Reprinted from: "Cancel Student Loan Debt to Stimulate the Economy" Facebook group by Robert Applebaum"How many times have we heard from our leaders in Washington that education is the key to solving all of our underlying societal problems? The so-called "Silver Bullet." For decades, presidents, senators and members of Congress have touted themselves as champions of education, yet they've done nothing to actually encourage the pursuit of one on an individual level.Some of us have taken advantage of Federal Stafford Loans and other programs, including private loans, to finance higher education, presumably with the understanding that an advanced degree equates with higher earning power in the future. Many of us go into public service after attaining such degrees, something that's also repeatedly proclaimed as something society should encourage. Yet, the debt we've accrued to obtain such degrees has crippled our ability to reap the benefits of our educations, causing many to make the unfortunate choice of leaving public service so as to earn enough money to pay off that debt.Our economy is in the tank. There isn't a reasonable economist alive who doesn't believe that the economy needs stimulating immediately. The only debate now centers on how to go about doing it. While the new stimulus plan contains some worthy provisions, very little of it will have a significant and immediate stimulating effect on the economy. The Obama Administration itself doesn't expect to see an upsurge in the economy until mid-to-late 2010.Instead of funneling billions, if not TRILLIONS of additional dollars to banks, financial institutions, insurance companies and other institutions of greed that are responsible for the current economic crisis, why not allow educated, hardworking, middle-class Americans to get something in return? After all, they're our tax dollars too!Forgiving student loan debt would have an IMMEDIATE stimulating effect on the economy. Responsible people who did nothing other than pursue a higher education would have hundreds, if not thousands of extra dollars per month to spend, fueling the economy NOW. Those extra dollars being pumped into the economy would have a multiplying effect, unlike many of the provisions of the new stimulus package. As a result, tax revenues would go up, the credit markets will unfreeze and jobs will be created. Consumer spending accounts for over two thirds of the entire U.S. economy and in recent months, consumer spending has declined at alarming, unprecedented rates. Therefore, it stands to reason that the fastest way to revive our ailing economy is to do something drastic to get consumers to spend.This proposal would quickly revitalize the housing market, the ailing automobile industry, travel and tourism, durable goods and countless other sectors of the economy because the very people who sustain those sectors will automatically have hundreds or, in some cases, thousands of extra dollars per month to spend. The driving factor in today's economy is fear. Unless and until the middle class feels comfortable enough that they'll have their jobs, health insurance and extra money to spend not only next month, but the month after that, etc., the economy will not, indeed, cannot grow fast enough to stop the hemmorhaging.Let me be clear. This is NOT about a free ride. This is about a new approach to economic stimulus, nothing more. To those who would argue that this proposal would cause the banking system to collapse or make student loans unavailable to future borrowers, please allow me to respond.I am in no way suggesting that the lending institutions who carry such debts on their balance sheets get legislatively shafted by having them wiped from their books. The banks and other financial institutions are going to get their money regardless because, in addition to the $700 TARP bailout, more bailout money is coming their way. This proposal merely suggests that in return for the trillions of dollars that has been and will continue to be handed over to the banks, educated, hardworking Americans who are saddled with student loan debt should get some relief as well, rather than sending those institutions another enormous blank check. Because the banks are being handed Trillions of dollars anyway, there would be no danger of making funds unavailable to future borrowers.To avoid the moral hazard that this plan could potentially create, going forward, the way higher education in this country is financed MUST be reformed. Requiring students to amass enormous debt just to receive an education is an untenable approach, as demonstrated by the ever-growing student loan default rates. Having a loan-based system rather than one based on grants and scholarships or, ideally, public funding, has, over time, begun to have the unintended consequence of discouraging people from seeking higher education at all. That is no way for America to reclaim the mantle of the land of opportunity.A well-educated workforce benefits society as a whole, not just the students who receive a higher education. It is often said that an undergraduate degree today is the equivalent of a high school diploma 30 or 40 years ago. Accepting the premise as true that society does, in fact, place the same value on an undergraduate degree today as it did on a HS diploma 30 or 40 years ago, then what is the rationale for cutting off public funding of education after the 12th grade? It seems to me that there is some dissonance in our values that needs to be reconciled. That, however, cannot come to pass until the millions of us already shackled with student loan debt are freed from the enormous economic burdens we're presently carrying.Many of the vocal nay-sayers who have curiously joined this group seem intent on ignoring the fact that Washington IS going to spend TRILLIONS of dollars, likely in the form of handing blank checks over to more and more banks, as a way of getting the economy under control. Normative assessments of how things should be are fine, but they don't reflect reality.Accepting the premise that Washington WILL spend Trillions of dollars in unprecedented ways (a good portion of which will just be trial and error, since we're in uncharted waters), what is the argument against directly helping middle class people who are struggling, rather than focusing solely on the banks and other financial institutions responsible for crisis to begin with?Further accepting that there is an aggregate amount of outstanding student loan debt totaling approximately $550 Billion, (that's Billion with a B, not a T), one is forced to ask again, what is the objection to helping real people with real hardships when all we're talking about is a relative drop in the bucket as compared with what will be spent to dig us out of this hole?In a perfect world, I share these biases towards personal responsibility and having people pay back what they owe and making good on the commitments they've made. But we don't live in a perfect world and the global economy, not just the U.S. economy, is in a downward spiral, the likes of which NOBODY truly knows how to fix.This proposal will immediately free up money for hardworking, educated Americans, giving them more money in their pockets EVERY MONTH, addressing the very real psychological aspects of the recession as much as the financial ones. Is it the only answer? No, of course not. But could it help millions of hardworking people who struggle every month to get by? Absolutely. Given the current economic climate, as well as the plans to spend trillions of additional dollars that are in the works, one must wonder what is so objectionable about giving a real helping hand to real people with real struggles.2009 and the new Obama Administration is supposed to be about change. Nothing in the new economic stimulus package represents a significant departure from the way Washington has always operated - it's merely a different set of priorities on a higher scale, but it's certainly not materially different from any other economic stimulus package passed during the past few decades.Washington cannot simply print and borrow money to get us out of this crisis. We The People, however, can get this economy moving NOW. All we need is relief from debt that was accrued under the now-false promise that higher education equates with higher earnings.Free us of our obligations to repay our out-of-control student loan debt and WE, the hardworking, middle-class Americans who drive this economy will spend those extra dollars NOW."
