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Friday, October 10, 2008

Banks Hold Economy Hostage, Blackmail World Governments

Joel Robinson for

For the past six years the Mortgage, Banking and Insurance industry have knowingly sown the seeds of the current economic crisis, as the government stood by and did nothing.

Now that the time has come to reap what they have sown they do not want to be stuck holding the bag of $1 Trillion dollars in bad debt, at first they started playing musical chairs with the debt. Later, when certain insurers went belly up and banks got caught with the bad paper they went to the government and essentially said, "We're not going to pay for all of this… you help us out or well bring the entire system down with us."

Now that the governments are on board with helping out, the banks have begun to add any all bad debt they can muster up to get off of their books. The governments would be well advised to just focus on the bad mortgage debt.

Liberty Newsprint is of the opinion that all parties involved should pay up to not just the Banks.

For example if Joe Borrower owns a house he needs to sell but can't because he's under $100K for what he can sell the house for we think that the shortage should be spilt up between the government, the bank and the borrower.

We think the split shout be 40% for the government 40% for the bank and 20% for the borrower.
In this case it would be $40K for the government and bank with $20K for the borrower.

We think that the government should set up a program for people who have bought a home within the past six years and are in a shortage position. The government would secure up to $100K loan to secure the shortage debt by the borrower plus 20% toward the purchase of a new primary residence they could qualify for and afford. In this case $20K plus up to $80K for a down payment on a new primary residence. No second mortgages would be allowed on these homes. When the house is sold and there is additional equity in the value of the house the government would be able to recoup up to 50% of it loss that’s $20K in this case or any value above the down payment a homeowner needs to purchase another primary residence.

Also government should set up a rating system for banks so that investors know when a bank is getting itself into trouble.

This would go a long way to shoring up current home values and restoring confidence in the system.

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