Maybe we need to set a restore point for the economy

You know when your computer crashes you go back and set a restore point. This is a point where the problem did not exist. It has gotten me out of many tight spots in computer land. But maybe we need a restore point for the economy. Maybe we need to go back to a point before the big crash when everything still worked. Well, here is my Restore Point Solution for our sputtering credit market. The Restore Point Solution is based on four suppositions.


One. The economy is dead in the water because the middle class lost their largest asset--their house.

Two. The economy worked before the mortgage crash broke the housing market.

Three. The mortgage crash broke the back of housing because it wiped out the basics of lending.

Four. If we fix the broken mechanism, then the housing market will return and the economy will start moving again. This will work because the housing market worked before. Not unlike a restore point on a computer, we go back to when the economy worked before.

The Restore Point Solution

One. every second mortgage by law has to be subordinated regardless of Loan to Value ratios if the borrower is credit worthy. Why this? Because the second mortgages are bricks on the first loans. They are strangling the primary mortgages because the banks have not adjusted CLTV Combined loan to value requirements. This is stopping millions of people from refinancing who are credit worthy. Refinancing is the way the middle class clears the board. It is the way they pay down debt, send kids to college, buy cars, do home improvements, buy boats, motorcycles, appliances, give themselves breathing room to catch up. Refinancing is critical to the middle class because it reduces their payments and gives them cash flow. It gives them what the rich have with their reserves, an emergency fund.

Two. You allow credit worthy people to refinance regardless of Loan to Value. One in four mortgages are under water. Again, high combined loan to value ratios are killing loans. People with eight hundred FICO scores are not being allowed to refinance because their homes are upside down. This is wrong. These people will stay in their homes if allowed to go to a lower rate. This is squeezing off the credit market for the middle class homeowner who has done everything right. Tying a loan to an asset that has depreciated due to extraordinary circumstances is bad banking. You must get the money moving around again. This would ignite a boom in refinancing. A literal boom of cash would be unleashed.

Three. Allow people to take money out of their homes and tie it to fifty percent of pre crash levels. In other words, we give people equity again in their homes. This would allow people who truly have equity but because of the extraordinary downward pressure of foreclosures it has artificially pushed the value of their homes down. This would free up millions of dollars and inject it back into the economy. Fifty percent of pre cash levels would give the banks protection.

Four. Credit Amnesty. Millions of people who had perfect credit have been wiped out by the Crash. They were good payers and never had a late. Now because of extraordinary circumstances their credit scores have fallen and they can no longer enter the credit market. This is wrong. The Crash is as much a catastrophe as 9/11 in that it was not the fault of the people. The middle class had no hand in the terrible decisions of the banks. They were the victims. And the victims need to have credit amnesty. If people had good credit before the crash then they should be forgiven and allowed to re enter the credit market. You can not have an economy when only one third of the people can participate.

Five. A permanent buyer credit of ten thousand dollars. Not first time buyer credit, but any buyer credit that will come off their taxes. This will jump start buying again. But it must be permanent until the housing market returns to boom levels. Then it can be stopped. The pump must be primed to get the machine rolling again. This will address the housing market wiped out by the crash.

Ok. That's it. Now, all we have to do is go and set that restore point on the computer. Let's see what button does that....

Bestselling author William Elliott Hazelgrove is the Hemingway writer in residence for the Ernest Hemingway Foundation. He has written four novels, reviews and features for USA TODAY and been the subject of stories in the NY Times, LA Times, Chicago Tribune, USA Today, and NPR'S All Things Considered. His forthcoming novel is Rocket Man. More information can be gathered at
http://www.billhazelgrove.com/

Amnesty for the Middle Class--Whats Good for the Goose...

We need amnesty for the middle class. We are going through the closest thing we have to the Great Depression and it has torched middle class credit. Forget the millions who have lost their homes or the people who have declared bankruptcy. They will be effectively shut out of the credit market for years. But you now have millions of people whose FICO scores have fallen below the magic number of 620 which is the minimum for a government loan--or FHA. These people have now been shut of the credit market as well.

What does this mean? It means that the recovery will not come. People have to be able to secure credit to buy homes again and if they can't then supply will outstrip demand and the values will continue to fall. Credit is the lifeblood of the economy. Because someone is late on a credit card payment or cannot pay a medical bill does not mean they should be denied credit for buying a home. If we go with the assumption that these are extraordinary times then there must be an extraordinary remedy--middle class amnesty.

We did it for the banks and the car companies and the insurance companies. The rational there was yes they made bonehead decisions but these are extraordinary times and for the common good they must be bailed out. So we did. We basically forgave their very bad creditworthy decisions and gave them billions to get their house in order. Isn't that what we should do now for the middle class? Forgive their bad decisions under the umbrella of extraordinary times?

Look at in a selfish way. We must have amnesty for the common good. We need to get the economic engine going again and you cannot have that if you are locking people out because they got behind. If people have to make a decision between paying a medical bill or their mortgage then they will pay their mortgage. Of course incomes are down. Of course people have been laid off. We are in a near Depression and there has been carnage across the board.

So we must have an amnesty for the middle class. This will get people back in the credit market. We cannot give the banks and corporations a bye and then stick it to the middle class. They have been victims too. What is good for the goose...is good for the gander as well.

http://www.billhazelgrove.com/

What's Good For the Goose

Alright, so the banks get a get out of jail free card. And the automakers. And the airlines. And Amtrack. And the retailers (in the works). And whoever else in Corporate America who can find a friend in Washington. So how about the middle class? Radical. You cannot give money to the people...they might riot, tear the clothes off, not spend it...right. Sure, fine, ok, so you don't want to give money to the people. So lets not give money to the people...let's give them amnesty instead. Here's the deal. All the people slipping into foreclosure (up 81percent last month over a million a month) and declaring bankruptcy and not able to pay their bills, medical bills, credit card bills...they will all be knocked out of our economy. Why? Because their credit will be in tatters. FICO scores rule the day and if you declare bankruptcy or are late on a couple of credit card payments, can't pay your mortgage, your phone, electric, gas, then...(unlike the banks and the automakers and everyone else in greed land) you get a ding on on your credit. So, what happens? You get no credit. That's right. Out of the game. Millions and millions of people will not be able to buy a hut in the swamplands of Florida much less a house. They won't be able to buy a washing machine, fridge, car (durable goods you've heard of them) and so guess what, the very people you want to get back in there and start buying won't be able too. We could take the attitude of that is their fault. Fine. Then tell the banks and automakers and retailers and anyone else getting bailout dollars it's their fault too. What's good for the goose... is good for the gander.
http://www.billhazelgrove.com