-Robert Applebaum
Randi Payton
rpayton@onwheelsinc.com
President Barack Obama may be doing a good job of repairing the nation’s economy but behind the scenes his strongest political base is eroding due to major setbacks in corporate diversity. African Americans reached into their pocketbooks to make unprecedented contributions to Mr. Obama’s presidential campaign last year. However, if the current trend of cutting diversity efforts continues, African Americans will not have the resources to financially support the president’s bid for a second term. When there’s the no work, there’s no money.
Thousands of African American small businesses, automotive dealers and suppliers, minority –owned media outlets and their employees are feeling the brunt of the recession. Businesses cannot get loans, corporations are laying off employees at an alarming rate and domestic automakers, the second largest employer of African Americans outside of the federal government, don’t see diversity as a priority during this economic crisis.
Minority car dealers and minority automotive suppliers who had the funds to support President Obama’s first run for the presidency will almost disappear because of the current economic crisis. Automakers have been corporate leaders in diversity for at least a generation. But diversity is not being considered in the restructuring plans of the domestic automotive industry.
Automakers that championed diversity and encouraged their ad agencies to support it, but did not require those same agencies to practice it, are now dropping diversity advertising and marketing altogether or making significant cuts. Corporations are too concerned with their survival to focus on diversity advertising and marketing which should be an essential part of restructuring. However, it has been looked at as affirmative action instead of a need to reach more than 30 percent of American consumers.
Minority dealers and suppliers who represented a huge financial support base for President Obama during his presidential campaign cannot get financing to operate their businesses and they have lost the support of larger companies that cannot get credit themselves. Not only has progress on this front ceased but all these businesses are closing at an alarming rate.
Small minority businesses experienced huge growth; their owners who often used equity in their homes to finance their start-ups can no longer do so and SBA and VA backed financing is frozen. The banks simply will not loan, although the Obama Administration has pumped money into them to free up the secondary finance markets. Banks either don’t have the cash or they are using the federal money to generate interest payments and to repay the government to escape federal oversight. But small minority-owned businesses have been left out of this equation.
African American employees, who were making inroads into upper management positions when diversity was a corporate priority, are now the first to be cut during tough times. Their input was never really valued; even those who have proven track records of success.
One 30-year senior executive at General Motors told me that this is the worse time that she has ever seen for diversity. Progress in that area is quietly being set-back. President Obama needs to appoint a diversity czar to protect the interests of minority consumers.
Other black politicians as well as President Obama should also be worried because they all need financially healthy voters to support their political campaigns. The ultra conservatives have yet another trick up their sleeve to destroy the economic base of minority consumers. They have one goal in mind – force the domestic automakers into bankruptcy and destroy the unions and the middle class. The current trend is having a devastating impact on African American middle class workers and it would make it difficult for all African American office seekers and incumbents, not just the president, to get future financial support from the black community.
Randi Payton is the CEO & President of On Wheels Media, which publishes African Americans On Wheels, Latinos On Wheels and the www.onwheelsinc.com web site. On Wheels will launch DECISIVE magazines and web hub summer of 2009, a consumer media to help consumer in multicultural market make decision on products and services. Get free digital copies of On Wheels magazines at www.onwheelsinc.com
Small Business needs YOUR HELP TO STOP PREDATORY LENDING PRACTICES. Below are representations of small business who has filed complaints to the Federal Reserve in Washington, D. C. and St. Louis regarding Cass Commercial Bank in St. Louis, MO. I should tell you up front the Federal Reserve position is there is no mechanism for Small Business complaints, only consumer complaints. The Federal Reserve in St. Louis will send a Bank Examiner to review; however, with the backlog of complaints it is going to be months before the Federal Reserve will investigate. SMALL COMPANIES DO NOT HAVE MONTHS!
This particular business is A Women-Owned Business Enterprise (WBE) Certified Company and US Government Central Contractor Registered.
Where is our Government! It is time FOR CHANGE!
The Most Oppressive Debt- The Banking Scam You Never Hear About
As a former student organizer and staff of the US Student Association, I always have an eye out for stories about access to higher education, and the affordability crisis. Not only are there few stories, but they usually focus on the impact of rising tuition. The analysis (if there is any) is it is caused by more cut backs in state funding. There's little to no analysis of the declining value of the Pell Grant.This segment on Democracy Now is astonishing. Like I said, I know more than the average person about student loans, the impact on students, and on access to higher education for communities of color; and I am amazed at the analysis and the evidence here of a student loan racket and wholesale ripoff. You have to watch it for yourself starts 13 minutes in (scroll down for audio or the written transcript).
