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11
Oct

As a guy who holds a Bachelor’s degreen in Economics & Finance, I find the banking system particularly

Engineering News-Record

interesting. In fact, my favorite professor taught a really dynamic class called “Money & Banking” that had us explore the Federal Reserve Banking System’s non-government / non-private monopoly on inter-bank lending and other interesting powers held by that monolithic institution.

Being a proponent of free markets, I am fond of policies that are not socialist in their leanings. That said, the current situation does at first appear to need a “government bailout” (read – taxpayers will eat it). However, William Angelo of the Engineering News Record proposes the following idea in his blog post entitled “A No-Cost RX for Our Economy“:

the answer to the Wall Street Ponzi scheme is simple – instead of a securities auction to buy so-called toxic paper from the banks, why not require that all suspect mortgages be renegotiated – free of charge – to prime plus 1/4 % over 30 years. That will cut usurious rates and stabilize payments and keep people in their houses. It’s called blowback. End of crisis and no taxpayer dollars involved. The banks that scammed the system eat the costs. Next time use fiscal prudence. As for the mortgagees, they should be required to make a one-time payment to the U.S. Treasury amounting to one percent of the loan. No scam goes unpunished and the taxpayers win.

Why didn’t our congress at least try to think out of the box instead of throwing free money at losers who mismanaged the money they had to lend? Why should any badly managed business be able to get a handout from the government? In a free market, bad business ideas (and sub-prime lending is one of them) should fail. That’s how we get more efficient and desirable outcomes for the consumer.

DISCLAIMER: The content provided in this article is not warranted or guaranteed by IncorTech. The content provided is intended for entertainment and/or educational purposes in order to introduce to the reader key ideas, concepts, and/or product reviews. As such it is incumbent upon the reader to employ real-world tactics for security and implementation of best practices. We are not liable for any negative consequences that may result from implementing any information covered in our articles or tutorials.
Category : Opinion / economy

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