Here’s the problem, and here’s why you need to encourage Congress to pass a solution.
Financial Crisis: Here’s The Problem
- Banks make money by lending money. Loans, home loans in particular, are packaged up and sold in huge bundles. The bank gets cash when it sells these bundled assets, and then uses the cash to make more loans. This ongoing business cycle has been broken.
- Right now banks cannot sell their packages of mortgages. Even though many of the mortgages are solid, there is too much distrust in the financial markets. Since no one will buy the assets, the banks have to hold the assets, and have no cash to make new loans.
- This means both small and big businesses alike can’t get the operating funds they need. It means legitimate, credit worthy home buyers can’t buy homes or cars.
Call It A Bailout If You Want: I Call It A Viable Solution
- Paulson and Bernanke have proposed a solution that will allow the government to buy solid assets, packages of mortgages, at fire sale prices. The purchase of these assets provides banks the cash they need to begin making new loans, thus restoring the business cycle.
- The proposal could pay for itself. As markets stabilize, asset prices will recover and can be sold at a profit; a remarkable and creative proposition that makes sense.
- Smart money takes advantage of fear, and buys cheap assets. For once, let’s make smart decisions with our taxpayer money, buying cheap assets, and rather than bailing out Wall Street, we can perhaps participate in profits at their expense.
Find your Congressman, or House Representative. Write, call, email. Tell them to set politics aside, think outside the box, and try something innovative. Tell them to find a solution.