They show clips of Defualt: The Student Loan Documentary, from the website,
"While the media has focused on the disaster that sub-prime mortgages have turned out to be, only superficial attention has been given to financial giants which have been profiting by approving loans to low-income students with variable interest rates up to 25%."
Another guest, Alan Michael Collinge, author of The Student Loan Scam: the Most Oppressive Debt in US History--and How We Can Fight Back, talks about his personal experience with the student loan industry and reveals how private banks have created a perfect monopoly and racket in student loans that even the mob would envy. His website www.StudentLoanJustice.org is fantastic- it names names.In addition to extraordinary and arbitrary fees, student loans have been stripped of consumer protections, not just bankruptcy protection, but truth in lending laws. Under the banking protection laws, it is in their financial interest for students to default- you owe them WAY more, AND they still collect. This graph will help illustrate that profit motive.
I keep seeing people posting to this forum begging Obama to “force banks to give credit.” Things like “I can’t get a 30 year loan to buy a house.” Or “My credit card company keeps reducing my credit.” When I hear these complaints I am reminded of a crack addict’s pleas that they use the drug “responsibly”. They all feel that if they could just get a little more they would be fine.
The reality is that use of a credit card has a much more profound and expansive impact on those around you then using crack does. Use crack, live 10 blocks over, and I will probably never know or feel the result. However, if you use credit to buy your groceries that you otherwise wouldn’t have been able to afford, you have increased the market value of groceries.
Basic economics most people have at least heard of tells us that “a market price is set by the highest value at which people are ‘willing AND able’ to buy the product. Credit cards have allowed people who normally wouldn’t have the resources to compete in the market against me to have access to those resources.
Let us say you are browsing the fine objects available for sale at an auction. You spy a great cigar store Indian in the middle of all the other stuff that you feel you must have. When the auctioneer get around to tapping his cane on the Indian you feel that little jilt of excitement that you are about to become the owner of that which you desire. Much to your delight he starts the bidding off at just $10. You raise your hand high. But just like that you notice another bidder raise the hand. Back and forth you go. 15 becomes 20. 20 50, at about $75 you wish the other party would run out of money. Now on it goes until you bid $150. You are starting to feel the excitement of the win when you hear the other bidder’s friend say “OK” to the request to loan out $50. You are not to be outdone, so eventually you win the bid at $210. You think to yourself, “I wish that yutz hadn’t offered her that extra 50 bucks or I would have only paid $150 for this treasure.” Well that is how I feel when I walk into a grocery store or an electronics store to buy a product with cash. I wish credit card companies hadn’t offered so many yahoos credit to buy these products. They would be priced more realistically. That is the way I feel when I look at the going rate for college when trying to save up for my children’s future. I think, “I wish somebody would make it illegal to offer loans for college educations. Schools would have to charge a more realistic price if they actually wanted students to show up. Now you might think, “but they have to charge enough to pay for their teachers”. But can you imagine how much less a teacher would have to ask for as a salary if they could get a big screen TV band new for $200. It is a classic “chicken or the egg” scenario. Do people need paid more because credit has allowed market prices to be bid up or is it the fact that market prices are so high, that people need credit to pay for them and thus need paid more. For some reason bread only used to be 10 cents.
What happened in the housing market is that banks started offering longer and longer terms in order to get more people the ability to afford to “buy” them. A win/ win/ win for financing organizations. They get more buyer, buying at hire sale prices (which they are getting a percentage of), and earning more in interest over the long term. Interest that they charge you up front. The same thing happens with everyday stuff as banks offer credit cards into the market. Credit companies get paid form the vendors and the consumers. (The funniest thing I have ever seen was an annual fee. I have to pay you money for the honor of paying you money? This is worse economics then a strip club.)
So it is the people who are going through “credit withdraws” and are trying to convince the world that “then need it to survive” that are threatening to unravel any chance we have at a wholesome economic recover. So stop it. Your credit card reduced your limit? Good, you will thank them when you loose your job. A mortgage company won’t let you finance a 30 year loan on a $150,000 house that ends up costing you $350,000 with interest? Write them a thank you letter for not letting you make a mistake that will not only damage you but the entire economy for the rest of us who were also promised our government would give us the opportunity to be alive, free, and happy. None of these thing can you be if you are in debt and working 60 hours a week just to make the minimums. And I can’t be if I have to compete in a market were you are capable of doing that.
"Many people took out loans they were never going to be able to afford,never! That means somebody knew from day one they were never going tobe able to pay back the loans." The bankers approved these loans and used the money to pay themselves bonuses and payed our government representatives to look the other way…that’s where we are…any suggestions for getting us out of the mess are welcome…but if you just want to play the blame game…where does that get us?
Read what was spammed on the comments section of my blog:
The people that bend the rules GET PAID!
You too can bend the rules by printing out fake paystubs w-2 w2 1099 forms usinghttp://www.PROOFOFEMPLOYMENT.com
Buy a home, car or get a huge irs tax refund just for being you! Do what you have to do to get yours! EVERYONE ELSE DID!!
http://www.FAKEPAYCHECKSTUBS.com
Print out Fake Employment and Fake Income, Wages, 1099, w2, w-2, using your home computer printer!
Oy vey!!
