The One Move That Will End The Credit Crisis!
By: Osama El-Kadi - September 2008
Does the US government and the Federal Reserve really think that they will resolve the credit crisis in America by continuing to pour Billions and Billions into the coffers of the mismanaged American financial institutions?
Something must be seriously wrong here, not only with the thinking of the American republican government but with the causes and motives of the people behind this whole fiasco and the way they are tackling it.
This entire crisis started because 9% of house owners in the USA are defaulting on repayments. Not because they are out of work, but simply because they have taken more loans than they can repay.
Perhaps the American republican government need to think radically different to resolve this crisis if they are truly the government of the people by the people instead of being government of the businesses by the businesses.
The crisis is not that the financial institutions are winding down or going bust and helping them is certainly solving the wrong problem. The crisis simply put, is the unstable housing market and the inability of home owners to repay their mortgage debts.
Here is what the Democrats may wish to push the US government and the Feds to consider to resolve the crisis.
The Federal Reserve need to work out the cost of buying the homes of the defaulting home owners (the 9%) and settle their debts (mortgages) with the financial institutions DIRECT. In other words, the FED must consider paying off the defaulting mortgages and STOP them growing like a cancer by the day, simply buying the debts.
The Feds will automatically then take ownership of these homes and work out a humane and sensible plan for the original owners to repay their debts and re-own their homes when their situation becomes better.
Any way you may calculate this cost, the amount of money that will be needed to make such a smart and courageous move will certainly be much less than the amount needed to bail out these financial institutions, in addition and with one stroke relieve a nation and its institutions if not the world from this crisis.
This is simply because the actual mortgage debts are much lower than the inflated debts with 25 years payment schedule, that is full if interest repayment and profit for these organisations.
Such a move will not only relieve the financial institutions from carrying these lose making bonds, but will instantly relieve the home owners and stabilise the housing market, thus solving the real crisis.
Stabilising the housing market is what Alan Greebspane hinted at as the only way the crisis could end.
Something for America to consider, instead of continuing trying the heroic task to influence the storm but instead perhaps building shelters and bridges for the people as a better economic philosophy and policy.
I think however that the republicans will never consider such a move as it is totally against their grain. Only the Democrats can see the wisdom of such a move that encompass all their philosophy of governing the people by the people for the people.
Osama El-Kadi September 2008
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