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The Solution to the Real Estate Meltdown
Rescue-Recovery Plan
Fixing the Economy (updated)

November 11, 2008
Sean Lewis

The Real Estate Portion of this plan is for
at risk properties going into foreclosure.
The Homeowner no longer owns their homes
but now rents and continues to live in their
homes with the option of getting their home
back.

All real estate properties included to the Trust should be submitted
at 75% the value of the 2003 tax assessment value. This will
be the NEW cost basis for the Homeowner.

The homeowners new rent will be based on the new cost basis
value at a 30 year mortgage at a 4% interest rate.

The original homeowner has two years to purchase back the property
at the NEW cost basis value. After 2 years the Homeowner will have
to pay market value but not Less than the NEW cost basis.

If the original homeowner purchases the home it is with
the understanding they can not sell the property for 5 years.

If forced to sell the property it will be at the NEW cost basis.

This prevents flipping.

This deal is only good for 5 years and the new mortgage
Is in the form of a 5 year certificate/mortgage/bond.

The financial institution can hold the NEW certificate and receive
interest until maturity or may sell the certificate as a 5 year bond.
The profit above the New cost basis is split evenly between the financial
Institution and the US government. Also rent collected will be split
evenly between the US government and Institution.

After 5 years the US government may sell the property at fair value
market rates if no one else has purchased the Certificate.
The profit goes to the treasury.

Whoever purchases the certificate owns the home.

The length of the certificates will be 5 years.

The Pricing of the derivatives is this.

If the Financial Institution is not willing to
have oversight, allowing the US Government
an equity state in the company and a hold
on executive compensation then they receive
$.33 on the Dollar.

If the Financial Institution IS willing to
have oversight, allows the US Government
an equity state in the financial institution and
hold on executive compensation then the
Institution will receive $.66 on the Dollar

The TARP Funds should be split 50% for
Home Mortgages to keep Home Owners
in their homes and 50% for the Derivatives
to pump liquidity back into the Financial
Institutions.

The Funds should be dispersed over
3 Quarters $350 Billion, $250 Billion
and $150 Billion, First come First served..

This stabilizes the real estate market.

Gives homeowners a chance to reclaim their homes.

Punishes the financial institution for not doing proper due
diligence, but also allows them to mark to market the
value of their holdings.
It also allows the treasury to receive a fair return for it's risk.

FIXING THE ECONOMY

The US government needs income to run.

Without the income the US government must borrow funds
from other sources.

The more the US borrows, the higher the US Debt goes and
the larger the payment on the Debt Interest becomes and the
more money the US needs to borrow.

The double edge sword is that as the Debt grows the faith in the US
Economy and the US Dollar declines.

The US dollar has fallen by almost half against every major
currency.

The Tax Cuts did not stimulate the economy, did not
create 15 million jobs, did not balance the budget or lower
the debt and did not increase revenues. Add to this mix US
companies exporting not only jobs but entire industries overseas
to maximize profits at the cost of US citizens and you have the
second leg of the collapse.

The American middle class, the true engine of the US economy was
under siege.

Americans were losing their jobs at the same time interest rates were
rising and core inflation WITH food and fuel were exploding higher.
Interest rates were rising so that Foreigners would buy the US
Treasuries to finance the DEBT.

Unfortunately the American middle class had
Adjustable Rate Mortgages tied to the interest rates. So American
Mortgage payments increased beyond their ability to pay.
Foreclosures began, and created a falling real estate market. The
more foreclosures the more home prices fell.

Middle Class Americans had to make a decision, sell their homes at a
lost or hold on in hopes that things would turn around.

Unfortunately not only did things NOT turn around, things became
worst.

The Fuel from Food program accelerated the decline of the economy. It
created a spike in grain prices and food costs and did little to
reduce the price of oil products.

The new law making bankruptcies harder and also no longer protecting
people from losing their homes, which means Americans could not
attempt any financial remedies to restructure their debts.