I can remember growing up in the 50’s, when our communities were more self-sufficient. To me, Affirmative Action divided and destroyed what semblance of togetherness we had as a people. Affirmative Action was designed to Window Dress, creating a crabs in the barrel black society.
Affirmative Action is kinda like the Pyramid schemes. Most of those educated and skilled, who understood the scam, took advantage of the opportunity. They were the ones, who were serving as role models, that began moving on up and out of the neighborhoods.
When Malcolm talked of self-sufficiency, he was accused of separatism. The reality is that within the 50 states we are many nations in one nation. During this presidential campaign it was made clear that family and social values were paramount in connecting with candidates. We African Americans are a family and it is time that we begin working toward our own families’ interests. “Charity begins at home”, is not separatism nor selfishness. The neglecting of ourselves and relying on others to provide for us, nurtures that negative perception other families have of our community.
Until we as a people take ownership of our own financial, political and social destiny we will be seen as not deserving of others’ respect. Today it is not a whole lot about fighting for our rights: it is more of how we should exercise our rights. For one, making sure that we are being treated fairly with the allocation of government contracts, loans, grants, scholarships, etc. and with the contracting of capital improvement projects. With a unified voice some of these infrastructure projects will be developed and buil[t]d by us in our communities.
This new world market, which can only expand, provides opportunities that abound; we have family and in-laws around the world, and when the companies and industries begin finding that potential clients and customers are looking to patronize businesses that are more reflective of their family members, those qualified will be in high demand and will be represented from the top executives to the receptionist.
Those of us who are more fortunate should become entrepreneurs in revitalizing our communities. We as a family need to get out of debt and pool our resources, and make our children, our elders and the legacy of our Ancestors, Proud!
Ivan Butcher II
Mr. President Obama,
My name is Common Sense Irv. In light of the problems with the economy I have a solution that may help with the Republicans in regards to tax cuts. Why not do it from the coffers of the American public itself. A percentage of Americans have money put away in various financial instruments for retirement, investment, 401Ks etc. We could have them move the money without penalty or taxation to our floundering banking system in the form of savings accounts. Now here's the meat.
Make each dollar saved an incremental tax break. For example: make one dollar saved 1/10 of a percent tax break applied directly to adjusted gross income. Keep in mind these percentages are purely hypothetical. However they illustrate the jist of the theory.
1- Again 1 dollar saved =1/10 of a percentage point from your adjusted gross income. In this example every 100 dollars of real money moved out of these various retirement and investment instruments and saved would = a full percentage point in tax breaks.
2- Place a minimum on the amount to qualify for the tax break, a time frame the money would have to stay in the savings account to qualify and of course a ceiling on the amount of tax break to be gotten.
3- As an added incentive to qualify for this program the participating banks would have to use this influx of cash as an immediate borrowing capitalization. In other words if they hoard it they will not be eligible for the program thus depositors will have to go elsewhere.
4. Some type of commitment by the banking community would have to be in place a head of time to insure this aspect of the plan.
Why I think this would work?
1. This would empower people who have money to get involved with the rebuilding of America and it’s not just giving a hand out. They stand to gain by opening a regular saving account and receiving a huge one time tax break (of course you could extend this plan as long as you like).
2. It encourages competition by the banks to get people saving. Obviously there would be all types of plans and incentives out there as the banks compete for that saving dollar.
3. Its taking real money already in the economy and redistributing it for the greater good at no penalty to the participants.
4. The beauty of the plan it gives people a reason to invest right away.
The Mechanics
1. No existing saving account would qualify. Money would have to be moved to new savings account designated for this program. Even if the money is in the same bank they would have to establish a new account specifically for this program.
2. By doing this banks would not be able to hide the fundsThe savings funds would have to be used for consumer or buisness loans.
3. In place from the beginning a government reporting system for the banks to keep track of the new accounts and how the new capital is being borrowed out.
4. Tougher penalties for not playing by the rules.
In closing this is a rough draft of a different approach to our problems in jump starting the economy It’s a win/win for all involved. There are many ideas and twist that can be incorporated into this simple plan.
To recap: Joe Plumber takes out of his 401K 10'000 dollars and puts it in a simple saving account.
According to the formula this would = a 100% tax break or a max out figure in accordance with a scale to be determined by the government.
The idea is to set the scale to be inclusive to all that choose to participate.
If done correctly the scales could be set to be attractive to the largest and smallest saver.
Well that’s it. I hope this spawns some different thoughts about our nations problems. My name is Common Sense Irv.I'd love to hear your thoughts on this idea
What happen to H.R. 5244 (Credit Cardholders' Bill of Rights Act of 2008)? The credit card industry is robbing small businesses and the American people blind while receiving TARP funds. They continue to raise APR's and the only explanation provided is, "to make the account more profitable". This once was called "loan sharking". Small businesses and the American people cannot afford to wait for the Federal Reserve's plan of take effect in July, 2010, to get these credit card companies under control. These companies are increasing the APR as much as 30% for customers with excellent credit histories.
How will it be possible for small businesses to get loans once their credit has been ruined by these predatory credit card companies or will small businesses be given the same consideration as these banks and big businesses when applying for loans. What these companies are doing is no different than what has been done with sub prime mortgages in the housing industry. There is something terribly wrong with the credit card industry. Unless they are trying to push you into default so they can receive additional TARP funds or to rid themselves of all credit card debt on their books by write downs. We must fight back, and find out which members of the senate and congress voted for the original bill to make sure we remove them from office.
