3 Responses

1. quietman

   September 30th, 2008 at 4:52 pm

   1

   We all know that reforms are badly needed. For our industry to return to its proper place in a thriving economy, the reforms and solution must come from private money, not politically engineered government paper that created this mess in the first place. Keep your eye on Rep Paul Ryan, ranking republican on the Ways and Means committee and one is above the frey in this mess. A very solid economic mind and free market advocate, look to see what reforms he can insert into the negotiations. If his reforms succeed, we succeed, and this market will rebound relatively quickly with fresh money and true valuations of assets.

2. Matt Arnold

   September 30th, 2008 at 6:05 pm

   2

   As far as the MBS portion of the bailout in concerned, this is what I came up with as a solution.
   What I would like is some negative feedback on it.
   Tell me why this would not work.
   (and because the government will mess it up is not what I’m looking for)

   Attached is a brief description of what I think could bail out the bad mortgage debt without costing the taxpayer $700 plus billion dollars and at the same time help bolster the economy.
   Attached is my idea.

   Mortgage Bailout Proposal

   Assume $500 billion in mortgage debt that the U.S. Government (U.S.) is planning on purchasing.

   Purchase this debt at a discount. This has been done in the mortgage industry for years. In the industry it is called “Scratch & Dent” paper.

   In our example the purchase price paid by U.S. is set at 75% or .75 cents on the dollar (this is probably high as the last MBS sold for .33 on the dollar).
   This allows the companies, stockholders, and funds that currently hold these mortgages to retain some value in their investment, but will take a loss.

   Now the U.S. would require each individual, 100% of all loans, to refinance their loan (rate and term only, no cash out) for 90% of the current balance. The new loan would be a thirty year fixed rate mortgage at a set rate of 5.25% (estimate).
   This would assist greatly with the issue of decreased property values, as the individual would receive an instant 10% drop in their mortgage balance.
   This would be done as a loan modification, or in some way that all junior liens would NOT be paid off in the refinance, but hold their current position. Due to the drop in the first mortgage balance it would actually strengthen their position.

   Each new loan’s monthly payment would have $20 added to the payment above the P.I.T.I (Principle, Interest, Taxes, & Insurance) amount to be set aside as a government controlled mortgage insurance fund to cover the expense of any future losses.

   The individual would contact a FHA approved lender to handle the refinance. Only lenders that are approved with FHA are to be used for this refinance and are only to be handled through “retail” channels. (No third party originations) Out of the 90% of the current balance the mortgage company could charge up to 3% total closing costs (not to include escrow setup).
   This would be an immediate boost to the economy by the increased business to an ailing mortgage industry. (Cash into the economy and the stop of job loss if not an increase of jobs in the mortgage industry)

   At this point the U.S. has $388.5 billion invested in a pool of loans now worth $450 billion.
   A profit of $61.5 billion.

   Now the U.S. pools these into sections and sells them to the major banks at 95% or .95 cents on the dollar of the new mortgage balance.
   After the sale of the entire pool of mortgages the U.S. has $39 billion (Surplus) to put into the new government controlled fund to insure the loans they have sold to the banks. (further funded by the additional $20 added to each monthly payment on the individual loans)

   The banks have made an instant profit of 5% or $22.5 billion. This would increase their value immediately, which would strengthen the financial market.

   The U.S. would waive any capital reserve requirement on the total amount of pool purchased by the banks to keep from causing a liquidity issue on the financial institutions that purchased the pool.

   Any losses on the new loans would be split between the new government controlled fund and the financial institution that purchased the specific loan that failed. This decreases the loss faced by the financial institution but should limit the total loss due to the shared percentage of such loss.

   So to summarize the outcome:

   - The U.S. has an initial investment of $375 billion.
   - The institutions that hold the current bad mortgage debt are compensated 75% of the value of these holdings, retaining a large portion of the value.
   - The individual citizen would refinance their mortgage at a low fixed rate and gains an instant 10% additional equity, which allows one of the following:
   a) The individual to afford the payments on their home.
   b) The drop in balance would allow them to sell their home.
   - Financial institutions purchase pools of loans with instant positive impact to their bottom line.
   - The troubled mortgage industry gets an immediate increase of business.
   - The loans are backed by a government fund, which costs the taxpayer nothing.
   - The initial investment by the U.S. is paid off by the sale of the pool. So the final investment by the U.S. (The Taxpayer) is $0.00.

   This proposal is simple, and not without flaw I am sure. But an idea that costs the taxpayers nothing, and actually may have a positive impact on the economy of the United States is worth reviewing.

