Don’t we all know that the bailout plan failed at first because the public is disgusted and would rather take a short-term financial downturn themselves than reward the powerful elite who have been fleecing us for decades. The public is sick to death of trickle-down economics, and the outcry was just too loud for government representatives to ignore.

So congress needs to figure out a way of getting cash back into the credit market in a fashion that is quick and fair to the public. So, here it is:

We should take the $700 billion and simply pay down the home mortgages purchased between certain dates, (let’s say 2000 when real estate prices started going crazy and 2006, when they really started crashing). That’s it. It’s that simple.

Alright, I realize it isn’t that simple, and I anticipate some of the issues below, but first, let’s take a look at how this resolves the problem.

I did some poking around at the National Association of Home Builders (NAHB) website and discovered that there were roughly 26 million homes sold between 2004 and 2007. Now let’s estimate that there were about 35 million sold between 2000 and 2006 (pretty rough estimate, but in the ballpark, I’m sure). Dividing into the $700 billion, that comes out to an average of about $20,000 per home. With an average home value of $200,000, that means about 10% of the home value. Are we on track?

What does all this mean? That means, if you bought a home for $200,000, the Bailout Commission writes a check for $20,000 that gets applied right to your mortgage. You paid $500,000, your mortgage holder receives a check for $50,000, etc… So the first result that happens is the lenders are all of a sudden flush with cash. They pay their obligations. The credit markets unfreeze. Financial institutions get back to business. (Hopefully not business as usual!).

Meanwhile, you’re happy, right? You may not have gotten a cash to spend but your mortgage is reduced. If you bought during those years you’re probably still under water, but not as much as before. So you’ll still have to take some lumps, but it will definitely soften the blow. You’re less likely to default and you feel more hopeful.

Alright, before everyone starts knocking the idea apart, I’ll point out some of the obvious objections:

1. It’s Socialism! - Yeah, I guess it is. And there will definitely be some idealogues who will object to it on that level. But somehow I think those objections will come from the people who don’t benefit from the plan. I have a feeling the 40 million or so families who get those mortgage payments will be able to live with it.

2. But it’s not fair! What about all the people who bought homes before the year 2000? - Come on… give me a break! You’ve enjoyed six years of super-low interest rates and hyper-appreciation. And now, on top of that, you want the mortgage reduction too? In the name of fairness? Please. And as for those who bought after 2006 when the market was already falling, well, I’m sorry, but that was just stupid. You don’t deserve a break.

3. What? It’s too complicated. How do we decide who gets how much? - We may need to figure out and come up with some formulas, but I actually think it will be fairly simple. It’s just a flat percentage of the purchase price of the home right across the board.

What other flaws do you see with this plan? Let me know! And if everybody else thinks this is as simple as I do, let’s push it on our representatives.

My disclosure: In the interest of full disclosure, I should divulge that I am among those who would benefit from this mortgage reduction plan, so I do have an agenda, but at least it isn’t a hidden one.

Tags: Biology and Technology