I have a suggestion based on the following observations.
Much private debt is the result of overspending on houses during our so-called housing boom.
And it is compounded in our public debt in our bailouts of the very institutions that made the “sub-prime” loans which collapsed the system. In other words, institutionalized corruption in the form of “incompetent” govt regulation of banks and other corporations which ended up profiting the profiteers and continues to do so.
I think most American’s agree that anyone here is entitled by right to affordable food and shelter. Let’s get people off the streets. Someone who is eating regularly and has a safe place to sleep is much more likely to look for a job and find one. And even if he doesn’t, society as a whole is better off without people sleeping in doorways. IMHO.
Likewise, society is better off if poor families can AFFORD to move into their own homes rather than pay to live in slums. It might give the slumlords incentive to be more responsive to the needs of their tenants, a kind of privately funded urban renewal. And it would bring some reality to house prices.
But how. Easy.
Offer free loans to any bank which offers the money to the private and public housing markets and, perhaps, the small business market at 6%, simple interest and whose board of directors will take personal responsibility for a yearly audit of those loans. To sweeten the pot, after a successful audit, the bank receives a Fed “free loan” equal to (double?) it’s profit on those loans. After that, it’s between the board and it’s investor’s how the money is distributed.
For riskier enterprises, set a high prime rate and let the banks use private capital with minimal govt oversight. I believe the investors will take over the job, perhaps even demand some accountability.
As I understand it, the banks are already getting free loans because interest rates are essentially zero. But the banks are not lending the money out because of the risk.
As I see it, a guaranteed profit of 12 to 18% per year on money invested in local economic/social improvement might bring some money out of the woodwork. All that is asked in return is complete transparency.
That’s what I don’t get. The sub-1% prime rate doesn’t seem to be doing much other than earning the banks money. Why not raise it? At least the banks will be forced to start trying to increase their returns.
Wait, your solution for the “corruption” of the Fed and other government agencies supporting banks which were offering mortgages that had high risk, is to subsidize banks to give out mortgages with high risk?
How are their profits guaranteed? If the debtors don’t repay their loan will the Feds pick up the tab?
If the banks start having to pay for the money they loan they will need to either (1) reduce the risk of the loans they issue or (2) raise interest rates. Neither of those is a desirable situation at this point.
Banks are not lending ,which would stimulate the economy, because they are guaranteed profit by buying bonds. They get money for free and no risk bonds assure them of risk free profits.
Obama should have taken over a bank and began lending after the crash. Piling the money into the banks was a mistake like cutting taxes to the wealthy. They have lots of money. More won’t change a thing. They just pile it deeper and do nothing.
What a load of crap. If the government had proposed doubling bank profits on risky loans before you came up with the idea, I’d say it is a lock that you’d flip out over corporate America owning the US government, calling Obama a moron for subsidizing the same activity that caused the recession, saying Bernanke needed to be arrested for taking bribes (as opposed to “economic terrorism”).
Regardless of your gall in saying the Fed is in corporate America’s pocket, then saying we should put taxpayer funds directly into corporate America’s pocket with no hope of recovering those funds, it’s a dumb idea.
Bernanke served on the Fed under Greenspan and succeeded him as Fed Chairman. Greenspan had given Keating and Ken Lay his AOK, even as their (unregulated) empires were collapsing in fraud. Second indictment here.
Bush appointed Bernanke, his previous “economic” adviser as Fed Chairman in 2006. Tho Bernanke was aware that a “weakening” (again unregulated) sub-prime market could (was likely to, I say, inevitably) bring it all down soon, he rosily prescribed more investment. I say, up against the wall, m*r.
Nope. Changed my mind. Wonder of wonders.
First, we clear Gitmo of Islamic Terrorists.
How to do it? Easy.
Repatriate the present inmates, first class, to the country of their choice with our apologies and $1M in their respective jeans.
We turn Gitmo over to the Cubans and let them deal with our Economic Terrorists there. When they get a confession of economic and moral turpitude (no torture:)), we pardon the confessed criminals and make it easy them to find some useful work back home, albeit it at a somewhat reduced lifestyle. Good for the planet, too. Win/win.
I bet Castro would do it for an apology and our lifting trade restrictions. It would also end our war on terror.
Wait a sec. How about the The Golden Rule, along with it’s negative, Thou shall not do unto your neighbor what you would not have done unto you. That about covers it.
No one hoping to rule the world would ever leally interpose justice on profit. Regulation? What’s your problem? Let me sell you some protection, please.
(again unregulated) sub-prime market could (was likely to, I say, inevitably) bring it all down soon, he rosily prescribed more investment. I say, up against the wall, m*r.