Open Letter to Washington: Saving Our Economy from Itself
A modest proposal on how to speed up the current unwinding.
All your machinations to save the country from the malaise caused by the past 5 years of debt-fueled excess... are simply not working.
They are, however, costing us -- as well as entire future generations -- the opportunity to preserve this as the greatest economy in the world. So, if you can get past the irony that all of you -- through Fannie (FNM), Freddie (FRE), Goldman (GS), the Fed, securitizers, and the rest of your cronies -- were as complicit as anyone in creating the current mess, perhaps you can stop squandering our money, and start fixing the problem - instead of growing it ever bigger and spreading it ever wider.
Put a surtax on both the buyer and seller of new homes. Such a move should be enough to bankrupt every homebuilder in the country - and that will be a good first step to ridding the housing market of utterly useless supply. Few of them are employing anyone these days, so it shouldn't cost you too many votes in the next election.
Extend tax credits to buyers of properties out of foreclosure as long as they will occupy the property. This will accelerate the process of finding the near-to-true value of homes, further decrease the inventory of homes for sale, and force banks to realize the losses they worked so hard for.
Extend a further interest rate subsidy to first-time buyers who put down 30% or more in down payment to purchase a foreclosure property.
If the foreclosure purchaser is an investor, and the investor puts down at least 20% equity, extend to the current owner/occupant the right to lease back the property from the foreclosure buyer for what would amount to a 5% return to the investor. (Length of the lease to be negotiated.)
This would not only leave a roof over the former occupant's head, but, more importantly, it would guarantee a prudent rate of return for investor money, which will further attract fresh capital to the sector.
Incentivize banks to unload REO quickly, by scaling out their ability to recognize losses on underlying mortgages the longer those mortgages stay on the books; furthermore, recapitalize banks in the amount of their losses if they liquidate their inventory within a very short period of time.
I'm sure I'm forgetting another dozen or so things that could speed up the unwinding of the current debacle, but this would be a good start.
The point of it all, gentlemen, is that you're squandering our money trying to invent value that does not, and never did, exist, and to protect greedy, gambling homeowners who don't deserve to own.
What a concept it would be if the government actually rewarded prudence and savings by giving those who carefully watched their finances an opportunity to realize the dream of homeownership - without having to overpay for the sins of others.
That would be"Change We Can Believe In."
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