I have no idea if it would work. I haven't done the research that you have. But I agree that 'bottom-up' plan would work better. Like the 'stimulus', but applied to mortgages. A simple plan - grant three months payments to any primary homeowner who owes a certain amount. (More than 80% left on the mortgage, or it takes more than 25% of their income to make a payment - some simple calculation.) The homeowner files for the program, and the fed makes the payment directly to the note-holder. This gives the banks a big boost, and the money never passes through the taxpayers hands. Those people would then be free to spend their next three months paychecks as they please, thus stimulating the rest of the economy.
I know that if I had the next three mortgage payments covered I would spend the money on other things - in particular the house repairs that I have been putting off. Giving the money to a local building contractor would be more 'stimulating' to the local economy than buying a new gadget. (Though a GPS or a laptop is tempting too.)
This type of plan would certainly improve morale. The common people would see a benefit, rather than just hearing how much money is being given to huge corporations in their name.
And a new wrinkle - it was announced on NPR this morning that Governor Arnold wants 7 billion dollars to bail out the state of California.
Sorry - but I don't like the three months of free living approach. It doesn't really solve the problem.
Maybe if we could persuade folks to save the three months of payments so that they could afford to cover the shortfall in the next 36 payments (or whatever) then this might work.
However, as you pointed out (and want to encourage it) folks would spend it. This may stimulate the economy. But then, in 3 months time we'd be back to having folks defaulting on the mortgages they can't afford to pay. The mortgages would still be risky - the banks who over extended themselves would still fail.
I know that if I had the next three mortgage payments covered I would spend the money on other things - in particular the house repairs that I have been putting off. Giving the money to a local building contractor would be more 'stimulating' to the local economy than buying a new gadget. (Though a GPS or a laptop is tempting too.)
This type of plan would certainly improve morale. The common people would see a benefit, rather than just hearing how much money is being given to huge corporations in their name.
And a new wrinkle - it was announced on NPR this morning that Governor Arnold wants 7 billion dollars to bail out the state of California.
The slope is getting steeper and slipperier.
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Maybe if we could persuade folks to save the three months of payments so that they could afford to cover the shortfall in the next 36 payments (or whatever) then this might work.
However, as you pointed out (and want to encourage it) folks would spend it. This may stimulate the economy. But then, in 3 months time we'd be back to having folks defaulting on the mortgages they can't afford to pay. The mortgages would still be risky - the banks who over extended themselves would still fail.
John H.
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