Financial Crisis Solution
You have no idea how freeing it is to not know all the intricacies of financial conundrums. It allows me to make great sweeping
pronouncements, to solve problems in a single bound; problems that better people than I have tried to resolve but without success.
Again, pay me to investigate, and I’ll give you better solutions. But if I may be allowed a an inspirational moment, then:
Bail out only those companies who agree to the following:
- All employees and officers to take a 25% wage cut.
- All management and upper management to relinquish all stocks and bonds and investment portfolios, with the exception of retirement plans.
- President/CEO to relinquish one half of his/her personal net worth.
- Board members to relinquish 20% of their shares.
- Companies who do not agree to these terms will be not be helped by the government, and should they declare bankruptcy, all employees and officers will be forbidden to work in any financial institution again, AND the fed will get first dibs on their assets.
Although these recommendations seem draconian, no one who accepts these terms will become impoverished, people can keep their jobs, businesses will become solvent, and the burden on government will be lessened. Not to mention the fact that those who were responsible (in part) for this crisis will have to sacrifice the most.
As for others who were also responsible for the crisis, namely borrowers who hocked their homes and used the funds to speculate on the stock market, these will lose their homes, or, will refinance at higher interest rates and tighten their belts.
As for those who are just aspiring home owners, caught in a power play, I would like to see the states, not the fed, investigate the individual cases with an eye towards providing state sponsored refinancing. I am sure that any home that has paid down 50% of it’s original loan amount is a easy candidate for refinancing. And that’s the quick way to do triage, viz. review loans based on percentage of pay-down.
Moreover, am I wrong in suggesting that refinancing at a higher interest rate will likely be the only compromise that will need to be made? Oh, you say that you borrowed more than your home is now worth. You’ve got options: Sell it, pay off as much as you can, start over; declare bankruptcy and start over; refinance and add a few years to your planned payoff date.
I can reasonably guarantee that housing price increases will no longer exceed the inflation rate, but I can also reasonably guarantee that the movement of the boomers out of homes and into condo’s and apartments (which is one of the root causes for deflating prices in the housing industry), will not result in a catastrophic down turn in prices because of the new emerging immigrant working class who will be seeking homes during the next 20 or 30 years, concomitant with the boomer’s retirement era.
That’s all I got to say about that.