A Modest Mortgage-Solution Proposal

Forget Bailouts, Bad Banks, and Toxic Mortgages Assets. Here’s a new idea for solving the housing-mortgage crisis:

The Department of Mortgage-Crisis Resolution*

Let’s Insert the Federal Government Between the Homeowner and the Mortgage Company. With its long-term investment horizon, this is truly something that really only the Federal government can afford to do.

Homeowners in Sub-Prime, Adjustable-Rate Mortgages in this new program can continue to pay the same monthly payment that they were paying before the crisis-inducing rates increased.

And Mortgage Companies Can Receive the Higher, Adjusted, Contractual Payments.

In Between Homeowner and Mortgage Company sits the Federal Government, with its new “Department of Mortgage Crisis Resolution.”*

Here’s How It Works:

1. The DMCR issues the homeowner a second mortgage and puts a lien on the underlying property. This additional mortgage extends the length of the original mortgage beyond the length of the original mortgage, with an additional “due on sale” clause.

2. The homeowner makes his regular monthly payment directly to the DMCR.

3. The DMCR calculates the difference between the payment received and the outgoing payment to the mortgage company, and adds that difference to the homeowner’s second mortgage.

4. The DMCR then forwards the higher, adjusted payment to the mortgage company, keeping this sub-prime mortgage current.

5. When the first mortgage is paid in full, the second mortgage kicks in, at the same monthly payment rate as the first mortgage, until the second mortgage is paid in full.

6. If the house is sold prior to the term of one or both mortgages, the sale is contingent on satisfaction of both mortgages.

If You Think About it, This Is a Pretty Good Plan.

No “purchase” of “bad assets” or “toxic debt.”
No unraveling of “tranches.”
No “moral hazard.”
No “good banks” and “bad banks.”
No “free ride for deadbeats.”
No “windfall profits” for “cold-hearted” banks.

Only the Federal Government can afford to wait out such a long time-frame for the return of its mortgage investment. But no bad assets are purchased. And the taxpayers eventually will get every invested penny back, with interest.

Since Most Houses Are Sold Long Before Thirty-year Mortgages Are Paid Off, we will probably get most of our money back sooner than the thirty or forty years of the mortgage. And the homes are almost certain to increase in value far beyond initial mortgage amounts, over a long-enough time. So long as we act now to prop up this long-term value.

The Federal Government—We, the Taxpayers—Are Assured of Getting Our Money Back. And since the DMCR mortgage rate can match current retail mortgage rates, the net effect is of the government buying long-term Taxpayer Bonds, which purchases counterbalance the sales of T-Bills and Treasury bonds.

This Is a Win/Win/Win Opportunity to prop up home values, minimize mortgage defaults, protect the homeowner, protect the mortgage companies and investors, and kick-start the American economy once again. And quickly.

What Will the Partisans Say About This?

The Democrats Might Oppose This Plan because the struggling homeowner doesn’t get a handout from the Federal government. And the Federal government doesn’t get to spend just wads and wads of taxpayer money that we don’t have. Curse those tax-and-spend Democrats!

The Republicans Might Oppose This Plan on the ideological principle that the Federal Government just shouldn’t get involved at all in commercial enterprises. Curse those tight-fisted spend-and-spend Republicans!

But the American People, Desperate for Change, might just look at this thing, see the potential profit for our grandchildren, instead of endless debt. Can the American people of both sides of the ideological, partisan divide go along with a plan that works for everybody?

Like the American Voters Said in November,

“Yes, We Can!”

[*DMCR: better designation to be named later.]

Doesn't Anyone Else Remember Republican Budget Blow-outs?

Throughout the Last Century of America’s History, it has been the Republicans who create massive debt and Depression, and it is the Democrats who bail America out.

Republicans Still Debate the Effects of FDR’s “New Deal,” despite the job growth that was created once Franklin Roosevelt took office. The unemployment rate in the four years from 1933 to 1937 shrunk by about 40%—forty-percent job creation by the New Deal!

But the Republicans Still Want to Wait and See about this stimulus package, because it might not get us out of the Bush Depression in the first 100 days of the Obama administration. After all, it's not Republican mortgages being foreclosed. It's not Republicans who are being laid off.

Republicans Still Revere Ronald Reagan as a Conservative, ignoring the huge excesses in spending during his years.

It Took a Democratic Administration, under President Bill Clinton, to retire the biggest debt that America had ever had and to provide America with a budget surplus. The same budget surplus squandered under George W. Bush.

