by Leonid Balaban
If somebody can give me an educated answer on why this bailout for the financial industry is necessary, I would certainly appreciate it. And no, I’m not trying to be sarcastic here, I’m simply trying to understand the difference between ordinary citizens who made boneheaded financial decisions in buying homes they couldn’t afford and banks who gave them these loans without properly vetting their repayment capabilities. I will not accept the argument that if there was no bailout, the whole financial system of the country would collapse, if the same people are not advocating for the bailout of the failing health care system, where over 45 million people are without healthcare insurance. I will not accept the argument if nothing is done in raising minimum wage, elevating environmental standards or fixing failing infrastructure around the country. Bailing out financial institutions without doing nothing for its citizens shows complete moral bankruptcy of this government.
I will argue, that instead of bailing out financial sector, our government should have simply given that money to the citizens. I know that some of you will scream that murder at this proposal, but my reasoning behind it is very reasonable. According to this CNN article, there are approximately a little over a million foreclosures in the US, as of June of 2008. Figuring that an average home mortgage is about $250,000, using simple math we conclude that by simply giving $700 Billion to the people, the government can pay off by my estimations about 2.8 million mortgages. What will this giveaway do, you might ask? Well, firstly, considering the fact that property values have gone down by as much as 25%, by eliminating all foreclosures, the house values will go up instantaneously. Secondly, this move will immediately allow at least 2.8 million consumers to invest a lot of money into the local economy, since they don’t need to worry about paying their mortgage anymore. That means that thousands of new businesses will be opened which will subsequently result in thousand of new jobs. These new jobs will in turn generate additional tax revenue for not only federal, but also for state and local governments. Lastly, these paid off mortgages will automatically rescue these financial companies, because they will no longer have the bad debt that brought us to this point in the first place.
I understand that my solution might sound like a crazy socialist talk. But bailing out commercial and insurance companies when they made terrible business decisions, using taxpayers money, is no less socialistic. If we allow corporations to easily right off their debt and stave off bankruptcy, we should do the same for ordinary citizens.