H.R. 5244 (Credit Cardholders' Bill of Rights Act of 2007) is available at the link below:
http://thomas.loc.gov/home/gpoxmlc110/h5244_eh.xml
Just want to voice a certain view I think MUST be noticed and taken action on. Our federal bailout of lending institutions has gone where? There are articles about banks making mortgage loans available, however when my partner purchased his home, with stellar credit + 20% down, we learned the lending is stricter than ever for mortgages. The majority of Americans are simply not interested in purchasing homes to begin with these days. So where is that money going to?I run a finance consulting firm that specializes in consumer finance, handling nearly 2,500 requests per month for non-mortgage, unsecured finance, both for small businesses and personal use. I have to say that lenders have nearly stopped lending. Home sales have plummeted, credit limits have been slashed (dropping personal credit ratings of qualified, responsible individuals in the process) and lenders have gotten paid for it!My companies clients, whom have 700+ credit with verifiable income documents and the ability to afford the new debt they request (by the lenders published guidelines!) cannot receive financing to consolidate their high interest credit cards, they can't get working capital lines to keep their employees on payroll through these tough times or expand and hire new employees.
As someone on the front lines every day, whose company has seen approvals for our clients (and company revenues) drop by a staggering 40% in the last quarter I really think something needs to be done about this. My company is not going to receive any bailout funds and the actions of these lenders, who received our tax money to fuel this economy, is going to put my business; and the businesses of hundreds of our clients per month, into a position where we will have to put people out of a job to survive this hard time.
Something has to be done about this. If the fundamentals of our economy are built on small business, as so many like to preach to the camera, we can't allow large enterprise to take our money and use it as kindling to burn us.
All in all we gave our money to those unable to manage their own. We are paying the price for their inability to perform now for the second time.
I started this blog because I bought a home a few years ago in Las Vegas, when the market was hot and now I've lost so much money on my home I can't even sell it if I want to. If I did I'd probably end up with a net loss of over $100,000. It was my first home. I put nothing down, with a 5 year arm. I have good credit, and so far have not missed any payments. However because the economy in Vegas is getting worse, I'm not sure how much longer I can afford to stay in this home. And since it's not appreciating and doesn't look like the value will be coming back anytime soon, it's looking more and more like a lost cause. I know there are many others in Las Vegas that are in the same situation that I am in, so this blog will be a good place to express your anger toward the banking system and government. I believe they both share in the majority of the blame for the foreclosures. I hear talk that the Govt. is working on it and Obama is planning on doing something, but not much action or specifics as of yet. I'm not sure the government really does have a plan. At least doesn't seem like they have any real good ideas yet. So I started this blog so Americans can post their thoughts themselves and discuss some possible solutions. The foreclosure crisis is the root of all our economic problems and what triggered the recession, so we will not only be solving the foreclosure crisis, but also saving the entire country from meltdown.
Just wanted to share a letter I sent early last week to my state's Senators, Barbara Boxer and Diane Feinstein, and to all the Democrats on the Senate Banking Committee:
With regard to the Automobile Industry emergency loans, I would like to express two main concerns:
Now that fuel prices have dropped to a fraction of what they were during the summer, and if history is any indication of the automakers’ (and the American publics’) shortsighted habits, the auto makers are going to resist moving toward fuel efficient and alternative energy driven vehicles. They will reapply lobby pressure to resist imposition of efficiency and technology regulations. Their ties with big oil will be renewed and we will face far greater crises in the future than the “depression” the auto makers are fear mongering about in the news today if they aren’t bailed out.
Congressional leaders rightly insisted that the automakers must develop a credible restructuring plan that results in a viable industry with quality jobs and economic opportunity for the 21st century while protecting taxpayer investments.
I believe the kind of detail they need to provide in their business plan includes:
These loan stipulations should be baked into the loan documentation in the form of loan covenants that can be tracked on a regular (quarterly, annual) basis. Confidentiality of all such information should be ensured, and should be shared only with certain members of Congress and relevant auditors who will oversee administration of any funding disbursed.
Requiring specifics from the auto makers should not be viewed as overkill. Per a recent NPR article, the three companies went through nearly $18 billion in cash reserves during the last quarter, and GM and Chrysler have warned of their imminent collapse. The only reason Ford has a bit more cushion is because they had arranged billions of dollars in financing before the financial crisis took hold, not because of their successful business model.
One more point on a claim the auto makers and others have made recently regarding the auto makers’ bailout that it is unfair to withhold financial help to them when over $700 billion has been pledged or disbursed to the financial institutions of this country. It’s comparing apples to oranges. The financial system is the backbone of all economic sectors. Without the ability for all businesses to borrow money and to do banking, all sectors of the economy would fail. The auto industry is but one sector of our economy. Granted, it is huge in terms of the U.S. manufacturing base, but its collapse would have nowhere near the devastating impact that a collapse of the financial system would have.
At the time the initial funding was infused into the financial sector, banks and lending institutions were failing in a domino effect at an alarming rate, unprecedented since the great depression. Unfortunately, we didn't have time to put together an air-tight loan covenant strategy as outlined above for the auto industry. However, I do believe that we did what we had to do to stop the hemorrhaging that would have opened up much greater problems than we face now.
I want to thank you again for all your efforts and thoughtful consideration in this most challenging and pivotal of crises.