Financial institutions looking for a new way of making money, linked
up with mortgage brokers to securitized loans in early 2001 to 2003
with creative vehicles such as no money down, interest only, 5 year
balloon ARM's.

Everything looked good on paper but was hinged on one thing, the
continued strength of the Middle Class, which I have shown was under heavy
siege.

As Americans fell behind on their payments the securitized mortgages
were not receiving payments so began to lose value. As the housing market
continued to collapse so did the securitized instruments.

So here we are. I streamlined this, there were a few other issues,
irresponsible spending, off budget expenses of two wars and Katrina.
How do we fix it?

Painfully.

There is no easy fix.

The US Debt most be reduced.

The economy must be stimulated.

The middle class most have jobs.

The long term costs of Medicare
Medicaid and social Security must be addressed.

The tax cuts must be rescinded.

Government spending must be reduced and pay/go instituted.
The age at which retirees can claim benefits must be extended by one
month a year and benefits will have to be means tested.

The alternative minimum tax must be raised to exclude individuals who
are single at $120,000 and Couples to $200,000. (middle class tax
break)

Social Security taxes need to be raised to 7.5% split between
employer and employee and also raised to include the first $200,000.
(I need to double check this percentage it may be less)

Businesses will receive tax breaks equal to the gross expense of
bringing US jobs BACK to the US for 7 years of continuous employment
of the position as long as the net jobs of employed are increased by
the same number of jobs at the job site.

Health Care should be bottom up.

$10,000 of health credits per tax payer for preventative care. The
individual Must get a physical check up each year or lose a portion of
the benefits. Give the Taxpayer a lifetime Budget of $250,000 for
medical care of their choosing. Pro rate this by age 18 to 72 at the
start of this program.

The way to keep medical costs down is early treatment. If a person
does not address a medical problem reduce their benefits.

This is not to REPLACE medical insurance but to give a minimum level
of medical care.

All of the above is the medicine to get the country back on track.

Ending the tax cuts to the rich will lower the debt, which will
strengthen the US dollar, which will mean oil will cost less, which
means inflation will go down, which means core inflation including
food and fuel will diminish, which means the economy will become
stronger because US workers will be able to afford to buy
discretionary products, which will employ other Americans who will
now have jobs so they will not lose their homes which means the housing
market will stabilize, which means banks will be more solvent, which
means money will once again become liquid which means loans for
investments will once again become available which means industry
will grow which means increasing GDP growth and more jobs.

Originally posted to VirtualTruth on Tue Nov 11, 2008 at 12:26 PM PST.

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Comment Preferences

  •  My attempt at voicing a solution (4+ / 0-)

    what do you think?

    Time will Tell all the Truth VT, Virtual Truth

    by VirtualTruth on Tue Nov 11, 2008 at 12:27:07 PM PST

    •  I think it is good that we try to understand (1+ / 0-)
      Recommended by:
      Lujane

      the complicated stuff.  I think it's a good way to explain things but I can't be sure of all the calculating.

      42.7% of all statistics are made up on the spot. A Wrightism

      by publicv on Tue Nov 11, 2008 at 12:33:17 PM PST

      [ Parent ]

      •  but the DEBT must be reduced (1+ / 0-)
        Recommended by:
        Lujane

        42.7% of all statistics are made up on the spot. A Wrightism

        by publicv on Tue Nov 11, 2008 at 12:33:54 PM PST

        [ Parent ]

        •  It will (2+ / 0-)
          Recommended by:
          Lujane, publicv

          but first the economy must be stimulated, and giving the working poor more money has been proven to work at stimulating the economy. The two examples are the Child Tax rebates in 2003, third quarter and the Rebate checks this year. Both saw GDP growth immediately go UP!.

          The other good thing is this is NOT money that must be supplied by the US government FIRST!

          People will spend and tax receipts will still be received on sales taxes and corporate taxes.

