Main Street Needs Help from Bailout Plan

Yes, the Bailout Bill passed!
AND
President Bush has signed it into law.

However, we still witnessed the stock market falling off the cliff on Friday and consumer confidence continues to be at an all time low. Why? Because D Street(Washington) and Wall Street don't understand that Main Street (the American worker and small business) keep this economy moving. Without Main Street spending money, Wall Street and D Street can't survive. It's about time we let Washington and Wall Street know that We The PEOPLE are the drivers behind this economy. Before you read this blog, it should be noted that on Friday, September 26, 2008, I called and wrote many in Congress and the Senate to introduce this modified plan, for I truly believe that we need to reignite the consumer confidence. However, I received only one response, and that was from Senator Jeff Sessions office in Huntsville, Alabama. I plan to speak with his aid on Monday to get their response to this modified plan. We need to get Main Street American taxpayers back to the cash registers and into the bank teller lines making deposits, instead of sitting home watching the bad news and rushing to their local bank to withdraw their hard earned savings.

THE CURRENT PLAN

Now that the bill has passed, Treasury Secretary, Hank Paulson, will be purchasing up to $700 billion in mortgage backed securities from our financial institutions at their current market values, which today are trading at 20-50% of the original value. This will create much needed liquidity to our financial system, but I don't believe it will be enough to encourage the banks to start lending to small businesses again. By the way, don't kid yourself, this bill authorized $700 billion at a time. We all know that $700 billion is a large sum, but it's not going to be enough to solve this crisis. That is why the bill was written with the language that allows Mr. Paulson the ability to purchase up to $700 billion in assets at a time. As I understand the bill, the government will buy $700 billion, sell off a few hundred billion and then go back to the financial institutions and purchase a few hundred billion again. This is what I would consider a revolving $700 billion line of credit secured by YOU, the American taxpayer.
After these mortgages are purchased by the government, one of two things will happen. First, the government will be holding these mortgages until the markets improve. Second, when the market improves, the government will be selling them off, at a small profit, to some of the very same groups of Wall Street institutions that created this mess! The important point here is that the "Markets Improve."

THE MODIFIED PLAN

The fact is, the only way we can get the "markets to improve" is to get Middle America back to feeling confident about the economy and confident about owning a home. The last time I looked, owning a home was still the largest single investment made by most American taxpayers. This leads me back to how I believe we can accomplish true economic stimulus with the recently passed bailout plan. First, every American taxpayer, having a mortgage that has been purchased by the government under this bailout plan, should be given the same opportunity as Wall Street, to repurchase that mortgage (in this case, their own mortgage) from the government. They would be able to purchase their mortgage at a 10-15% premium over the government purchase price. The end result is an instant WIN/WIN for all involved. The homeowner gets to stay in their home at a much lower price, the Government will be paid back the $700 billion+ debt much faster, the housing market will be stabilized quickly and the American people will once again feel confident about spending, which will in turn stimulate our economy. After all, private equity and Wall Street are currently setting up newly created investment funds to purchase these assets from the government under a very similar arrangement. In order to stimulate the economy through this modified plan, every American taxpayer with a mortgage purchased by the government under the bailout plan, should be afforded the same opportunity as Wall Street - to repurchase their mortgage and thereby reduce it by 30-65%.

THE SIMPLE, BUT REAL EXAMPLE

Under the modified plan, if you had a $100,000 mortgage balance and it was one of those purchased by the government, you would be afforded the opportunity to reduce your mortgage by purchasing it back from the government at $30,000 to $65,000. The price would depend upon the price paid by the government under the bailout bill plus a 10-15% premium. This premium would cover the costs of government processing and provide funds to cover any shortfalls that may occur due to truly "distressed assets." The end result is that you have now reduced your $100,000 mortgage down to $30,000-$65,000. This is real economic stimulus for Main Street America and what I believe is missing in the plan.

THE FACTS

Make no mistake.....Congress and the Senate DO NOT have to vote again to authorize Treasury Secretary Paulson to modify the execution of this bailout plan. Under the current plan signed by President Bush on Friday, October 3, 2008, the American homeowner is authorized, just like Wall Street or Private Equity to purchase one of these mortgages/assets from the government.
The modified execution of this plan would immediately stimulate the economy. Given the option, what American homeowner would not take the opportunity to decrease their mortgage under this plan? More importantly, it will make the mortgage payments affordable again for those that were victims to the predators of the teaser rate mortgages. Yes, those foreclosures on your street will come to a screeching halt, your neighbors will be keeping their home and they will begin cutting their grass again! And YES, the American dream of owning a home will continue to be the ultimate goal for our children and grandchildren for centuries to come.

