Wednesday, January 13, 2010

Killing Two Birds With One Stone

So, the two problems we have to solve are 1)bad home loans & 2)personal debt. My first thoughts on the matter were: assuming the subprime borrowers could afford the early teaser rates they were given, the solution would be to convert their loans to 30 year fixed loans at those rates so that they could afford to keep their homes. At this time, of course, lenders aren't able do that with interest rates subject to the fluctuations brought about by fiat currancies. However, what if lenders could borrow money from the government AT A FIXED RATE FOR 30 YEARS. They could then turn around and lend it out for 30 years (at a fixed rate) and not be victimzed by an increase in interest rates. Now we have an effective way to deal with a lot of those bad loans out there (and most of those loans still to go bad). How does this help out with the personal debt? Instead of the administration's complicated and lame attempt at bailing out a narrow segment of homeowners with problem loans, don't discriminate; make the program available to EVERY homeowner AND potential homeowner out there. If every homeowner could convert their, say 6% loan, to a 4% loan, they would be saving hundreds of dollars a month in interest payments. The savings could be used to pay down their credit card debt to the point where the could afford to become consumers again. UNDERSTAND THIS: it is people with money AND the desire to spend it that creates jobs and moves the economy. Lowering interest rates for homeowners will put some significant money in middle class hands WITHOUT the government GIVING anyone anything. If anything, it will shore up government coffers at a critical time in our country's history. More to follow.

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