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Dave Ramsey's fix - 9/30/2008 3:31:15 PM
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csl7037
Posts: 2062
Joined: 3/24/2008
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From DaveRamsey.com What do think? I'm sending this to my Legislators today. (I've shortened it but go to the website for the full version and his three steps to fix this mess...)
quote:
The Common Sense Fix
Years of bad decisions and stupid mistakes have created an economic nightmare in this country,
but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support
any congressperson who votes to implement such a policy. Instead, I submit the following threestep Common Sense Plan.
I. INSURANCE
a. Insure the subprime bonds/mortgages with an underlying FHA-type insurance.
b. In order for a company to accept the government-backed insurance, they must do two things:
1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.
a. Roll all back payments with no late fees or legal costs into the balance.
b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan.
2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages.
c. This backstop will cost less than $50 billion—a small fraction of the current proposal.
II. MARK TO MARKET
a. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages.
b. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing.
III. CAPITAL GAINS TAX
a. Remove the capital gains tax completely.
b. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down.
This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to
stand up, speak out, and fix this mess.
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RE: Dave Ramsey's fix - 9/30/2008 4:02:33 PM
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Random
Posts: 974
Joined: 4/18/2005
From: Zipperhead
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So, if I have a fixed mortgage over 6%, all I have to do is not pay on it for a few months, then at no penalty to me they will lower the rate to 6%?
This may sound harsh, but not everyone is cut out to be a homeowner, and we need to stop thinking they are. Refi'ing them to a lower rate is not fair to those who actually pay their bills.
Part of me says let the whole thing crumble and then start over. I know that's harsh, but it's probably better in the long run than these "fixes" that make things worse.
_____________________________
"That which has always been accepted by everyone, everywhere, is almost certain to be false." -- Valery
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RE: Dave Ramsey's fix - 9/30/2008 4:10:49 PM
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csl7037
Posts: 2062
Joined: 3/24/2008
Status: online
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quote:
In order for a company to accept the government-backed insurance, they must do two things:
1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.
a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.
b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while working with the borrower—again limiting foreclosures and ruined lives.
I shortened it a bit to make it more concise (and I think it's a violation to post an entire article so I wasn't sure if this would be considered an article).
PLEASE read the whole thing at www.daveramsey.com
I think this part is what politician need to include to cover their backsides....it's throwing "Main Street" (which they claim to be so concerned about) a bone.
Of course I think if you don't pay your mortgage, you don't get to live in that house. That's the way it works and that's what all those papers said when you signed 'em!
But, at this point, no matter how much I think my neighbor might need a lesson in personal finance, I don't and I'm not at all happy about being forced to pick up the tab (and my children's children doing so) to the tune of $700 Billion.
This isn't perfect...because this situation is preposterous to begin with!! But this is common sense and Washington doesn't have any so we all need to send this to them TODAY.
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RE: Dave Ramsey's fix - 9/30/2008 4:41:53 PM
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GroupW
Posts: 2863
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
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To some degree I both agree and disagree with Dave Ramsey here.
Points of agreement:
Some form of homeowner relief could definitely be part of the longer term solution to this current problem. Yes, it rewards people that managed their own finances poorly, and yes it does nothing for the guy that actually did things right and paid his loan as scheduled. Still, it does minimize some losses for the banks, keeps people in their homes, and reduces the number of foreclosures on the market.
Points of disagreement:
It doesn't really address the most critical aspect of the problem which is more short term in nature - banks don't have the cash nor the capital to lend. When banks stop lending, everyone gets hurt.
To this extent, some form of banking assistance is required to get illiquid assets off the banks' balance sheets and free up capital to be redeployed in the banks' normal lines of business.
Either way, somebody that doesn't necessarily deserve to get bailed out is getting a helping hand. It's not fair, it's not right, but it's what is most productive for everyone. Bailing out the banks first gets the financial infrastructure put back in operating condition. Once you've done that, then you can focus on other longer-term, slower-acting solutions like Ramsey's.
BT
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Dave Ramsey's fix - 10/1/2008 11:48:33 AM
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BlueAdept
Posts: 95
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I think this makes a lot of sense.
As for banks not having money to loan, I think that is bunk. They have money to loan, they are CHOOSING not to loan the funds at this point. They will make loans to people that have proven track records, however there will likely be a cost associated with getting loans today.
Changing everyone to a fix rate loan, and waiving all penalties and charges, those are hard to take. However, these can be one shot deals, and those that STILL fail are going to whine and cry for relief again. And the nanny state will likely cave in to them again.
