Experts eye alternatives to bailout approach

[Amerigo Vespucci]

Source: MSNBC

To hear Henry M. Paulson Jr. and Ben S. Bernanke tell it, there is only one plan to save the economy -- use $700 billion in taxpayer money to take the worst of Wall Street's assets off its books.

But leading economists and financial thinkers argue that there are a host of alternatives that would reduce taxpayers' liabilities and perhaps more effectively address the urgent crisis in financial markets. Although these experts concede that the clock is ticking, they say different approaches have been dismissed too quickly.

While the government's plan is built around buying troubled assets, other options offer sharply different visions.

One approach seeks to reduce taxpayers' liability by offering collateral-backed loans to troubled banks, leaving them to work out their own solutions. Another idea is to have the government set up a profit-driven investment fund with the aim of infusing the financial system with cash without taking on bad debt. Still others suggest radically different tactics of directly helping homeowners by reducing mortgage principal or bolstering banks by suspending capital gains taxes.

Read more: http://www.msnbc.msn.com/id/26861562/

[JDPriestly]

1. My solution is mentioned.

The government should refinance the mortgages and turn them into 99-year mortgages. The homeowners should have to pay the government some of the profits if they sell their homes.

I call this the Family Values Plan. I call the Paulson plan the Predators' Protection Plan.

The reason that I call my idea the Family Values Plan is that it keeps families in their homes. It also protects neighborhoods and housing stock. One of the biggest problems in this crisis (to the extent that it really exists) is in areas in which a number of houses have been or will be foreclosed, there are every growing numbers of abandoned houses. No one is tending the yards. No one will is protecting the homes from vandals. Living next to one of these abandoned homes would be a nightmare. In urban areas, the homes will invite gangs, graffiti and violence. Not good for families and children.

Another reason that I call this the Family Values Plan is that refinancing the loans will prevent families from becoming homeless. Children today have enough problems. Often both parents are working and there is no extended family to care for the children after school. Children do not need to be uprooted at times like these. The emotional stress on children of parents facing financial ruin and upheaval is terrible. Also, domestic violence, not just against spouses but also child abuse is likely to increase in families whose homes are foreclosed.

I did not listen to all of the hearing with Bernanke and Paulson today, but I heard a lot of it. An the amazing thing to me was that neither Bernanke nor Paulson seemed at all concerned about the people who are losing their homes or the neighborhoods that will be trashed by the foreclosures.

The argument against my plan is that those people who entered into these sub-prime mortgages unfairly obtained houses that they really couldn't afford. Sensible people, smarter people stayed away from these mortgages. As a result, a lot of prudent people, especially young families, do not own homes while a lot of foolish people do.

Thus, it is not fair to keep those who bought their homes at overly high prices in the homes. Those homes should be sold for reasonable prices to people who waited until they could really afford them. That is a good argument, but I believe that, although my plan will slow down the decline in the housing prices, those housing prices will still drop sufficiently. That is because my plan should be accompanied by strict regulation on mortgages that end sub-prime mortgages and encourage responsible home purchases and mortgages.

So that's my Family Values Plan for the mortgage crisis.