May 10, 2011 Why Doesn't The Government Bail Out The People?

Article first published as Why Doesn't The Government Bail Out The People? on Technorati.
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"Fannie Mae asked the government for an additional $8.5 billion in aid after declining home prices caused more defaults on loans guaranteed by the mortgage giant. The company said it lost $8.7 billion in the first three months of the year. Those losses led Fannie to request more than three times the federal aid it sought in the previous quarter. The total cost of rescuing the government-controlled mortgage buyer is nearing $100 billion—the most expensive bailout of a single company."

Whoa! Hold on there a second. $8.5 Billion MORE!?!? On top of all the other bailout cash they got and squandered, they are asking for more. Why!? I am personally against the government from helping corporations. They got themselves into their own mess they can get themselves out or fail and others will take them over. Just like every other company that has come and gone and failed due to bad decisions or bad markets.

I say if you are going to go the bailout route, why not bail out the people directly? You put together a program for complete control of the funds, you set up the requirements for receiving the money, and whatever is left is spending cash.

I am sure there is an economic reason for not doing this kind of bailout, but here's how I would structure it.

First, everyone, no matter their income bracket or wealth, will get a one time payment of $1,000,000 if they meet the criteria. Right there it's no more than $350 million, far less than the billions to one company.

Here's what you would need to do in order to be eligible for this payment.

1) You must show, with your Social Security Number, you have paid taxes for 5 consecutive years. If not the program will run for 5 years and you can file taxes from now for 5 years and be eligible. If you have massive tax debt, that's what part of the $1 million will cover.

2) You must have been a resident of the U.S. for 5 years. Either proven by your Homesteaded mortgage or you can register from today for 5 years.

3) The money will be setup like a trust fund to be managed for clearance of debt, you don't get a check and away you go. Through your tax records, credit reports, bank statements, etc.. the money will be used in this order of priority. This will bailout the IRS, Mortgage Companies, and Credit Card companies all at once.
    - IRS Debt is cleared first.
    - Mortgage balances are paid off in full.
    - Credit Cards are paid off.
    - Whatever is left, you get in cash tax free.

If you take the averages, most people would walk away with about $600,000 in cash.

Now think about that if every tax paying, hard working American had $600,000 in the bank? How many would buy that cabin, boat, new car, investments, college educations, flood the market with cash and purchasing power. To the government it may cost them close to $1 billion with all the management and process, but $1b is still far less than $100b and you can clear almost all debt in the nation. Have the people start fresh.

Sure, some people will fall back into a hole, you can't cure some people's actions. Outside a small majority, if you are going to be in the business of bailing out things, bail out the people and let them bail themselves out. Helping out a failing mortgage company is not going to make the delinquent mortgage holders pay their bills any faster.

The corporations don't deserve bailouts, the people are suffering, do something different that is cost effective and will work for everyone.