President Elect-Obama and his ecomonic team, should take learn alittle something from the expample set by Rudy Giuliani.
When Giuliani took office, he started with a lot of quality of life changes. At the time they seemed meaningless to a lot of people, but gettting rid of panhandlers and increasing a visible police presence helped everyone believe he was making real and lasting change.
Please take a page from Rudy's book and start with making sure every American feels change where they need it most...in their wallets. The ecomonic bail out, right now is a joke. Companies with their hands out is just sick. Fortune 500 companies telling their vendors, and I swear this is a true statemtent, "the money we owe you for this year, we intend to pay, but the money we have not paid from last year...forget about it...we are not going to talk about it". These are the people you are bailing out.
Business 101, if a business is failing because they have no money coming in to pay their bills, then bailing them out does not change the fact that they have no money coming in to their coffers.The bail out money has already been used to bolster wasteful expenditures and mergers.
Here is my great point. Force all the banks and the newly formed banks and any financial institution that takes bailout money, including foreign enities; to create new Debt Management Departments, that will be required to help current and new customers repair their debt. The new customers will be required to open accounts and the deposit money with the institution and the Debt Management department will consolidate the customers debt and place the customer on a spending plan and provide education that will result in a customer with a higher credit score and lower debt.
What is the upside for the bank? They will consolidate debt at a prearranged rate, sugguest consolidation loans and facilliate payback through the customer's accounts. The bank ends up with good debt customers that are extremely valuable and loyal customers that can now apply for car loans, mortgages, education loans etc.
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The bill designed to solve the credit and financial problems was voted down in the House of Representatives on September 29, 2008, because the people didn’t understand the problem or the proposed solution. I’m not at all sure the Members of Congress understood either in a way they could explain it to their voters.
The effects of the problem:
1. If you go into a card dealership to buy a car, you had better bring cash to pay for it, or most of the purchase price in cash, because you won’t be able to finance a loan without the cash. Result: no sale.
2. If you want to buy a house, you’d better bring cash to the table because you won’t find a lender to loan you the money unless you’ve put up a substantial amount of cash, say 40 per cent of the purchase price or more. Result: no sale.
3. If you are a sole proprietor restaurant owner and your cash receipts start to taper off, you won’t be able to borrow short term cash to pay for your chef and the food prepared, or come up with the tax money owed. Result people out of work, now unable to make the mortgage payments on their houses. Result: restaurant closes and mortgage loans foreclosed, and people out in the street.
4. If you and your partners own a small town newspaper and the ads fall off significantly because the car dealer can no longer afford to advertise, eventually you will not be able to pay the staff or pay for the newsprint to publish. Lenders will not be able to loan you the funds on a short-term basis because the loan is risky. Result: paper is sold to one of the big chains, or closed.
The cause of the problem: Many, but primarily the huge number of bad mortgage loans that were made to people who could not afford to pay the adjustable rate mortgages after the initial low rate expired and the loans go from 4.5 per cent to 7 per cent, and then to 11 per cent. Hundreds of billions of dollars of these loans were made and packaged and then resold. Now, these mortgage packages can no longer be traded or sold because of the loss in faith that the interest and loan principal will ever be paid. Result: tightening of the credit market to the point that banks are afraid to lend to other banks even with low Federal Reserve rediscount rates.
Oversimplified? Perhaps a little, but that is my understanding of the credit freeze in the financial markets.
Solution? Federal Government temporarily buys the bad loans from the banks holding them until enough credit is freed up to start the lending process back up. When that happens, the market place slowly returns to normal; loans can be made; and most of the bad loans can be repackaged so they can be sold, and the Federal Government gets out of the picture, after it gets the taxpayers money back and either reduces the debt or reduces taxes.
Political Implications? Leaders. Understand the problem so you can explain it to the dumbest voter, so they will understand the problem and the solution and support their congress members so the right solutions can be made into law. Not sure this has been done well by any of those in leadership in this country. Stop the jargon, and make it simple. More later.
George
The recent crisis on Wall Street has produced fear around the country as well as around the world. The crisis has caused millions of Americans to wonder whether or not their financial future is safe as they once believed it was. This situation that the U.S. finds itself in is the single worst financial meltdown since the depression of 1929. Matters are impacted even further because of the increased globalization of the world and all of its individual economies. The reverberations of this crisis will be felt around the world for some time to come, if something is not done to alleviate the situation.
The answer that the government has come up with is to buy out the failed mortgages of millions of Americans across the country. The government wants to pay the lending institutions that hold these devaluating mortgages, 700 billion dollars, to let the government take possession of the mortgages. In turn, this will put money back into these institutions and hopefully the banks will be more willing to lend money. In theory, this is what is needed to stimulate the economy and get the U.S. back on financial track.
One interesting area that has been discussed is the fact that some congressional leaders are pushing to give some type of help to individuals, as well as to the institutions in question. Congressional fear is that the help given to the banks will not work its way down to the individuals who are at the root of the problem. A solution is needed that takes into account both the institutions and individuals.
The government wants to give the money hoping that it will stimulate the economy, while others would like to see it help people who will put money back into the economy.