I just read that this is not a "bank" failure, but a government failure. The government stepped in and demanded a change in how banks opperate, and inforced it with the normal government enforcement tool. If you want Freddie and Fannie to buy your loans, this is what you WILL DO! So the banks gave in, like any smart business. So when the whistle was blown in 2004, the hearings basically chastized the regulator not the management.
Rush Limbaugh had some You-Tube video that he played the audio part on. WOW, that was bad stuff.
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RE: Dave Ramsey's fix - 10/1/2008 12:00:43 PM
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GroupW
Posts: 2863
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
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quote:
ORIGINAL: BlueAdept
As for banks not having money to loan, I think that is bunk. They have money to loan, they are CHOOSING not to loan the funds at this point. They will make loans to people that have proven track records, however there will likely be a cost associated with getting loans today.
REALLY???? How do you know this? There is plenty of evidence to the contrary.
Why is it that I can only find one bank in the entire country that can refinance my business loan right now?
We've tried every single one of the majors - no luck. We're stuck with the original bank that wrote the loan, and they're telling me that even they wouldn't have done this if it weren't a refinance of a prior obligation.
Why is GM drawing down on all it's lines of credit BEFORE it actually needs the money? Because they aren't convinced that the banks will be there when they DO need the money.
Why has the inter-bank lending market completely dried up? Why is LIBOR (the rate that banks lend to each other) 200 basis points higher than it should be?
Why are firms dependent on international trade having trouble financing their inventory and leaving goods sitting in the docks at all the major ports?
You are correct that banks are still lending, but very very cautiously and not in sufficient volumes to prevent economic gridlock.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Dave Ramsey's fix - 10/1/2008 7:06:36 PM
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Random
Posts: 974
Joined: 4/18/2005
From: Zipperhead
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I paid two mortgages for an entire year because after we moved our old house would not sell due the housing mess. I didn't complain, I didn't walk away from my obligation, and I didn't demand a bailout. I honored my commitment. I finally sold my home for way less than was owed, and dug into my own pocket to pay off the balance.
I don't expect rewards for that, but I also have NO intention of paying my money to bail out borrowers and banks. Nothing in any of these bailout plans will do anything for those innocent victims who honored their commitments at great financial cost (in our case $many,000). Instead they will bail out the people who took out loans they knew they couldn't pay from banks who knew they shouldn't be offering them.
Sorry, but I say let capitalism rule and let the bad businesses fail and the bad borrowers lose their homes. In most cases they shouldn't have been homeowners in the first place. Every time you bail people out for reckless behavior you provide justification that the strategy is sound and more people engage in it.
These bailouts are offensive to me, because we are propping up businesses that have already shown they are not viable.
_____________________________
"That which has always been accepted by everyone, everywhere, is almost certain to be false." -- Valery
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RE: Dave Ramsey's fix - 10/1/2008 7:13:23 PM
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GroupW
Posts: 2863
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
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Unfortunately, it's always the responsible that pay for the sins of the irresponsible. Bailout or no bailout, it will work out that way. It always does.
As far as letting capitalism rule, are you willing to pay for that statement with your job? It's likely that unemployment in a severe recession would result in 1 out of 10 workers being put out of a job. That's not necessarily a given. Who knows? Maybe we would have no recession at all.
All bailouts are offensive. We should all be offended. Doesn't mean it's not necessary though.
FYI - the plan as structured isn't likely to cost very much at all in the long run. The plan as stated leaves plenty of room for the government to earn a return on their money significantly above their cost of funds. This is one of the great misperceptions regarding EESA. It's also the feature of EESA the government has explained the least.
Bugs the bejeebers out of me.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Dave Ramsey's fix - 10/3/2008 12:18:17 PM
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coolfamily6
Posts: 340
Joined: 4/18/2005
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quote:
I paid two mortgages for an entire year because after we moved our old house would not sell due the housing mess.
My sister and BIL are doing this right now. They are not asking to be "bailed out" but working their like mad to keep their committments.
quote:
Some form of homeowner relief could definitely be part of the longer term solution to this current problem.
Or not because they will continue the same behavior that got them there in the first place. My brother and his wife will spend $500 at the mall on clothes for their daughter and "skip" the house payment because they don't have the money.
_____________________________
If your bible is a mess; your life won't be.
~Encouragement a mom gave to our children at our First Grader's Bible Ceremony!
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