Hitler was a statist. Stalin was a statist. Mao was a statist. Bush was a statist. and OBAMA will be a statist. Government Power, Government control. And "Liberals" and "Conservatives" are currently almost to a man Statists. The more the State controls the More they Botch.
Now I'm not saying the government doesn't have a roll in regulations of financial institutions but every time something happens people scream for the government to come in and save them. Its not the governments job to fix the markets. Because they don't have any money. The Government doesn't have anything that WE do not first give it.
Now here is the Ironic part.
I say nationalize the Banks. Let the congress create the money (as was constitutionally mandated) and distribute it through the FED and let the Government get rich off the Loans IT makes. Without getting the money created for them and loaned back to them by banks. If it was transparent and open (unlike everything else the government does) it could be a real good thing the only thing that would change is who makes policies and who makes the profit.
I'm not a fan of anything Government but at this point I say Role the FED into the Treasury Dept. and Let congress debate monetary policy on C-Span. I bet the money they could make on Mortgages, Corporate loans and international loans could pay off the Debt in about 8-10 years and then we would be home free, what do you think??
1. Declare a jubilee year no mortgage payments for 1 year while the changes take place.
2. Roll the FED into the Treasury Dept.
3. Create a "Bad bank" to take all the bad Mortgages and failed Banks in, refinance the loans minus 30-50% there value.
4. Re-bundle the mortgages and Sell them as U.S. treasury mortgage backed securities (USTMBS).
5. Sell them to Government retirement accounts (The pentagon alone has trillions it will never spend)
6. Allow Social Security to purchase the securities, SS currently has 2.2 trillion saved up they might as well let there money do some of the work for them/us.
7. Stabilize the Mortgage market and the new treasury note by requiring stricter limits on Mortgages minimum 5% down payments eliminating ARM's and sticter controls on wages Vs. Payments.
I don't know what do you think? But I think nothing would really change except it may be a little harder to get a loan (necessary) and who makes the money from the loans Bankers or the Government.
Bad idea
First off, the last thing we need is the government having control of the currency. The problem was not the Federal Reserve Bank, but the Congress, and past presidents.
There was Jimmy Carter who signed the Community Re-Investment Act in the late 70s and thus set the stage for the current crisis.
Then came the Democrats, and Clinton who used their majority control of Congress in '93 to strengthen CRA more forcing banks to lend out money. Add into the mix the actions of unethical groups like ACORN who were accusing banks of discriminating for refusing to make bad loans, and trying to coerce the bankers to make bad loans through coercion through the political system (government interference in the markets) or by making total asses of themselves.
On top of that was government's decision to allow Fannie Mae to purchase more subprime mortgages, actions that were pushed by Reid and Pelosi, as well as being supported by ACORN, and other Democrats (such as Clinton).
These actions set the stage for Fannie Mae (The Not Non-GSE) to purchase millions of bad mortgages from bankers, and allowed those same bankers to make them, because Fannie Mae was willing to buy them (despite their low quality) as money was available.
With the increase in home prices the loans that could be considered SubPrime increased drastically, and while SubPrime is typically used to refer to credit rating, a more accurate description in the case of loans would be Interest Only, Adjustable Rate, and No Documentation/Falsified Documentation Loans. These Loans have since shown that they are worthless, and the result was an explosion of the derivatives markets, where insurers and reinsurers hedged against the loans in the event of default. With the explosion in the value of the loans the losses at the insurance companies and financial companies that were betting in those markets increased faster than their gains.
Now we have a government that is trying to fix the problem that they created by making good the losses of the banks. It's stupid. The money that they are doing it with likely came out of the pockets of the people that are currently losing their homes. If anything, the only logical solution would be to declare a tax holiday. Not only would such an action possibly avert a massive number of foreclosures, but it would put a large chunk of money (200 - 300 Billion/3 months) into the economy. If a holiday was declared on income taxes and payroll taxes it would provide a boost to the economy, and put money in the hands of those that would be most likely to use it. Those that still have jobs, and are actually paying taxes.
Everyone from the lowest fastfood worker or retail worker to the middle management of firms would see more money in their hands, and more money would get spent.
Even better would be a tax holiday until the economy is moving again, and then the government could slowly reimpose taxes until there is a noticable drag on the economy. At that point (which might take decades to reach if the tax increases are small and sane) the government could lower tax rates again and thus find tax rates that do not effect the economy as much as the current tax rates.
Or perhaps the government could get of its ass, abolish income taxes and the IRS and switch to tariffs.
Which would also serve to give the UN, NAFTA, GATT, and the WTO a giant middle finger with a flag wrapped around it saying, "Blow us, we're not killing ourselves for your benefit."
