Edited and Revised Thursday, August 11, 2011
The Fed’s New AAA
BOA’s Balance Sheet Tool?
AAA Incentive Tool
Come Big & Stay At Home
In view of the Banks funding issues, I have something to contribute.
Here’s a novel organic idea for the Federal Reserve Chairman today …one which dose not rely on printed …or borrowed money to craft ..draft …implement and execute.
Actually, after thinking of this for a while …I think this monumental idea has more to offer the banking industry …Bank of America for one …above all.
I say so, because bank of America is scrambling about …trying to raise capital at a time when cash is king.
And if there ever was a cash generator, this idea has huge potential to rock and roll …recapitalizing an anemic sector like gang busters …like the Dallas Cheerleaders at halftime.
Shoot, I bet Timothy Geithner could figure a way to securitize and market this idea’s exotic specialized product’s potential.
Bring back the exotic specialized products division …in safety …with an eye …whose oversight measures actually support honest home ownership.
What is this idea?
Offer increment interest- breaks as incentives to home buyers as a measure and form according to the skin they bring to the table at closing.
In other words “…Skin for A Time Out.â€
More skin would translate to a greater “…more time outâ€ period.
The earnest could be hinged to a non-refundable “dependent periodâ€ …should the owner not stay in the home a predetermined qualifying time.
By offering home equity markets a new mortgage tool to home buyers who qualify, a period of progressive and incrementally “…no-to-low …â€ interest breaks could …initially start at zero (for the first 6-12 months) and then …rise annually to a prime-plus ceiling whose limit could be taylor made to match the going home mortgage market rates.
There could even be a “portability” transfer feature incorporated into the mortgage which could benefit both the homeowner as well as the mortgage holder and or servicers …in spite of a highly mobile populace.
In this manner, both the earnest as well as the skin-money (down payment) would be available to recapitalize the banks naturally.
The down size of this, of course, is that such an idea would …of course be competing head-to-head with the Federal Reserve’s policy whose window is essentially open …to the big banks …offering them money for nothing …save chicks for free.
(Yes, that was a line from ZZ Top)
Imagine that! The Fed standing in the way of recovery …by reason of all that is ARTIFICIAL!!!
None the less, such a mortgage type as this is …it does have the inducement that could bring about a mutually beneficial affect to naturally lift the housing and banking industry together.
Such a mortgage type could offer measurably longer periods of time and a varied number of annual rate-reset increments based upon how much skin the buyer brings to the table at closing.
Penalties and conditions could be crafted to reward, reinforce and strengthen the security of the mortgage. Such as that would be; these types of mortgages could do wonders for the likes of those who deal in the CDS (credit default swaps) markets …namely those in the shadow banking industry.
If regulators could limit these mortgage products to only certain home buyers and those qualifying homes from the pools of existing home inventories …for a limited trial offer; I believe that potential homebuyers would line up in droves to buy.
“Get em while their hot …!â€
And the opportunity to expand such a program …beyond the initial trial would provide banks and regulators with some needed valuable data which would support the programs expansion …one with a view toward doing the due diligence in a maner which offers greater oversight and clarity.
Such as it is; I believe that this idea is definitely one which is badly needed.
Incentives work …private incentives work better …especially if they build ownership equity …from the beginning by a measure of qualifying earnest vested equity.
Even if the incentive to own could be made to sweeten the offer’s front end and or the back end …such incentives would go a long way to stimulate housing …banking …employment …and above all, the economy as a whole.
Such would lift GDP and generate huge sums of badly need tax revenue.
Consumer confidence would take a huge leap forward …immediately.
Excitement would be generated overnight.
America’s dependency upon foreign credit would go down markedly.
Let Freddie and Fannie Eat it …they are already costing America big time in terms of their right offs which the federal government is already underwriting anyway.
Think of what this all would mean to a strengthen a weak dollar.
Think of what that would mean for inflation!!!
Think of the possibilities to offer America an increased measure of organic hope at a time when it is most needed.
Think of all the efficiencies that …would be accrued by this truly organic …private solution.
America needs a fresh breath of spring air …as that which would come to fruition …going into autumn, if this idea were offered to stimulate private home ownership.
Come to think of it, going into Fall …this is exactly when America needs to experience to produce a robust recovery …especially to harvest a bumper winter crop of hope and change going into 2012.