A partial solution—Help college students, who have graduated and have outstanding college loans, pay off their loans in total. This is a good risk because the students have already proven that they are success minded and have an established plan for their lives. These graduates are our future mortgage holders, business owners and even national or world leaders. They are also affected by the financial crisis to the point that they are unable to pay back the loans in the same timely manner as once envisioned. According to www.clevelandfed.org the student loan market peaked in 2006, with $75 billion in new student loans being issued. This amounts to more than 10% of what the government proposes as a bailout to financial institutions and it is for only one year. At the current pace, these student loans will surpass the proposed bailout in less than ten years. If these figures are not enough, http://usgovinfo.about.com states that over a lifetime, graduates with a Bachelors degree earn $2.1 million and those with a Master degree earn $2.5 million. There is not a bank in the world that would turn away from a return on that kind of investment, when you consider that most people’s education cost less than $100,000.
If these loans are paid, this will free up a portion of their income that they can in turn contribute back into making our economy healthy again. This will enable these students to purchase homes and invest in businesses sooner rather than later. This is a win-win plan because the homes and businesses that are bought will have a slightly elevated interest rate attached to them. This extra interest will be returned to the government to repay the money that was paid to satisfy the student’s loan debt. Rather than working on a 10 year repayment schedule, these new loans would be on a 20-30 year period. This period would allow the graduates to pay off both loans at the same time, as the increased interest rate will not be felt as much as payments on a 10 year loan.
What if the graduate never purchases anything that requires a loan? Steps would be taken to encourage these new graduates to invest in their future by taking out a loan on a business or property. Maybe preference would be given to graduates who work in specific careers and find themselves in this situation or maybe these loans would be low interest for the first three years. Another way might be to allow them to make purchases without requiring a down payment. The options are plenty. It’s just a matter of finding the plan that fits the individual.
The best part of this whole idea is: While these graduates are building their futures, they are also satisfying an old debt AND rebuilding the economy in the U.S.
This plan would be regulated so as to insure that not just anyone is getting this money. These would truly be deserving individuals who are maybe 3-4 months behind on their loan payments but otherwise a decent risk. The focus of this program should be to help as many aspects of society as it can all at the same time. Let’s rebuild the economy, build the lives of our citizens that have proved their motivation (graduates), contribute to the welfare of our schools, and maybe even assist the new economist that will keep a financial crisis from happening again.
Below are some very basic examples of payments with different interest rates and different terms of the loans.
On a $50,000 student loan, an extra $149.59 per month would pay off the loan at .5%, over 30 years.
$218.97 extra would pay off the loan, at same interest, in 20 years.
This does not take into account any interest previously on the loan.
On a $150,000 home loan, $899.33 per month would pay the loan off in 30 years at 6%.
The same loan could be paid off in 20 years for $1074.65 per month.
If combined, the two loans equaling $200,000 could be paid off at 6.5% in 30 years, for $1264.14 per month.
If paid off in 20 years, the same two loans would equal $1491.15 per month.
As stated above, these are very basic figures, but it gives an idea of what the borrower and lender can expect from these loans. The interest and term of the loan could both be manipulated to get the best result for everyone concerned.
Congressional leaders have the right idea, however now is the time to focus on individuals and not just reward the failed lending practices of large institutions.
Let’s not pass up the opportunity to help success-minded people improve their lot in life.
The Bailout Explained
Candy Metaphor-Rachel Maddow
Mistakes are made and learning must happen but, if we as a country will bailout irresponsible companies, then I see no reason not to bailout homeowners who have been duped by companies. Gov’t is supposed to be for the people, by the people…not for corporations by corporations…
You can send this to your representatives:
I do not support this bailout..for the reasons this article has sited: Judicial Modification of Loans Would Save 600,000 Homes: Purchase of Securities Will Save Nonevia The Center for Responsible Lending: A resource for predatory lending opponents The subprime crisis is severe and will get worse.Current law excludes homeowners from relief available to yacht owners and subprime lenders.Judicial modification would be effective and cost the Treasury nothing. The Benefits * No cost the U.S. Treasury. * Narrowly targets families who would otherwise lose their homes, and excludes families who do not need assistance. Helps maintain property values for families who live near homes at risk of foreclosure. Saves American families not facing foreclosure $89 billion in wealth by avoiding 600,000 foreclosures by their neighbors. * Complements programs that rely on voluntary loan modifications or servicer agreement to refinance for less than the full outstanding loan balance. Voluntary modifications and refinances are the goal. Judicial loan modification would induce more voluntary modifications outside bankruptcy because everyone would know the alternative, just as occurred under Chapter 12, which was passed to modify loans on family farms in the late 1980’s. Please consider this information carefully
I do not support this bailout..for the reasons this article has sited: Judicial Modification of Loans Would Save 600,000 Homes: Purchase of Securities Will Save Nonevia The Center for Responsible Lending: A resource for predatory lending opponents
The subprime crisis is severe and will get worse.Current law excludes homeowners from relief available to yacht owners and subprime lenders.Judicial modification would be effective and cost the Treasury nothing.
The Benefits * No cost the U.S. Treasury. * Narrowly targets families who would otherwise lose their homes, and excludes families who do not need assistance. Helps maintain property values for families who live near homes at risk of foreclosure. Saves American families not facing foreclosure $89 billion in wealth by avoiding 600,000 foreclosures by their neighbors. * Complements programs that rely on voluntary loan modifications or servicer agreement to refinance for less than the full outstanding loan balance. Voluntary modifications and refinances are the goal. Judicial loan modification would induce more voluntary modifications outside bankruptcy because everyone would know the alternative, just as occurred under Chapter 12, which was passed to modify loans on family farms in the late 1980’s.
