the current U.S. economic structure is flawed and now would be the perfect time to fix those flaws.
By bailing out the banks and trust companies, the government is simply condoning their lending and spending behaviours. By giving the $700 Billion to the banks, the government is putting the U.S. taxpayer on the hook for those faulty behaviours. CEO's and other executives of these companies earn absurd amounts of money in the forms of salaries and bonuses. Some have even recently jumped ship with multi million dollar severance packages. They also loaned money to consumers beyond their means. The latter practice contributed to the crash of the mortgage market while the former practice has eroded corporate reserves necessary to protect the company from defaulted loans.
The solution? Selective Government aid. Not to the corporations per se, but to those Americans on the verge of losing their homes. Corporate America is like a bad kid who will never learn from their mistakes if mommy and daddy keep sheltering them from the consequences.
The U.S. does have the manpower to pull this off. The IRS alone has the resources to audit every citizen in the country. Let's put that power to use.
The figure of $700 Billion seems to be the amount we're working with here, so let's throw it in to a pot and have each troubled institution come plead their case to the government for their share by bringing in their books and list of defaulted loans.
The government could then, on a case by case basis, review the loans in question and step in accordingly and assume the mortgages on the homes of Americans. Very little money is given to the corporation, but rather the lien on title of Americans' homes is transfered from the current mortgagor to good old Uncle Sam. The government could then work with each mortgagee to arrange a payment schedule that suits their budget. Irresponsible borrowing by the consumer is as much at fault here as irresponsible lending by the banks.
With these bad debts off the books, the banks are then again free to lend money but only if they restructure their own spending habits. Executives will have to take pay cuts, excess corporate assets will have to be sold off. This will free up corporate capital to resume their business.
Uncle Sam is now holding the mortgages on millions of American homes for pennies on the dollar. Is this not how many of these corporations became successful in the first place? By buying up smaller companies a bargain basement prices (see JP Morgan, JD Rockefeller et al.). Maybe the government can do a better job in managing the portfolio than corporate America has and actually make a slight profit from all this.
Bottom line is that many Americans will keep their homes and corporate America gets a wake up call to change its ways.
Imagine, taxpayer money actually being used to help the taxpayer. Pretty novel idea, isn't it?
These are difficult times and if Corporate America can work together with the government and the American people, we can get through it......together.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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