[UPDATE: In light of the so-called "housing plan" being put forth by President Obama, currently valued at perhaps $275 billion-with-a-B, I'm bumping this post from September. The only addition I would make is that the banks which made bad loans should not get all of the money, they should get a little bit of the pain too. And Chris Dodd and Barney Frank should be sharing a cell.]
I'm no economist, so I really don't have much of an opinion on the bailout issue, whether it's "necessary" or even desirable. I'm against such measures as a rule, just on general principle. But perhaps the companies in question really are "too big to fail" without huge damage to the economy. I don't know.
Some have suggested, and I would be more inclined to agree here, that a better approach is to help shore up the housing market, perhaps by guaranteeing mortgage loans. This would have the benefit of also helping those companies that are hurting but not yet on the verge of bankruptcy. Again, I can't pass judgment on the wisdom or effectiveness of this approach.
Assume, though, that this second approach is correct, and that we should guarantee currently shaky mortgages to prevent more foreclosures and further erosion of the financial markets. This would be terribly unfair to those who have already lost their houses. It would also be terribly unfair to the rest of us who didn't make poor financial decisions and who acted responsibly. With this in mind, I have a modest proposal, should the gummint actually go ahead with this approach, that I haven't seen suggested anywhere else:
Rather than simply give money to people, or simply guarantee their "bad" mortgages, the government should "buy" some portion of the property in the form of taking some proportionate fraction of the equity ownership. When the property is eventually sold, the government can recoup some of the costs of this bailout by taking its share of the proceeds. If the owner defaults completely, the government owns ALL of the property and keeps all.
There should be consequences for irresponsible actions. People should not simply be bailed out of their financial obligations with no repercussions. And the responsible people who have to foot the bill should have some assurance that they are not getting totally shafted (only partly).
Would it work? I have no clue. But it certainly sounds better to my amateur ears than any of the other proposals I've seen. What do you think?
Iz out!
2 months ago
3 comments:
I'm sure someone will scream "unfair!" or "Racism!" about the government retaining part of the ownership of those homes, but that plan does make more sense than a wholesale bailout.
I was anticipating your proposal to be, I don't know, more Swiftian. Like maybe, the government could burn the bad-debt houses and use the energy to generate electricity.
I just don't understand how we could base out economy on all this outstanding credit and not expect that this was going to happen. So much of Wall Street and our economy was based around having people use more credit than they could pay for over time.
It's going to hurt, but I think that this is the market fixing itself. I'd like to see us give the market a chance to right things.
It seriously pisses me off that this whole shitstorm is going to have to be paid for by not only my generation, but my son's (of whom I have posted new pics on my blog), and my grandchildren's and great-grandchildren's.
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