My Bailout Proposal

Its back. Thats right. We are having another global depression. Some are saying it is already worse than in the 1930s. With the George Bush stimulus checks, the numerous bailouts, and the current Congressional bill along with the Treasury Secretary's proposal, we are looking at, in the course of less than a year, an increase of the federal deficit of around 4 trillion dollars. I'd give you an exact figure, but they don't have one.
So, lets look at what caused the financial collapse. A person observing the daily monitored news reports covering the housing market would be a big clue as to what caused it. The default of millions of sub-prime loans by people unable to pay for the loan, and the credit default swaps (when insurance companies were insuring the loans to the banks, to more than just the bank that owned it. That is right, you can't take out life insurance on your neighbor, but some companies were letting your neighbor take out insurance on your home loan. This was done in the hundreds of billions of dollars range for insurance. Insurance companies wanted more sub-prime mortgage loans because they wanted to sell more insurance. Banks wanted to give out more loans to get more payments on the interest. Then the third group, the ones who bought the insurance on the loan that wasn't theirs, wanted more because they got to collect if any of them failed (by collect, I mean not just $150,000 on a home loan, a bundle of failed loans worth 10 or 20 billion dollars.) Now, how did the insurance companies profit from this, all you had to do to get the loan insurance (credit default swaps just to clarify) was make a 10 percent down payment. Then it was yours. The bank had a billion dollars on a ten billion dollar insurance, which had never failed in history as a major investment on the whole. It was almost the safest possible investment one could make. At that point it is in your best interest as a third party owner of the loan insurance, to make the home loan fail. So you encourage, through corporate lobbying, not in Congress, but in CEO board rooms at the central bank, the 1 percent sub-prime rate to change after a while not from 1 to 5, or 6 as originally, it goes up to 16, 20, or 25 percent. So a monthly payment goes from 300 or 400 dollars to 1000 overnight. In observance, the inflated middle class becomes lower class yet again, thus sparking a nice class warfare, which I'll talk about again in another blog.
So, person goes bankrupt or their house forecloses, and they are out of a home. The bank loses the loan but the insurance is going to replace the losses. Now, a bank taking out the insurance isn't an issue. Ten people claiming the ten billion dollar insurance on a package of defaulted home loans, the insurance company doesn't have that much money. This is why AIG collapsed. AIG insured these loans, and when the groups they insured came to them, there were too many claims and not enough money. So when that happens, the bank is out, the insurer is out, the others who paid for the insurance are out, and the homeowner is out of a home. Gloriously out of this immense stupidity, very few are going IN to a court room. The groups who write our laws have hopefully, but I've yet to see it, outlawed such a practice.
Now, the fallout goes all the way around and the homeowners, numbering in the tens of millions, are out of homes and bankrupt. The banks are out of money. So when the former homeowner, now in small apartment hopefully, if not they are buying their home in the car lot, goes to buy a car, they have a horrible credit rating, and the bank has nothing to led, so the car can not be purchased. This reigns true for all major purchases. Thus the car industry is also failing. Now we get to the government remedies. The government gives people a stimulus check in the mail. They are hoping the people will buy the big purchases with their stimulus check. Instead, the government forget that everyone still had their massive debt and those that didn't were afraid to let go of their cash. So, most people paid their bills or put it in the bank. Now, you would think this might help the banks, but it wasn't enough. However, the housing market is still crashing. It didn't work. The banks are still losing money and people are still losing homes. Companies are starting to make lay offs because of the lost buyers. Thats when an idea to save the banks comes into view about six months later, passed two months after that.
So lets save the banks. Banks get help they can loan more to people so cars, refridgerators, wedding rings, platypuses (platypi? Plat PLUS?) and other great stuff keeping those industries alive. So they put 400 billion into the banking system. I'd tell you how, where, or when but in all honesty, nobody knows. The government didn't keep track. The oversight groups were too busy raising fists over the wars in Iraq and Afghanistan. The banks were too busy losing more money than they were getting because, yet again the failure of this attempt, the homes were still foreclosing. So the banks are still in rough shape. The companies are announcing even greater layoffs than before. So, now we come to the current and proposes stimuli.
So lets save the companies. Construction is shutting down because people can't afford new homes considering their losing their jobs. Their losing their jobs because the company they work for isn't finding enough customers. So the proposed bill here is to provide a customer (the United States of America government) for the construction companies and any company really. They are buying a new fleet of cars for their staff, not senators, but the senators STAFF. Hey its ok, they are flex fuel vehicles after all which will be in another blog down the road. So the bill goes on and on through a month of painful deliberation, partisanship, campaign hard feelings by the Democrats (they claim Republican's hate it because they lost the election, we hate it for the reason's I'm outlining here) and at the end of the day when this goes through it will not help the mortgage industry. However, four jobs for a month building a tennis court is going to save the nation right? For a recovery bill, it isn't going to help people RECOVER their homes. Then ontop of it we get an announcement for 1.5 trillion dollars (potential for 2 trillion) to be the NEXT stimulus bill.
This new bill is supposed to be a "comprehensive bank bail-out". Basically we are bailing the bank out yet again, but this time we are going to know where the money goes. I'd tell you more about its effects, but we've seen its effects in the past bank bail out. We might not know where it went, but we know it went to the banks one way or the other. This will be the same way, but we'll know which banks get it and which don't. Won't that be lovely. Also, this one is bigger than that one was. Why? The banks need more. They've been neglected by the debate over the current stimulus. The homes are still going under and their bank rolls are running out. People are still losing their homes. Which is why I will now outline my proposal.
Pay off all the home loans in the country. People keep their homes, and get more money every month to flush into the economy as always without worrying about losing their home, banks get their money and can loan for cars and colleges again, then the ripple goes through the rest of the economy. Now was that so difficult to figure out? Congress? You reading this? Yeah, I'm talking to you. I'm a citizen and you're kinda sorta supposed to listen to me. I may not have voted for you, but the least you could do is represent me. Anyone else reading this, tell me what you think. This blog isn't just a blog, its interactive.