          AFTER the economy stabilizes in a year THEN you raise the taxes on the top 5%. If the Republicans say no, then let the Bush Tax cuts sunset and raise taxes on the wealthy even HIGHER!

          Time will Tell all the Truth VT, Virtual Truth

          by VirtualTruth on Tue Nov 11, 2008 at 12:39:36 PM PST

          [ Parent ]

          •  Agreed. I even thought the bailout money (1+ / 0-)
            Recommended by:
            Lujane

            would be better serving the people as well.  Because i don't believe Wall Street will turn a profit on this 'investment' nor do I think they deserve it.  I thought failing businesses file bankruptcy (I am aware of many  of the negative ramifications these interconnected financial institutions cause the whole economic system) But I am galled at the solution.

            42.7% of all statistics are made up on the spot. A Wrightism

            by publicv on Tue Nov 11, 2008 at 12:48:18 PM PST

            [ Parent ]

        •  But the ECONOMY must be stimulated. (1+ / 0-)
          Recommended by:
          publicv

          That means plenty of federal spending.

          "The president was writing checks to the Georgians without knowing what he had in the bank," said a senior administration official.

          by perro amarillo on Tue Nov 11, 2008 at 12:56:25 PM PST

          [ Parent ]

  •  About those taxes (1+ / 0-)
    Recommended by:
    PsychoSavannah

    The tax cuts to the 95% of Americans should be done immediately. Raising taxes on the other 5% should be done one year after the tax cuts go into effect.

    Time will Tell all the Truth VT, Virtual Truth

    by VirtualTruth on Tue Nov 11, 2008 at 12:31:55 PM PST

  •  The format's kinda tough- (2+ / 0-)
    Recommended by:
    PsychoSavannah, Lujane

    It's probabley me, as I'm pretty tired.

    I have a HUGE problem with

    The way to keep medical costs down is early treatment. If a person
    does not address a medical problem reduce their benefits.

    This is de facto mandatory treatment- an ethical issue that I'm guessing you haven't really explored. For instance, who gets to decide when a medical problem has been addressed? Do we factor in religous belief? What about availibility of care? How about appropriateness of care mandated? Treatment over quality of life?

    How do we handle terminal situations?

    The natural reply seems to be that medical professionals decide, but who pays them? Look at any HMO to see how third party payers can influence health care decisions, almost always badly.

    Bad idea.

    I had the blues so bad one time, it put my face in a permanent frown- but I'm feelin' so much better I can cakewalk into town..

    by Remembering Jello on Tue Nov 11, 2008 at 12:37:01 PM PST

    •  Details (1+ / 0-)
      Recommended by:
      Lujane

      The premise is to make the system proactive rather than reactive.

      Catching disease early works, and if you have an issue with the process you opt out.

      Remember this is to OFFER a safety net NOT a comprehensive heath care system!

      It is supplemental care OR a safety net ONLY!

      The reason for the mandates is to keep the costs DOWN.

      Time will Tell all the Truth VT, Virtual Truth

      by VirtualTruth on Tue Nov 11, 2008 at 12:44:33 PM PST

      [ Parent ]

      •  I remember a time when people weren't so (1+ / 0-)
        Recommended by:
        Lujane

        preoccupied with the medical side of life.  It is overbearing in our everyday psyche now.

        42.7% of all statistics are made up on the spot. A Wrightism

        by publicv on Tue Nov 11, 2008 at 12:49:38 PM PST

        [ Parent ]

        •  It's all in our minds, then? Don't think so. (1+ / 0-)
          Recommended by:
          Remembering Jello

          "The president was writing checks to the Georgians without knowing what he had in the bank," said a senior administration official.

          by perro amarillo on Tue Nov 11, 2008 at 12:55:28 PM PST

          [ Parent ]

          •  Not all in our minds. But people seem sicker tod (0+ / 0-)

            ay of all kinds of crazy illnesses that never existed just 20 years ago.  Then we are bombarded with the possibility of a disease with every minor symptom.  We have commercials for drugs that end asking to bring the drug to our doctor's attention, if we a re feeling a certain way.  I don't know  there is just more sickness going around these days and such a huge focus on health insurance, premiums, lack of health care.  For me it's just a little too prevalent.

