Does Congress Use Any Common Sense?

Posted on October 1, 2008
Filed Under economy |

I got an email last night from Dave Ramsey outlining his “Common Sense Fix” for the Government Bailout Plan. Not surprisingly at all, it made a ton of sense to me. It’s a simple plan and addresses not only the current issues that banks and mortgage companies are having but also adresses the root cause of these issues — the declining markets in real estate.

Without quoting it word for word, there are three steps to the plan.

Part 1

Reduce foreclosures by providing a Government backed insurance program for subprime bonds and mortgages. This would immediately increase their value and desirability.

Refinance any mortgage that is more than 3 months past due at 6% fixed interest rate and bring these mortgages current giving homeowners a fighting chance to keep their homes.

Eliminate all prepayment penalties. This would encourage people to try to refinance or sell their homes instead of letting them go into foreclosure.

Mark to Market

Remove Mark to Market accounting practices for Subprime Tier III bonds and mortgages for 2 years. “Mark to Market’ according to Investopedia is the practice of recording the value at the current market value rather than it’s book value. Dave believes that this would stabilize failing and ailing banks that are currently being forced to record their subprime bonds and mortgages at much lower value than the mortgages and real estate they represent.

Part III

Eliminate the Capital Gains Tax. Investors looking for tax free investments would buy up real estate and stocks. This would provide the needed boost to the economy. Yes, this would definitely help the more wealthy but stimulating the economy would provide jobs and help our ailing retirement funds.

The best part is that it won’t cost us 700 Billion dollars in new debt.

You can read the full text of Dave’s Common Sense Fix here. I understand enough of the real estate/mortgage market to believe that Part 1 would work. Experience has shown that eliminating the capital gains tax will stimulate investment in both the stock market and in Real estate. I’m lost when it comes to Mark to Market accounting and really don’t want to comment on that.

I’d love to hear other’s opinions on Dave’s proposal. He recommends sending it to all of your legislators if you agree with it.

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Comments

2 Responses to “Does Congress Use Any Common Sense?”

marci on October 1st, 2008 7:52 pm

I’ve always said eliminate the capital gains tax… oh wait - I said eliminate all tax ! LOL!

Seriously, helping the wealthy is not a bad thing, (tho some would have you believe it was) as they are the ones who provide the capital for the businesses, or the businesses themselves… and all the jobs that go along with it. I just wish people could see that~!
cindys on October 2nd, 2008 12:21 pm

Marci, I like the eliminate all tax idea!! LOL! It’s been proven that eliminating the captial gains tax will stimulate investing so I’m not sure why they don’t just do away with it, at least for a period of time. I realize that the government makes money off of it but it seems like we would be better off to give up some income rather than go so deeply into debt.

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