Two Steps to Solving Financial Crisis

If the government wants to get the economy moving again, there are two things it must do:

• Help homeowners in trouble
• Create (or save) jobs

There are other problems, but until these two are fixed, the pain on main street will continue.

Helping Homeowners

The government can help troubled homeowners by working with banks to renegotiate failing mortgage before foreclosure.

The government should define the conditions (homeowners able to make the new payment, for example) for the assistance and see that they are strictly enforced.

Homeowners meeting the qualifications would see their mortgage interest rates lowered and the term extended. The resulting payment would be one the homeowner could reasonably expect to make.

The goal would be to keep the family in its house, even if the government had to compensate the bank for lost income on the lower interest loan.

Few situations are more toxic to families and the economy than losing a home through foreclosure. The government should do whatever it can to reduce the number of foreclosures by working with banks and homeowners.

The FDIC has a similar program in operation now. It should be expanded and broadened.

Excluding the complete deadbeats who would probably have defaulted on their mortgage even in a strong economy, keeping families in their own home saves the economy much more than the cost of renegotiating the mortgage.

Creating Jobs

The strongest stimulus to the economy is putting more people to work. Of course, the economy is shedding jobs in record number at the moment.

It is usually best if the private sector provides job growth, however that’s not going to happen in this economy. The more jobs are lost, the harder and longer it will take for a recovery.

When people are working, their salary supports more than just their family. It goes to the grocery store, to retailers and many others in the community.

Consumer spending (not irrational debt) is a positive influence on the economy.

We may not be able to wait until the private sector is strong enough to begin creating jobs in the numbers we need.

The government has the blank check to begin a massive program of public works. One of the best ways is to funnel money into state government for distribution on infrastructure projects.

When people are working, they can pay their mortgage and the grocer and others. They also pay local, state and federal taxes.

Obviously, controls must be in place to ensure the money is used for maximum benefit.

If government help can keep worthy homeowners in their homes and create jobs, it will go a long way towards solving the current crisis.