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!