Op ed by reader tinman
A Failout in Three Parts
What Do We Do From Here?
Failout Part 1 – The Solution or “Pulling the TARP Over the Body (Economy)”
What’s the best answer to our “credit crisis”?
Pay the money to the banks via the borrowers.
Pay off their mortgage; make the note whole in the eyes of the financial entity and you no longer have to worry about said entity calling on an unregulated securities instrument for payment in event of default.
There are no more defaulted mortgages in the United States! Yay! Everyone cheer!
“But who should get these mortgage payoffs? And what do you do next? And what, what, what, what….?” Easy Cochise…we’ll get to that.
Let’s look at the real root of the problem with our credit & financial markets.
What is the real reason for the overall seizing of the credit markets?
Derivatives? Lack of faith in the markets? OTC markets for unregulated securities?
Hardly – the real root of the problem is the failure of keeping mortgages paid.
Remove from your thought process or logic function how these folks ended up with the house to begin with. Eliminate the idea of whether the note written on the house was legally clear to them or any other tangential association with the mortgage, securities, or real estate markets.
Essentially Joe & Suzie Smith ended up with a mortgage on a house that eventually became unaffordable and possibly loosing value in the market. Their “solid middle-class income” of $75,000/year is unable to afford the $750,000 house on the hill in San Francisco…
Had the hundreds of thousands of Smiths across the US, and even our compatriots in the EU, been able to continue to pay their mortgages none of these bad events occur and thus trigger the cascade.
This solution springs from a growing concern about whether even our fabled “capitalistic leaders” are capable of pulling themselves from the morass that has become the credit markets even with the help from Uncle Sam (or Auntie BoE or Cousin ECB for that matter).
With the cascade upon us and now that we’ve set aside all political ideology (there’s no longer a discussion of “if” a bailout is needed so now we’re on to its price) we’re confronted with how much bailing there is to be done and who should receive the buckets.
Unfortunately our politically misguided administrators have decided the money should go to the banks.
Yes, nothing like giving a kid with a sugar-shock food coma a garbage bag full of cotton candy.
Parts 2 & 3 will follow.