   Thank you for your time.

3. Paul R. Spenard

   October 1st, 2008 at 12:00 am

   3

   From my blog at http://www.etmcdirect.com/Answer+to+the+Current+Financial+Problems

   “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” - Thomas Jefferson

   I am sitting in my office this morning and listening to George W. Bush say how much we need this bailout. Then he goes on to say that yesterday we lost 1 trillion dollars in the market. Well let’s put that in perspective. The 1 trillion dollars was a blip on the computer screen. The money did not evaporate! There was a transfer of wealth. Monies left from stocks and moved in to another position, probably cash. It’s a funny thing, currency, it’s always moving. Yesterday a whole lot moved at the same time.

   The bottom line is this; we can not continue to allow the Federal Reserve to manipulate the markets. The Constitution gives the government the authority to print money.

   In Article 1, Section 8 of the Constitution enumerates the powers of the government. It reads in part:

   The Congress shall have Power . . .

   To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

   On June 4, 1963, a little known attempt was made to strip the Federal Reserve of its power to loan money to the government at interest. On that day President John F. Kennedy signed Executive Order No. 11110 that returned to the U.S. government the power to issue currency, without going through the Federal Reserve.

   President Kennedy’s order gave the Treasury the power “to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury.” This meant that for every ounce of silver in the U.S. Treasury’s vault, the government could introduce new money into circulation. In all, Kennedy brought nearly $4.3 billion in U.S. notes into circulation. The ramifications of this bill are enormous.

   With the stroke of a pen, President Kennedy was on his way to putting the Federal Reserve Bank of New York out of business. If enough of these silver certificates were to come into circulation they would have eliminated the demand for Federal Reserve notes. This is because the silver certificates are backed by silver and the Federal Reserve notes are not backed by anything. Executive Order 11110 could have prevented the national debt from reaching its current level, because it would have given the government the ability to repay its debt without going to the Federal Reserve and being charged interest in order to create the new money. Executive Order 11110 gave the U.S. the ability to create its own money backed by silver.

   After President Kennedy was assassinated, just five months later, no more silver certificates were issued. The Executive Order was never repealed by any U.S. President through an Executive Order and is still valid. Why then has no president utilized it? Virtually all of the nearly $10 trillion in debt has been created since 1963, and if a U.S. president had utilized Executive Order 11110 the debt would be nowhere near the current level.

   Perhaps the assassination of JFK was a warning to future presidents who would think to eliminate the U.S. debt by eliminating the Federal Reserve’s control over the creation of money?

   President Kennedy challenged the government of money by challenging the two most successful vehicles that have ever been used to drive up debt - war and the creation of money by a privately-owned central bank. His efforts to have all troops out of Vietnam by 1965 and Executive Order 11110 would have severely cut into the profits and control of the Federal Reserve.

   President Kennedy wasn’t the first to recognize the affects of the Federal Reserve on the citizens on the United States. On May 23, 1933, Congressman, Louis T. McFadden, brought formal charges against the Board of Governors of the Federal Reserve, The Comptroller of the Currency and the Secretary of United States Treasury for numerous criminal acts, including but not limited to, conspiracy, fraud, unlawful conversion, and treason.

   In one of Congressman McFadden’s speeches he stated:

   “Mr. Chairman, we have in this Country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks, hereinafter called the Fed. The Fed has cheated the Government of these United States and the people of the United States out of enough money to pay the Nation’s debt. The depredations and iniquities of the Fed have cost enough money to pay the National debt several times over.

   “This evil institution has impoverished and ruined the people of these United States, has bankrupted itself, and has practically bankrupted our Government. It has done this through the defects of the law under which it operates, through the maladministration of that law by the Fed and through the corrupt practices of the moneyed vultures who control it.”

   The destructive practices of the Federal Reserve, stealing the wealth every citizen, has been going on since its illegal creation in 1913. The American workers need to wake-up and demand that this atrocity be stopped. As long as there is a private company controlling the money of this country, we will continue to experience the booms and bust that they create. Please take time to investigate these facts and see for yourself what is happening.

   Baron M.A. Rothschild wrote, “Give me control over a nation’s currency and I care not who makes its laws.”

   All that is needed to effectively control a government is to have control over the nation’s money: a central bank with a monopoly over the supply of money and credit. This had been done in Western Europe, with the creation of privately owned central banks such as the Bank of England.

   To understand more about The Federal Reserve and what is going, watch this informative video:

   “The Money Masters - How International Bankers Gained Control of America”

   http://video.google.com/videoplay?docid=-515319560256183936