I voted "No, but with mods" below. Here is why and my suggestion. (If you agree send your version of it to your Congress reps, NOW.): Paulson’s plan will fail because it treats only a symptom and not the cause of America’s financial illness, which is: Too many were persuaded to buy more house than they could afford by irresponsible, greedy writers of innovative new mortgage types. Everyone was operating on the “greater fool” theory and assuming the un-payable mortgage would clear later when the house was resold. Many of these mortgages writers knew it was a CRIMINAL Ponzi scheme, designed to collect large bonuses. Throw some in Jail and recover bonuses etc. - more below. A real cure must: (1) Restore liquidity to financial system. (Make the toxic paper worth face value.)* (2) Get Joe American into housing he can afford. (3) Transfer real assets, not toxic trash, to Uncle Sam. (4) Not significantly increase US’s already excessive debt. (5) Prevent repetition of the problem. This is possible as follows: SUMMARY: U.S.'s money automatically buys houses at foreclosure auctions if highest bid is less than the mortgage debt, not toxic trash from banks. The banks are helped as they know the foreclosure sales will cover the mortgage so this is an anti-dote to the toxic poison they now hold. I.e. from POV of the banks, not one piece of this paper is worth less than face value. Everyone knows this so, it becomes a marketable security. If the bank needs more liquidity, they can sell it and make new loans. Goal (1) accomplished. The ex CEO of Goldman Sack’s plan helps GS and others holding toxic loans by transfer of them to Uncle Sam. It just sticks Joe American with the toxin but is no anti-dote for the poison. Here is the anti-dote: The government buys partial ownership of EVERY foreclosed house, if it would otherwise sell for less than the mortgage. Joe may remain in the house for up to one year with deferred interest bearing rent. During that year, Joe must find a home (house, apartment or trailer) he can afford, at least to rent. Then, when opportunity exists to recover the price paid, Uncle Sam sells his ownership share of house, which may be more than the price paid as this plan is taking houses off the market. - Keeping price of houses from falling every month as they are now, and will continue to fall under Paulson's plan, which only aids the banks, not the real-estate industry or evicted Joe. When Joe gets out from under some of his debt, he begins to pay his deferred months (<13) of rent and interest, over 5 years if need be. Goals (1, 2, & 3) accomplished. Goal 4: Instead of an immediate $700 billion increase in US’s debt ceiling, banks send bills to Uncle Sam for ONLY the DIFFERENCE between the unpaid mortgage amount and the price some buyer paid at public foreclosure auctions ONLY as they occur, if sales price was less than the mortgage still due. Uncle Sam then receives that fraction of the house’s title in exchange for paying this difference. Individual auction sales are semi-automatic with bank processing all transactions details but periodically inspected. I.e. US is a “silent partner” (minority owner or land-lord renting**) for a few years, but investors may buy the US’s share of title anytime provided US profit equals what US would have received in interest by investing in 10 year Treasury bond, as well as full repayment of the “difference funds” provided initially. As individual auctions are expensive, many “under water” owners may avoid foreclosure auctions and simply transfer the entire title and debt to US (FHA?) for later sale*** in collective auctions. By avoiding auction expenses, Joe hopes to get small check later, if the house sells for more than the mortgage debt. If house is re-possessed by the bank and not sold at auction, the bank may also transfer title to US and receive the unpaid mortgage due. In any case, bank receives full repayment of the mortgage due. Goals (1) & (4) accomplished. Goal 5 may require new legislation and/or adequate enforcement of existing laws; however, criminal miss-representation by greedy creators of these inventive new mortgage types should not go unpunished. Bonuses they received for writing and selling these trouble making mortgages should be return 100% with interest to their firms (golden parachutes of their now retired CEOs included). If they cannot afford to do so, some of their assets should be ceased. They also may transfer titles to US (FHA?) to avoid extra cost, criminal prosecution and probable**** jail time. It is a well accepted principle of law that criminals are not allowed to keep the loot they took. Ponzi schemes are illegal and these greedy CEOs should have known that was what they were doing. Do not let them now pass their toxic trash to the tax payers. ------------------------- *The "feet dragging" Republicans refusing to accept Paulson's plan, even with the CEO bonus caps etc., have a good point (as do I). We only need to insure that ALL mortgages will be paid in full, not buy them all. These Republicans no doubt want to give this job to private insurance compainies, but as the biggest (AIG) has already failed, that will not work. **If Uncle Sam receives a fraction of the title of house sold at auction, and it is rented by buyer, Uncle Sam receives that fraction of the rent and pays none of the maintenance expenses. *** Joe American remaining in “his house” after US (FHA?) holds the entire title via "rent to buy" instead of sale is best option, if Joe can afford it. Many who cannot pay their old mortgage will be able to, especially if they still have any equity in the house. Effectively, the US (FHA?) grants Joe a new mortgage with principle equal only to the old unpaid balance. “Better” socially and economically because Joe as renter will not damage “his house.” - That is hard to control. - It is very tempting (to a transitory renter) to sell the dishwasher etc. during the last month of the rental contract, if he is planning to move to another house. That renter can always claim it was broken and did not bother to tell Uncle Sam. - "I just discarded it as the repair man said it was not worth fixing." etc. Second reason "rent-to-buy" is better is it eliminates the sales commission the real estate agents would take and other title transfer expenses. (US got title cheaply directly from Joe without auction expenses. - No one can claim US does not own the house, even if not recorded at the local court house etc. but it should be. The county can contribute by making no charge to US for recording in land records as this plan helps hold up their assessment based taxes on the house.) ****Joe American is likely to be part of the jury. Please Register or Log in to view the hidden image!