SUPERIOR RESULTS!

When this modified execution of the plan is adopted and American’s have the opportunity to repurchase their mortgages from the government at the same discount afforded to Wall Street, everyone will begin spending with confidence again. The housing crisis will be instantaneously resolved. Local shops, restaurants and automobile dealership will prosper once more. The superior results will be that the economy will get an instant jump-start; the American taxpayer will feel confident about their jobs, confident about owning a home, and confident about the future of America!

TAKE ACTION!

No, this may not be as interesting as those YouTube video's being passed around these days, but it is much more IMPORTANT! With your help, we can get this message out to everyone on Main Street, which in turn gets the message to Washington! Let's do our part to take the steps needed to get out of this Recession and avoid another Depression. Our political Representatives need to know that we do UNDERSTAND the current crisis. Join with your fellow Americans and demand to be part of the solution! After all, it is our money that will be used if the plan doesn't work! Please do your part and pass this blog link around to all of your friends and let's get the message to Washington, so that WE THE PEOPLE can HELP solve this crisis!

Bailout Crisis Needs to Help Main Street

I have stood by and listened to all the rhetoric over the bailout plan and want to give our Representatives a chance to help the American taxpayer, instead of just using us as additional collateral for this $700 billion loan to the government. It should be noted that I do believe we should pass a plan because it is the right thing to do and the Government will make money on this deal. However, we need to take significant actions that will not only help stablize our banking system but help bring the consumer back to the cash register.


I understand the reluctance by many of our representatives to pass this bill; however, I believe they should consider the following as an option to be added to the Senate approved bill so that we can sincerely help the American people and not just Wall Street. Here is a summary of the very real solution that would bring Main Street to Wall Street! My plan is that we simply let Paulson execute his plan (with the added Slyman Plan option). We all know that the government will be funding the purchase of these mortgage backed securities at 20-50% on the dollar. This will take these securities off the balance sheets of the financial institutions that have purchased them and provide the needed liquidity to restart our banking system. In turn, with my plan, Paulson and team will send letters to the Main Street (homeowners) and offer them the opportunity/option to purchase their own mortgage(assuming it is included in one of the government purchased pools) back from the government at a 10-15% premium over the government's purchase price of their individual mortgage. This would allow Main Street to reduce their mortgage by anywhere from 35-65%, creating an instant market/exit strategy for the Government. The premium over the government purchase price would cover those mortgages that may be troubled and reduce or eliminate any potential loss to the taxpayer. Any residual mortgages left in the government purchased pools would be the truly "Sub-prime" or "distressed assets". These assets could then be sold to the newly created Wall Street Funds at a significant discount, taking the government out 100%. I believe every American would agree that given this option, individuals currently paying their mortgage or those that just stopped paying due to their teaser rate being adjusted to market rates, would not turn this type of offer down. This is a true win/win for the government and the taxpaying public. It would be an instant economic stimulus and the catalyst to getting America out of the housing crisis. The reluctance by the Senate and Congress to pass this bill would go totally away, due to the fact that their constituents would no longer feel like the government is spending taxpayer money without a true exit strategy. The new and improved fail safe exit strategy will be to help the American taxpayer reduce its current mortgage debt, which in turn would generate the needed funds for repayment of this bailout plan. Politically, I believe each party would be off the hook! The smart money knows that 87% of the sub-prime mortgages are current, so with only 13% in the non-performing category, this plan would make the treasury money and make Main Street (homeowners) with mortgages in these government pools very happy. In fact, with this approach, I believe many of the non-performing mortgages would now be at a manageable level for those that got behind, because their mortgage would now be 30-50% lower than the original mortgage. This would include those that couldn't make the adjusted payments due to the increase from the teaser rates that got so many Americans into trouble. These Americans would now be able to manage the payment and stay in their homes, reducing the rate of foreclosures tremendously. After all, why should we give those that the American taxpayer considers, Wall Street, the opportunity to profit from dumping these mortgages on the government. Instead of having Wall Street turn around and start new distressed asset funds to purchase these mortgages at some small rate above the rate at which they were sold to the government, we need to help Main Street stay in their homes by allowing them the same opportunity to repurchase their own mortgage from these government acquired pools. Any IRS gain that would be generated from a reduction/forgiveness of debt needs to be waived in this case. I respectfully submitted this plan (The Slyman Plan) for your consideration and hope that you will introduce this into the bill and work with our representatives to move this great Country forward.