            42.7% of all statistics are made up on the spot. A Wrightism

            by publicv on Tue Nov 11, 2008 at 12:59:14 PM PST

            [ Parent ]

          •  Yeah- we're a (0+ / 0-)

            nation of whiners.

            I had the blues so bad one time, it put my face in a permanent frown- but I'm feelin' so much better I can cakewalk into town..

            by Remembering Jello on Tue Nov 11, 2008 at 01:08:15 PM PST

            [ Parent ]

        •  My wife has a chronic disorder. (1+ / 0-)
          Recommended by:
          publicv

          She isdependant on medication to stay alive.

          I will outlive her.

          You have no idea what overbearing is

          I had the blues so bad one time, it put my face in a permanent frown- but I'm feelin' so much better I can cakewalk into town..

          by Remembering Jello on Tue Nov 11, 2008 at 12:59:31 PM PST

          [ Parent ]

          •  You know, I'm sorry. I don't mean to (0+ / 0-)

            sound callous or uncaring.  I have family members with chronic diseases.I don't know how old you are but I'm just saying that we are hearing so much about it, all the time, when before we didn't used to.  

            42.7% of all statistics are made up on the spot. A Wrightism

            by publicv on Tue Nov 11, 2008 at 01:01:31 PM PST

            [ Parent ]

            •  I'm 40. (1+ / 0-)
              Recommended by:
              publicv

              We've been struggling with this for 15 years, and she was ill when we met. It has defined my adult life.

              I'm gonna bet you're younger than I am.

              The population is aging- Health care doesn't seem important when you're young and healthy, but it becomes more important as you get older and sicker.

              I had the blues so bad one time, it put my face in a permanent frown- but I'm feelin' so much better I can cakewalk into town..

              by Remembering Jello on Tue Nov 11, 2008 at 01:05:39 PM PST

              [ Parent ]

              •  Agreed. I'm 39. (0+ / 0-)

                I understand.  It's not the care part that bothers me.  it's the advertising.

                42.7% of all statistics are made up on the spot. A Wrightism

                by publicv on Tue Nov 11, 2008 at 01:09:20 PM PST

                [ Parent ]

              •  If these comments are directed at me? (0+ / 0-)

                My wife had stage 4 cancer and my mother had Parkinson's.

                I am VERY familiar with medical costs, and I bore the brunt of these costs for both during the last 8 years.

                My mother passed away this year and my wife is nearing the 5 year mark of being a cancer surviver.

                I am 48 years old.

                Time will Tell all the Truth VT, Virtual Truth

                by VirtualTruth on Tue Nov 11, 2008 at 01:10:12 PM PST

                [ Parent ]

  •  Medicare and Medicaid (0+ / 0-)

    I only gave one line to this because if we extend the the time one needs to qualify for benefits AND means test, there WILL be enough funds if we also require regularly scheduled check ups, with penalties for patients who do not go to these check ups, and doctors who miss ailments or are overzealous in treatments.

    Time will Tell all the Truth VT, Virtual Truth

    by VirtualTruth on Tue Nov 11, 2008 at 12:56:57 PM PST

  •  ONE MISTAKE! (0+ / 0-)

    The financial institution must hold the certificate for 2 years before they can sell it. This is to give the original homeowner a chance to buy back their own homes.

    Also the US government does not have to give funds to the financial institution for the Certificate. It will be backed by the full faith of the US government. And if the Institution does not sell the home after 5 years, the uS government will THEN deliver the funds for the Certificate at the maturity in 5 years!

    Time will Tell all the Truth VT, Virtual Truth

    by VirtualTruth on Tue Nov 11, 2008 at 01:06:40 PM PST

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