(Rec'd from author) From: Travis Subject: Ideas for a Plan to Solve the Subprime Mortgage Crisis Date: Wednesday, October 1, 2008, 4:15 AM
*Ideas for a Plan to Solve the Subprime Mortgage Crisis* *Rene Guerra*** Years of malicious policies by the Democrats and stupid mistakes by home buyers have created an economic nightmare in America , but $700 billion ---and probably more--- in new debt for worthless mortgages, and a systemic drift toward socialism and autocratism is not the answer. The solution to the problem cannot be worse than the problem itself; it cannot be a bailout that wastes taxpayer money, foments socialism and implants autocratism. It has to be a workout based on free-entrepreneurialism, which is one of the greatest assets of America . A partial plan is presented at the bottom. The problem must be solved at its superficial manifestations and at its roots. Furthermore, the solution must also include prophylactic measures that prevent similar problems in the future. To that effect, a brief review of the origin and development of the crisis fits here. On the one side, the Democrats craftily perverted and inversed the pro-free enterprise goals of the Bill Clinton administration Gramm-Leach-Bliley Act (GLBA) <http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act> of 1992 into a piñata in the housing market, where credit unworthy individuals were given mortgage loans that they couldn't pay; "Ninja" loans, were called those "instruments" of credit that in essence was bad paper, mere Monopoly money. *"Ninja = a member of a Japanese feudal organization practicing clandestine activities."*** In a jujitsu-like massive operation, the Democrats used the pro-capitalism momentum-generating-power of GLBA to create critical conditions that would eventually lead to pushing America further toward socialism. The genuine intention of GLBA is to promote capitalism but the Democrats maneuvered to use GLBA to promote capitalism's antithesis: socialism. *"Jujitsu: a Japanese martial art mainly consisting of cleverly attacking an opponent by using his/her strength and weight to her/his disadvantage, rather than engaging in attacking him/her directly."*** Using GLBA as the lever and the Carter Administration Community Reinvestment Act (CRA) <http://en.wikipedia.org/wiki/Community_Reinvestment_Act> of 1977 as the fulcrum, the Democrats created a clever mechanism to manipulate the housing market into a great chaos, conducive ultimately to socialism. And, in the process, it conduced as well to the enrichment of some Democrat apparatchiks, such as Jamie Garolick (the very one who built the walls between the national security agencies, which contributed heavily to 9/11), Franklin Raines, James Johnson, Penny Pritzker and others who, by the way, are very close to the Obama campaign. Add to it that Senate Banking Commission Chairman Christopher John Dodd (aka Chris Dodd) became the largest beneficiary of Fanny Mae and Freddy Mac political contributions, followed by none else than Barack Hussein Obama, in second place. Using CRA and GLBA, the Democrats pushed Fanny and Freddy to in turn push banks to make Ninja loans like in giving away candy in a piñata party. Fanny and Freddy bought the phony paper by boxcar loads. The big investment-banks (Lehman Brothers and the rest here in the U.S.A. and abroad, went into a piranha frenzy buying the worthless paper from Fanny and Freddy, in the illusion that if the two Fs were selling them in their condition of Government Sponsored Enterprises (GSE)<http://en.wikipedia.org/wiki/Government_sponsored_enterprises>, they had to be good . . . although they neither looked nor were good, at all. On the other side, hundreds of thousands of entirely credit unworthy, giddy homebuyers jumped into the occasion and gingerly applied and obtained their Ninja loans. They perfectly knew that they couldn't pay those loans; however, they went ahead with it. The realtors who sold them the homes knew it too; however, they went ahead with it. The banks that made the loans knew it too; however, they went ahead with it. The bubble that *Ninja-ism* ---along with other causes that would take too long to discuss here--- had contributed to create in the housing market had to burst. And, in the aftermath, the Democrats would push for the statization of the resulting failing financial entities under the disguise of a bailout that taxpayers would pay for. Pure socialism, the end result would be. Duplicitously clever creatures, the Democrats indeed are; they make the American people pay from their own pockets for the yoke ---socialism--- that they will be enslaved with. Thanks to true conservatives ---that is, conservative talk show radio anchors, some conservative columnists, some Fox Business Channel and Fox Business Channel anchors, and hundreds of conservative bloggers and Internet journalists--- Americans are aware of what is going on and have, by the tens of millions, realized that the entire thing is the duplicitous socializing work of the Democrat Party. We need not a solution to the crisis, but the proper solution. That is, we need a