“Bi-Partisan” Means Both Sides Have to Chip In

Bi-Partisan Is What We, the American People, Want Now. But the members of the Republican Party remain blinded by the foolishness of their failed ideology. Giving Republicans the most-generous consideration (that they are blinded by ideology, rather than that they just might not care how much the “real Americans” of real individual responsibility, suffer), it's a pretty sad fixation on failed ideals.

What's the Difference Between
Consuming and Investing, Anyhow?

The Biggest Flaw in Republican Reasoning right now—besides their blindness to history and the historical effects of job-growth on the welfare of the American people—is that they can’t tell the difference between “spending” and “investing.” By far, most of what the stimulus package offers is investment in things that will last.

Capital Investment Means Borrowing the Infrastructure Projects of Tomorrow, for the working people today. For decades to come, we will have the infrastructure—without additional cost. And meanwhile, those of us who truly live by “individual responsibility” pay our mortgages and put food on the table.

If You Can’t Understand That, then you really shouldn’t be running the nation’s economy. If your idea of an “investment” is a luxury Lexus or BMW, you haven’t a clue why the American economy suffers so greatly under the Republicans Party.

Can America Really Afford Republicans Right Now?

All Those Republicans Stonewalling the American People: you can be sure that they're not missing their Congressional paychecks. Not what you would call a bonus exactly. But then, the Republicans in Congress have their nationalized health care, too.

Are We Really Paying the Republicans Now in Congress to fiddle while America suffers from past Republican excesses?

The Best Time to Buy What You Can't Afford...

....Is When There's Something That You Need
No Matter the Price.

So Long as You Need Jobs, to rebuild confidence in the national economy, and to resume the upward growth of the American way of life, you might as well invest in something that you need, but that there will never be a better time to afford.

The Catch-22 of Mass Transit, outside of such urban centers as New York and Chicago, is that you can't get enough passengers to justify the rail until there's enough rail in place that people can do without cars, but you can't afford enough rail until you have passengers in place to use it.

What This Means Is That once light rail and commuter trains are in place, people build along the tracks. High rises and office buildings, along with retail, and soon you have enough people living and working in place, that the passenger count is no longer an issue.

(After All, This Is What Happens with Roads.)

The Longer We Wait to Build Rail—everywhere throughout the country—the worse and worse the roads get. And no matter how many trains we build, the worse roads will never get better than they will be when the trains begin to run.

We Will Never Be Able to Afford Rail on a balanced budget.

But at a Time When We Need Jobs, and the jobs we need must contribute to tangible investment in America's future, now is the best possible time to start building those tracks.

The Various Components of Energy Independence provide the perfect objectives for our current "stimulus" situation. Jobs put into green energy do treble duty by giving us jobs, reducing our energy dependence, and improving the environment.

It's the Perfect "Win-Win-Win" Situation.

Let's Put This Challenging Opportunity to Good Use. Let's start laying the tracks to American energy independence right now.

Not All Jobs Are Created Equal

At a Time When Americans Call for Jobs, Jobs, Jobs, it's tempting for the Democrats to give us what we want. The form of those jobs seems hardly to matter, and considerations of the expense—when it all comes out of money that we no longer have—seem irrelevant.

That's the Sticking Point for Republicans, who believe that the only legitimate means to create jobs is to cut taxes. Lower and lower and lower. Regardless of whether any corporations are earning enough money to pay taxes in the first place. Regardless of whether jobless American citizens have payroll taxes to pay, either.

It's Time for American Capital Investment.

"Capital Investment" Means Building for the Future, using whatever resources you have available today. We have a tremendous jobs shortfall right now, with an abundance of labor, and we need to get that labor employed—so that people can earn income—and pay taxes—and businesses can sell them things. Let the cars fly off the lots! Let the homes get mortgaged! Let the flat-panel TVs get sold!

But First: There's an economically sound way to do this.

Let's Build the Roads.

Let's Build the Bridges.

So That Once America Is Back to Work, we will have invested our money—and our debt—in something tangible that we can ride on.

Why a Spending Bill Just Won't Cut It

As a Nation, Most of Us Seem Not to Understand the difference between consumption and capital investment: Those roads and bridges add substance, where tax credits and tax cuts are the true short-term wastes.

What Matters Most Right Now is not how much tax we are paying, but whether we are earning a paycheck at all.

We're Losing Our Jobs. We're afraid of losing our homes, or at least our home value.

And So We Don't Spend.


Tax Cuts for Broke Corporations or for the unemployed? Neither pays much in taxes, so the point is moot.

