You Can’t Save Your Face and Your Ass at the Same Time
By Michael Lang on Oct 9, 2008 in Featured
You cannot save your face and your ass at the same time……it just won’t work!
The United States is in BIG TROUBLE as evidenced by the continued downward spiral of the stock markets. And those the we, the American people, look to for guidance and leadership are shaking their heads giving us the impression that they are just as lost as the “little guy” who has relied on his “nest egg” for his family’s future.
One of the problems which is now becoming transparent to all is the ineptitude of our leaders as they try to look good at the same time they are desperately seeking solutions.
Won’t happen because it just doesn’t work! Again, you cannot save your face and your ass at the same time!
OK, now that that is understood. The Lang Report would like to share the thoughts of Ambassador Marc Ginsberg who has the distinction of being the first American of Jewish heritage to be appointed to an Arab nation.
Kudos to Sen. Obama for hard-wiring an empathetic connection to the beleaguered American middle class at last night’s debate. His winning performance inspired me to go outside my normal national security box to consider how he could construct a greater economic recovery program to meet dead on the fear and apprehension that is undermining confidence in our future.
I believe now is the time for Obama to consider a bolder and more historic approach to the financial crisis by presenting to middle income Americans a step-by-step "big think" FDR-style New Deal program to add greatness and urgency to his economic recovery plan. Tough times call for urgent and big-think measures. Surely, we are in this era, once again.
In 1933, Franklin Delano Roosevelt unveiled a landmark economic recovery plan that created a "New Deal" for America’s middle class and restored confidence to a hard-pressed nation. It was imaginative, bold and daring and lifted America up by its bootstraps and restored confidence and stability. It took several years, but it worked.
A similar type of "new deal" program aimed principally at the crux of our financial crisis — the falling U.S. housing market — is now urgently needed by our Democratic standard-bearer to create an indelibly understandable and comprehensive framework in the minds of voters that he has the most coherent and bold recovery program that gets at the very heart of what plunged our financial markets into chaos (aside from greedy Wall Street executives peddling credit default swaps, etc.) . Another financial infusion of funds to average Americans modeled after the last economic stimulus proposal may just be too insufficient to meet the emergency that will surely follow us well into 2009.
Accordingly, coupled with his affordable health care program, necessary tax reductions and renewable energy incentives the components of the Obama "New Deal" for middle-income America could include the following options:
– Setting the table, so to speak: take one day out of the campaign to convene an emergency economic summit of key financial advisors, business leaders and economists to discuss and assess the credit and liquidity crisis with the objective of legitimating this "New Deal" style-emergency recovery program for the middle class, and present it in a easily comprehensible speech to the American people (fireplaces always a good backdrop).
Program elements would include a new across-the-board housing-focused economic stimulus package. It would be be designed to ensure that the plan is directed at incentivizing prospective and existing home buyers to re-enter/remain in the housing ownership market. Such a stimulus would include the following components:
1. A tax credit on 2009 taxes in the amount of $10,000 used to purchase a principal residence for qualifying buyers whose FICO scores are deemed above the sub-prime lending qualifications and who can meet reasonable credit worthiness and income qualifications to manage the special mortgage requirements noted below.
2. A government-guaranty fixed rate mortgage program offered through banks that would set a federally-mandated interest rate ceiling of 5.5% on 30 year fixed rate conforming mortgages. The fixed-rate mortgage would provide an adequate return to banks that would be compelled to hold these mortgages in to assure the government-backed guaranty (thus avoiding the securitization shenanigans that got us into the fix in the first place).
3. A tax credit in the amount of $3,000 on 2009 and 2010 taxes to cover moving and out-of-pocket costs (excluding points) for qualifying purchasers of principal residences.
– Propose to offer banks that are holding delinquent but not defaulted mortgages a federally financed .875% discount off the then federal rate on short term borrowings in exchange for converting conforming adjustable rate mortgages to fixed rate mortgages plus a "payment holiday" of 90 days to enable borrowers to regain their financial footing. This is significantly different than McCain’s plan for the federal government to purchase mortgages.
– Create a new series of 3-5 year U.S. Treasury bonds targeted to be purchased by Americans participating in 401K plans through licensed asset managers who would be incentivized to promote the purchase of such bonds by receiving a personal tax credit in 2009 and 2010 for the amount of such bonds sold. Pre-redeemed bonds would be used to finance the housing stimulus package components and interest earned would be tax deductible if/if purchasers use bonds as collateral toward housing purchases or qualified renewable energy improvements in existing or newly purchased houses.
– Given the escalating unemployment rate and the lack of financial incentive to maintain current employment levels, propose an new Unemployment Recovery Program that would extend existing unemployment benefits for unemployed whose benefits have lapsed, AND provide a two year tax credit to employers who maintain their 2008 full and part-time time employee roster at levels not less than two-thirds existing salary and benefits equal up to 33% of any salary reduction for each employee retained; provided that any former full time employee that was laid off due to the economic crisis is re-hired at comparable levels.
– For Americans aged 55 or older who have lost at least 20% of the value in any annuity, retirement or 401K plan in 2008 due to losses directly attributable to passive equity portfolio losses, establish a one-time 2009 and 2010 tax deduction equal to 50% of the loss up to a maximum of $50,000.
OK…I will keep my day job, but I hope that between now and the election this meager attempt at rolling up my inexperienced sleeves in Economic Recovery 101 will generate additional ideas so come inauguration day our new president demonstrates to the nation and the world an audacity for FDR-style leadership at a time of national crisis since he represents that best hope for a more secure financial future for our nation.
So, if it comes down to the choice of saving our face or our ass…..I vote for America saving our collective asses!
AROUND the BLOGOSPHERE:
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MIT Panel Discusses the Financial Crisis - But while the loss of value of these instruments caused investors to panic and began a downward spiral in financial markets that has unfolded over the last year, "the impact of the financial crisis on the real economy, Main Street, …
Political Climate: What does the financial crisis mean for greens? - European greens are already feeling the fallout from the financial crisis: the EU’s plans to limit carbon emissions are faltering, with automakers pushing hard for a timeout and saying that global economic turmoil means the proposed …
IMF: Global economic slowdown a certainty, due to financial crisis - The financial crisis that’s constrained credit around the world will slow the global economy considerably and quickly, the International Monetary Fund announced in its October 2008 report. The IMF now expects global GDP growth to slow …
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