The Dynamics of American Ingenuity
in the 21st Century
As a nation, we’ve become more complex and diverse. If you compare that to social systems of the past (name an “ism”) or countries today, it seems a good direction. However, this nation has also demonstrated a key ability to pull together collectively when the need arises, even in something as simple as “Hands across America”.
First, let’s recognize who we are. Our collective past is stitched onto our collective soul.
Some touchstones:
We defiantly fought for independence.
We set up a government where every branch would be weak, so that we would be strong.
We fought a bloody, heart-wrenching war to keep our country from fragmenting and to set people free.
We dealt brutally with the natives of this land.
We did not succumb to the Great Depression, but rather, allowed it to reveal that our form of government never faltered in the minds of we, the people.
We weighed our options across the ocean and pushed for victory against Nazism.
We helped re-build what was destroyed.
We took a step closer in the ‘60’s to “all men are created equal”.
We cheered as a wall fell.
We wonder about the rationale of our 3 wars in the last 40 years
We celebrate our wonderful freedom as some become wealthy and some become poor.
Today, we find ourselves in somewhat of a crossroads. National debt, unemployment, collapse of the mortgage giants.
The Collective We
We need to make some smart moves that solidify our nation collectively. We need to assure that we are not destroying our monetary base, yet also not succumbing to the 15 years of “Japan-style” deflation. Can we do both?
It is important that we, as a democracy and republic, rein in nuclear economic “loose cannons” that can destroy us. There is one logical path on the “too big to fail” issue. We need to require powers of proper institutional financial oversight and regulatory restraint with effective methods to implement true authority whenever needed, particularly when it is well-documented that many key corporate leaders of giant financial organizations made the decision to go “all in” on major risk positions, leading to a massive bubble. You can doubt that ( and the holocaust too if you so wish). The massive multiple trillions of securitization of sub-prime by Wall Street, the rating companies such as Moody's and Standard and Poors, and major banks was not Fannie Mae or Freddie Mac, and the sub-prime-caused run-up of property values and first bubble to pop was the conflagration that brought down Fannie and Freddie. End of story.
We need the bridled strength of Wall Street and the banking system to work for us rather than against us, collectively for the health of our nation. Europe sees their banking system basically as pirhannas with little social value. But that is harsh. Let’s recognize that capitalism is also an “ism”, and almost never, never a democracy, but more typically one powerful man giving no one else a “vote”. At the same time, we need to embrace what is good in capitalism.
We the people need to be capitalists on a collective basis. We need to accomplish this feat as the strong republic/democracy that we are, through our clear, strong form of a republic through our legislative body. If anything, may our government re-capture its dissipated strength by reverting to a better dialogue across the aisle. If we have a threat today, it is the breakdown of dialogue in Congress.
Capitalism on a collective basis
A certain dialogue making its way in discussions today is:
“FDR’s spending and programs didn’t work. He didn’t pull us out of the economic morass. It took WW II to get our economy back on track.”
The reality is that FDR did not go far enough. Yes, the $1 trillion deficit built up from WW II ($10 trillion in today’s dollars) got our economy going. How? WW II G.I’s got their pay checks 3 meals and a “bed”, so they saved their pay. Back home, women and men hit the workforce, riveting, sewing, driving steam shovels. It was full employment with spouses working, and that $1 trillion went to the pay checks of the people. After the war, the “little people” spent their money, bought cars and homes, and it was a “bottoms up” not “top down” trickle effect economic rehabilitation. It started a population swell, which are healthy stimuli for economic activity.
We again need this collective capitalism to spur this economy and heal major wounds within the context of the lives of the people.
We have the basis to do this, and more than just the basis. We are neck deep in the basis already. We the people currently have 100% default (creditor) risk on virtually 100% of the residential mortgages in the U.S. (Sure, take out the sub-prime loans still remaining which are now minimal, and jumbos, and then its 95% of virtually all residential mortgages in the U.S.)
We the people guarantee all the Fannie Mae, Freddie Mac, FHA , VA, and residential USDA (rural) home loans in the U.S.
But, we do not own them. We guarantee them so that the owners (pensions, life companies, hedge funds, etc) do not have any default risk. We have the complete 100% downside, shared by no one. We have no upside, since we get none of the interest or principal return for our guarantee.
If we own 100% of the risk, but NONE of the reward, then lets keep the same exact risk posture but get interest on that risk by re-financing all these mortgages. Let’s allow ourselves the capitalistic upside for the people. At, say, 3.25% we would earn $325 billion per year, with no further risk, and by virtue of the Federal Reserve funding/ owning the new re-financed loans. The Federal Reserve pays no interest to fund these.
Our risk position would actually improve dramatically by virtue of the fact that at a 3.25% fixed rate mortgage, significantly less people will default.
From history, FDR’s capital influx was not enough: it took $1 trillion back then. $10 trillion today. In funding these new mortgages, the Federal Reserve position would pay down naturally as interest, principal and early payoffs. The average life of a mortgage is less than ten years on thirty year fixed rate loans. This one-time effort would pay out naturally in approximately ten years. Staving off deflation could be a significant boon to Americans.
We also have a great vehicle to make this happen. Our FHA system (unlike Fannie Mae and Freddie Mac which paid hundreds of millions of bonuses to their executives over many years) paid no bonuses and yet FHA has not asked for one dime of taxpayer money in the last 40 years. FHA would always finance those not qualifying for the Fannie Mae program with lower credit scores or lower down payments such as FHA’s 3 ½ % down payment requirement. But, it has stayed solvent from the fees it charges without any government funding.
How do we make this happen? Much, much simpler than you would guess.
to find out, read the blog link below: (copy and paste)
http://curingthemortgagemess.blogspot.com/2010/10/curing-mortgage-mess_04.htmlauthor: James B. Quinlan can be reached at:
shmclinton@aol.com
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