Please consider this information carefully
The McCain campaign has decided that the New York Times is not real journalism. The stinging article below may be why...
Senator John McCain’s campaign manager was paid more than $30,000 a month for five years as president of an advocacy group set up by the mortgage giants Fannie Mae and Freddie Mac to defend them against stricter regulations, current and former officials say.
Mr. McCain, the Republican candidate for president, has recently begun campaigning as a critic of the two companies and the lobbying army that helped them evade greater regulation as they began buying riskier mortgages with implicit federal backing. He and his Democratic rival, Senator Barack Obama, have donors and advisers who are tied to the companies.
But last week the McCain campaign stepped up a running battle of guilt by association when it began broadcasting commercials trying to link Mr. Obama directly to the government bailout of the mortgage giants this month by charging that he takes advice from Fannie Mae’s former chief executive, Franklin Raines, an assertion both Mr. Raines and the Obama campaign dispute.
Incensed by the advertisements, several current and former executives of the companies came forward to discuss the role that Rick Davis, Mr. McCain’s campaign manager and longtime adviser, played in helping Fannie Mae and Freddie Mac beat back regulatory challenges when he served as president of their advocacy group, the Homeownership Alliance, formed in the summer of 2000. Some who came forward were Democrats, but Republicans, speaking on the condition of anonymity, confirmed their descriptions.
“The value that he brought to the relationship was the closeness to Senator McCain and the possibility that Senator McCain was going to run for president again,” said Robert McCarson, a former spokesman for Fannie Mae, who said that while he worked there from 2000 to 2002, Fannie Mae and Freddie Mac together paid Mr. Davis’s firm $35,000 a month. Mr. Davis “didn’t really do anything,” Mr. McCarson, a Democrat, said.
Mr. Davis’s role with the group has bubbled up as an issue in the campaign, but the extent of his compensation and the details of his role have not been reported previously.
Mr. McCain was never a leading critic or defender of the mortgage giants, although several former executives of the companies said Mr. Davis did draw Mr. McCain to a 2004 awards banquet that the companies’ Homeownership Alliance held in a Senate office building. The organization printed a photograph of Mr. McCain at the event in its 2004 annual report, bolstering its clout and credibility. The event honored several other elected officials, including at least two Democrats, Gov. Edward G. Rendell of Pennsylvania and Representative Artur Davis of Alabama.
In an interview Sunday night with CNBC and The New York Times, Mr. McCain noted that Mr. Davis was no longer working on behalf of the mortgage giants. He said Mr. Davis “has had nothing to do with it since, and I’ll be glad to have his record examined by anybody who wants to look at it.”
Asked about the reports of Mr. Davis’s role, a spokesman for Mr. McCain said that during the time when Mr. Davis ran the Homeownership Alliance, the senator had backed legislation to increase oversight of the mortgage companies’ accounting and executive compensation. The legislation, however, did not seek to change their anomalous structure as private companies with federal support.
The spokesman, Tucker Bounds, also noted that the Homeownership Alliance included nonprofit organizations like Habitat for Humanity and the Urban League. “It’s not controversial to promote homeownership and minority homeownership,” Mr. Bounds said. More than a half-dozen current and former executives, however, said the Homeownership Alliance was set up mainly to defend Fannie Mae and Freddie Mac by promoting their role in the housing market, and the two companies paid almost the entire cost of the group’s operations.
“They were financed largely, possibly exclusively, by Fannie and Freddie,” said William R. Maloni, a Democrat who is a former head of industry relations for Fannie Mae. “We thought it would be helpful to have someone who was a broadly recognized Republican to be the face of the organization, and that person became Rick Davis.” Mr. Maloni added, “Rick, for that purpose, turned out to be quite good.” (Several executives said Mr. Davis’s compensation was not unusual for the companies’ well-connected consultants.)
The federal bailout of the two mortgage giants has become an emblem of what critics say is the outdated or inadequate regulatory system that allowed the financial system to slide into crisis this summer.
At the time that Fannie Mae and Freddie Mac recruited Mr. Davis to run the Homeownership Alliance in 2000, they were under new pressure from private industry rivals and deregulation-minded Republicans who argued that the two companies’ federal sponsorship gave them an unfair advantage and put taxpayers at risk. Critics of the companies had formed their own Washington-based advocacy group, FM Watch. They were pushing for regulations that would deter the companies from expanding into new areas, including riskier and more profitable mortgages.
Mr. Davis had recently returned to his lobbying firm from running Mr. McCain’s unexpectedly strong 2000 Republican primary campaign, which elevated Mr. McCain’s profile as a legislator and Mr. Davis’s as a lobbyist.
“You can say what you want about free-market distortions, but people like the system because it gets them into houses cheap,” Mr. Davis said to Institutional Investor magazine in 2000, adding that he would run the advocacy group out of his Alexandria, Va., lobbying firm.
The organization also hired Public Strategies, a communications firm that included former Bush adviser Mark McKinnon. Mr. Davis wrote letters and gave speeches for the group. In April 2001, he sent out a press release headlined, “It’s Tax Day — Do You Know Where Your Deductions Are? For Most Americans, They’re in Your Home.”
But by the end of 2005, Fannie Mae and Freddie Mac were recovering from accounting problems and re-examining costs, former executives said. The companies decided the Homeownership Alliance had outlived its usefulness, and it disappeared.
John Harwood contributed reporting.
