Dave Ramsey's Approach to the Economic crisis

by Stangmar

Back to The Real World.

Stangmar2008-10-01 04:37:41
I found this on another site and was curious as to what everybody else thought about it.


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 three step Common Sense Plan.
I. INSURANCE
a. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity.
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. 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.
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. This keeps underperforming executives from being paid when they don't do their jobs.
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. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate.
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. Investors will flood the real state and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.
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.

EDIT: Added formatting for clarity purposes.
EDIT Part Deux: I guess formatting changes didn't happen, since the editor decided for me that i somehow don't want indentations after all.
EDIT Hard with a Vengeance: I guess i showed that editor. Formatting now correct.
EDIT 4: This Time It's Personal: The poll results got deleted, wtf?
Daganev2008-10-02 03:35:09
you don't want fixed rates like 6% to be manditory, then everyone and thier mother will refinance to that percentage. Better to allow them to refinance to the current market rate plus 1 point or whatever.
Stangmar2008-10-02 04:14:51
I agree. I think Ramsey's main point however was to get rid of the ARM.
Acrune2008-10-02 23:26:20
Eh, its ok. I agree that $700 billion is rather much to fix this problem, but I'm not crazy about the 6% thing either, and removing the capital gains tax seems a little crazy, especially since I wouldn't get to enjoy it before it was reinstated tongue.gif
Xavius2008-10-03 02:53:39
There's not a ton in there that I agree with, but they're both important parts.

Subprime mortgages needed to die a while ago. As soon as they showed trouble, they should have been nixed.

The other is CEO income. There are no grounds on which a CEO should view himself as worth more than 500 of his employees. Is it not enough to make 10-20 times your employees? That's not a response to this, though. That's something that needs addressing independently.
Stangmar2008-10-03 04:29:56
I agree, that while I do support free market capitalism, CEO salaries surpass excessive 100x over. They're just another suit, give them a comparable wage to say, an accountant, or other professional.

The problem is, we're probably going to have to eat this, because we've been warned several times that the censor.gif was going to hit the fan. Lo and behold, it did.
Daganev2008-10-03 05:51:17
QUOTE(Xavius @ Oct 2 2008, 07:53 PM) 565975
The other is CEO income. There are no grounds on which a CEO should view himself as worth more than 500 of his employees. Is it not enough to make 10-20 times your employees? That's not a response to this, though. That's something that needs addressing independently.


Don't you think that boards would pay less money to CEOs if they could?

For example, Currently, Actionscript programmers (not designers) make an average of $70K a year, and if you have more than 2 years experience its currently between $85 - $140K (depending on the location) a year. Now Actionscript programmers are on average less skilled than C++ programmers, but they make almost 50% more money, just because of the scarcity of people capable/applying for those positions.

Rules of supply and demand work for workers just as much as they work for goods.