solution based on workout rather than bailout. What we need is a solution based on free-entrepreneurialism, not in socialism. The stronghold in the crisis resides in the fact that the failing financing institutions ---having mal-invested huge resources in worthless Ninja mortgages--- have run out of cash to cope with their other financial operations and with their obligations. Most of their cash is captive by worthless paper; they need cash; they are suffering a lethal lack of liquidity. That's the problem . . . on the surface. But the underlying problem must be addressed and corrected as well, and that problem resides in the intrusion of the government in the realms of the private sector. And that governmental intrusion materializes, in this particular case, through Fanny Mae and Freddy Mac, and in general, through other GSEs. GSEs lend themselves to political manipulation and cronyism, and therefore, to corruption and unaccountability. As long as GSEs exist, they will keep being fertile ground for the generation of crises like the one the Democrats created with *Ninja-ism*. We must make sure that similar crises don't repeat in the future. Borrowing heavily from the "*Commonsense Plan*" that conservative author and TV and Radio Show anchor Dave Ramsey has posted on his website<http://www.daveramsey.com/etc/fed_bailout/3_steps_to_change_the_nations_future_10928.htmlc?ictid=sml>, and expanding with the help of commonsense ideas from others and from my own, I have compiled a partial plan to solve the liquidity problem and the root problem of the mortgage sub-prime meltdown. No bailout at all is included, and the plan is rich in measures that stimulate the economic growth we need to work our way out of this mire. Serious measures to prevent similar problems in the future are included. I call it "*Commonsense Plan++*", meaning that it is Ramsey's plan plus some other goodies that bite hard, and you can find it below. * * *Commonsense Plan++* *To Solve the Current Finance Crisis*** * * *I. INSURANCE* A. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity. B. In order for a company to accept the government-backed insurance, they must do two things: 1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage. a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes. b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while working with the borrower—again limiting foreclosures and ruined lives. 2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don't do their jobs. C. This backstop will cost less than $50 billion—a small fraction of the current proposal. *II. MARK TO MARKET* A. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate. B. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing. *III. CAPITAL GAINS TAX* A. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing. B. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down. *IV. BUSH TAX CUTS* A. Make the Bush tax cuts permanent. Much more money will be available to invest and stimulate the economy to grow. B. Same as in III B above *V. TAX MISCELLANEA* A. Lower business taxes considerably, say, to no more than 10%. B. Abolish the death tax. C. Ban federal and state tax hikes for at least 10 years. F. Similar as in III B above *V. GOVERNMENT SPENDING AND SIZE* A. Cut government spending<http://en.wikipedia.org/wiki/Federal_budget_(United_States)>drastically, by at least 5% (about $140 Billions at minimum). B. Reduce the civilian size of government (126 in 1808<http://books.google.com/books?id=W4CloB3dvZoC&pg=PA395&lpg=PA395&dq=%22total+number+of+federal+government+employees%22+and+%22United+States%22&source=web&ots=iRM2eMHi-Z&sig=zb7AkkxA3NUlUxCSHTjJ7STQRU8&hl=en&sa=X&oi=book_result&resnum=8&ct=result>; 2,720,688 in 2006 <http://ftp2.census.gov/govs/apes/06fedfun.xls>; no one knows in 2008, not even the U.S. Office of Personnel Management<http://www.opm.gov/> knows) drastically, by at least 5%. C. Ban earmarks for at least 10 years. D. This will reduce the budget deficit and will lower the need of further taxation. *VI. GENERAL* A. Give the President line-item veto powers. B. Name a special prosecutor ---with subpoena and Federal Grand Jury convening powers--- to investigate any wrongdoing by officials ---and indict them if necessary--- of failing financial institutions tangled in the crisis, including Fanny Mae and Freddy Mac. C. Create and install a Subprime Mortgage Meltdown Commission ---not a sham like the 9/11 one--- with subpoena power, to investigate the whole affair, from its origin to the meltdown itself. D. Privatize Fanny Mae and Freddy Mac. E. Ban the creation of new Government Sponsored Enterprises<http://en.wikipedia.org/wiki/Government_Sponsored_Entity>and wean any existing GSEs from the government. G. Remove Christopher John "Chris" Dodd and Barnett "Barney" Frank from their positions as heads of, respectively, the Senate Banking Commission, and the House Financial Services Commission, for their grossly complicit dereliction in the matter. -- *~@):~{> --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. 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