Trickling Up II - Addendum Part II

My world traveling friend Dave left a comment (I read it after posting my Addendum Blog) on my Trickling Up – Part II Blog. He puts forward some interesting questions about my proposed Economic Recovery Plan.

First he asks if “it would include well-off folks who can afford their mortgage payment with no problem?”

It depends on what is considered to be well-off.

Three years ago I considered myself to be well-off. I paid all of my bills (including rent) before the due date. I had no debt. I dined out at least once per week. I went to my favorite watering hole at least two nights per week. I could easily afford my bad habits (drinking and smoking). I was able to take a two week (unpaid) vacation every summer. My Medical costs were fully paid (Prescriptions, if any, cost me $7). I could lavishly entertain out of town guest when they came to visit me. Yet I was still able to put money into savings each month.

But there are millions of people that were far better-off than me. There are people who are able to pay their mortgages and bills with ease and yet put a good amount of money into savings. These same people were able to take two or three extended overseas vacations per year.

But since we are giving away the taxpayers money; let’s add Subsection A to Amendment #1 (People that own homes (outright) valued at $750,000 or less would get a one time cash payment of $10,000).

Subsection A, would give the above benefit to Homeowners (homes valued at $750,000 or less) that the people who own there homes outright get. With the stipulation that the money would be paid to them after they had spent the money on Durable Goods purchased in the USA (receipts required).

Dave then goes on to ask “And shouldn't it be considered an interest-free loan from the government (from the taxpayers, actually) that has to be repaid when the place is sold, at least to the extent there's a gain from that low market value?”

I though that this was implied in the original Blog. We are giving the money to the people rather than the Corporations and Banks. The Banks and Corporations would be getting it as a loan; therefore the people that we are bailing out of foreclosure would have to repay the loan when their property sold.


Dave then states “But more importantly, it ain't a stimulus if it goes in the bank, and as you pointed out, this money definitely goes in the bank.”

My point as well as Jon Stewart’s; was rather than give the money directly to the Banks and lending institutions, give it to the people, who will in turn give it to them. This way the Banks and lending institutions get their bailout money indirectly from the Government. The homeowners now have lower affordable mortgages. And with the extra money they are saving, on their mortgage, they spend it and therefore stimulate the Economy.

Thanks for your comments Brother Dave.

The Beach Bum

Trickling Up - Part II

I enjoyed the Super Bowl yesterday – it was a very good game, for a change. However the Commercials were not as good as they are normally. The Halftime Show was good but not as good I had expected. And I’ve been a Bruce Springsteen fan since 1973.

Now let’s go back to Jon Stewart’s Trickle Up proposition. I’m sure that at least one person on President Obama’s staff watches the Daily Show. I’m also sure that the President himself has viewed the Gwen Ifill interview. This should give him something to think about when they re-hash (or should I say un-pork) the Economic Stimulus Bill.

Don’t bailout the large Corporations or the Banking Industry; give the money to the people. Give the money to the people is something that I have been saying for the past 7 or 8 months.

I have a simple plan and here’s how it works. And this plan will stimulate the Economy.

The first issue that I will address is Mortgages.

Many people bought overpriced homes between 2003 and 2005. They panicked because prices were escalating monthly. There was a construction boom here in Florida at that time. It kept a lot of Illegal Aliens of Spanish descent working. But it also increased the price of the used homes on the market. Real Estate Agents use a tool called comparables to judge the market value of a resale home.

At the same time the banks and mortgage brokers were loaning people money that were marginal credit risks at best.

For example – there is a house on the market (2 miles from where I am living), that was built in 1997, it has 3 bedrooms and 2 and ½ Baths, with a screen enclosed swimming pool, mahogany flooring, nearly 2000 sq. ft. of living space, sitting on a half acre plus of property. Assessed Value of $207,000 (Public Record) and an asking price of $132,905 (this is not a short sale).

The people that bought it in 2003 and paid $170,000 for the property went into foreclosure last year and the bank took it back and has listed it with a Realtor. It’s been on the market for 238 days. No nibbles no bites.

My proposal to use the Economic Recovery money wisely is:

1) The Fed would pay the mortgages down to the current fair market price of the property (For example; if you have a $200,000 mortgage and the fair market value of your home is $140,000 they would give $60,000 to the lender, reducing the mortgage to $140,000) This money would go directly to the lending institutions that are holding the mortgage. In turn these institutions (or others) would refinance the new loan at current rates. Thus lowering the mortgage payment.

This would only apply to people that have owned and lived in their homes for at least a year as of December 31st 2008. The homes must be valued at less than $750,000 to qualify (most of the homes over that amount have probably increased in value, despite the current economic downfall).

Now this is an Economic Stimulus.

The Government would have to create about 5000 new jobs (knowing the way the government (HUD) works probably closer to 10,000 jobs) to work this program.

Now this is an Economic Stimulus.

What about people who rent? Shouldn’t they get a break? Yes they should.

For people paying less that $2500 per month (if you pay more than that for rent, you are either well off, insane or live in New York City) in rent, the Government should pay 6 months of their rent in advance. This is a maximum total of $15,000 per household. This program would also create new Government jobs.

And what are these people (home owners and renters) going to do with this money saved. They will spend it, invest it or bank it.

Now this is an Economic Stimulus.

Parts III and IV will follow shortly.

The Beach Bum

Trickling Up

I had originally intended to write this Blog last Wednesday, when the topic was fresh. I didn’t because I was suffering from one of my gastrointestinal aliments. I was in pain! I don’t use pain killers or analgesics of any kind. Therefore the thinking and reasoning part of my brain doesn’t function as well as it should. In other words - I cut back on my alcohol intake.

Last Tuesday night’s guest on the Daily Show (on Comedy Central) was Gwen Ifill touting her new book “The Breakthrough: Politics and Race in the Age of Obama”. Near the end of the interview, Jon Stewart (the Daily Show host and inquisitor) turned the subject to economic policies.

Speaking about the billions (or a trillion)of dollars for the bailout, Stewart said “Give us (meaning individuals rather than the banking industry) the money, but only for consumer debt and mortgages.”

Stewart called it his “Trickle up” theory of Economics. The people get the bailout money and give it to the financial institutions.

I had written several Blogs last summer and fall advocating that the Government give the bailout money to the people rather than to the Corporations that had raped us and put us in the economic crisis that we are currently facing.

Last week I was looking at the Economic Stimulus Bill that passed the House. I don’t see many of sections (of the bill) that will help stimulate our Economy. If you have a few spare hours to waste you can view H.R. 1 here.

Jon Stewart didn’t go into depth on his “Trickle up” proposal.

I have my own proposal for trickling up the Economy. I’ll Blog about that later.

The Beach Bum