Bonuses for the Wealthy, that get parked in Treasury bills and Certificates of Deposit? Parked money is not getting lent by banks, nor invested by anyone else, so the stimulus effect is nil.

"Rescuing" Banks Whose Reserves, marked to market, are currently without value—and are getting worse? These banks have no choice, under "mark to market" rules, to do anything but shore up their reserves. Thus, no credit is released by these "bailouts."


Stimulating a Stagnant Economy Is One Thing.

Restoring Consumer Confidence is another. It's what will turn our economy around. Whether now or later.

Maybe in the Mean Time, We Can Learn about the difference between consuming and speculating, and between speculation and capital investment. So that we won't have to go through this again.

Right Now, Let's Invest in Our Future, with roads and bridges and other infrastructure. It's not the same thing as spending. It's capital improvement.

It's Time Americans—Including Democrats and Republicans in Congress—Learned the Difference.

The Audacity of Speaker Pelosi

As a Representative in Congress, Nancy Pelosi has a California congressional district as her constituency. But as Speaker of the House, she represents the entire United States. In that regard, she owes it to the overall population to show some consideration for what we, the people, want.

The Stimulus America Wants

The American People Want a Stimulus Bill that looks like a stimulus bill:

Build up the Nation’s Roads and Bridges.

Fund Prizes for Green Energy Initiatives, such as solar power and high-mileage vehicles.

Commuter-Rail Projects, prohibitively expensive in the near-term, look like the only control on the cancer-like spread of the automobile. What better opportunity to get these projects underway than at a time when our need for jobs temporarily overshadows our desire to balance the national budget?

These Are Stimulus Programs That Put People to Work, and which will pay off unarguably over the decades ahead.

Why Then Did the Democratic-led Congress put forth a package filled with the kind of things that brought on the Republican revolution in the first place, back in the day?

Speaker Pelosi, Then

In Seeking an Answer to the Partisan Nature of the House’s Stimulus Package, we need look no further than to Nancy Pelosi's behavior during last summer’s wrangling over the TARP bailout plan. Anyone who remembers Speaker Pelosi’s impassioned, anti-Bush Administration speech just before the vote will remember the sense of anger and dismay that her speech created.

There, at a Time When Congress Struggled to set politics aside and unite in a rescue plan for the Nation’s economy, Speaker Pelosi rubbed Republican faces in it. By her speech, she enmeshed a vote for the rescue bill with a vote against the sitting Republican President.

Nancy Pelosi’s Speech Said, in effect, that a vote for the bill was a vote against the President. Small wonder then that the Republicans turned about-face and voted against the bill.

One Would Hope That Speaker Pelosi Would Have Learned Something from That. That maybe her political “tin ear” would have gotten the message.

Speaker Pelosi, Now

But Apparently It Did Not. Speaker Pelosi’s ear remains as tin-filled now as it was back then. For here we are, at the dawn of a new era in American politics, one in which the needs of the American nation are to be served, rather than the needs of the politicians in Washington.

The Bill That the House Just Passed Without a Single Republican Vote has only a small percentage of its costs going to the kind of programs that Americans of both Left and Right can agree on as appropriate to the role government plays in securing our national infrastructure.

Too Many Liberal Programs

But Too Many of the Programs, which stand out in media reports, concern dubious and even controversial programs:

A Program to Assist in Family Planning, including contraception.

A Program to Re-Sod the Capitol Mall, following 1.8 million pairs of feet trod over it for the recent inauguration.

A Program to Fund the National Endowment for the Arts.

What America Needs from Its Government—

People Across America Are Frightened for Their Jobs. Americans are frightened that they may well lose their homes. We are united in a desire to put the resources of government to work at getting us working again.

The American People Are United in a desire to see the new, bi-partisan, post-ideological era of strong government lead us forward into the twenty-first century—

—versus What the House of Representatives Wants

But the United States House of Representatives, under House Speaker Nancy Pelosi, wants to rekindle the fires of bipartisan government and Liberal ideology, and lead us back into the swamp again. Both sides of the aisle seem determined to continue the "business as usual" that continually disappoints the potential of the American system of government.

Last Week We Took Aim at the House Republicans, whose blind-siding of the American people displayed a disheartening “Audacity of Disdain” for the wishes of the American people.

Today We Take Aim at the House Democrats, whose attempted hijacking of the anti-Conservative mandate delivered in the last election have now displayed, for all to see, the audacity of the Democrats.

The Audacity of Nancy Pelosi.