Open letter to any senator on the financial services committee

Dear Senator:

Let me first thank you for allowing the privilege and opportunity to write to you to express my concern on the pressing issue of the day that is the economy.

Since this historic economic event started in August 2007 when BNP Paribas froze one of its money funds to prevent investors from making a run for their money I have just been amazed at the antidotes that have been conjured up to fix the gaping bottomless hole that has been left by this financial crisis and are threatening the country and our standing in the world.

I am sure you are already aware that continually printing more money to bail out this one and to bail out that one (not John McCain’s that one) is making the dollar more worthless everyday because at the end of the day when it is all said and done that is all that is happening is the printing of money to help rescue banks and that will eventually lead to a devalued currency. And printing more money for business and corporations appears to be like putting money in a bag with holes.

This is not a letter to criticize the efforts but a letter of concern and to say there is I believe an alternative. Looking at it from a macro economic perspective, two thirds of the economic make up of the country is consumption via the consumer, and it is that two thirds that drive the economy. The one third that the Treasury and the Federal Reserve feel is so necessary to rescue depend on the two thirds as we have noted the effect the inability of the consumer to keep up with mortgage payments is having on the banks.

Shoring up the base, the two thirds, would go a lot further than shoring up the one third that threw out the debt ratio rule when lending money for home mortgages. I propose this as an antidote: The portion of the 700 billion that has not been used plus some additional monies be injected like a shot in the arm to businesses directly for payroll purposes and mandate an increase in the minimum wage to at least 10.00/hr, since the U.S. Government would be the guarantor.

Additionally if the banks must have a rescue at the taxpayer’s expense place a deposit of equal size into the account of every American citizen that has a checking account or savings account and pays income taxes, mandate a portion of their deposit be held in reserve at their bank for a period of time, like a 401k, which at maturity they can earn some type of interest which could be very helpful in encouraging the citizenry to save especially if they know they can earn a little bit of extra money by keeping it in savings. Offer incentives maybe such as the longer you keep your money in the bank the more interest you can earn. And let the portion of the amount that is held in reserve be the same amount say, that would prevent a bank from insolvency. In other words, if a bank needs 10,000 dollars to prevent insolvency, and the bank has 2 depositors, then inject say, 12,000 dollars or two deposits 6,000 dollars each for the depositors of that bank, hold 5,000 dollars in reserves and pay 3% interest on the 5,000 dollars at 1 year maturity.

By doing this, the banks could have money in reserves and sort of like start from the beginning without any market disruptions. Also by raising the minimum wage instead of a one shot stimulus check you have a more long term effect and it avoids the socialism stigma, because you have to work for your wage.

Lastly and not least, there should be an across the board interest rate cut to homeowners. Maybe take all the interest rate ranges that are currently on these mortgages and average them out and let that be the rate the homeowner pays for his mortgage or add the highest rate and the lowest rate and let the resulting average be the across the board rate that every homeowner pays for their mortgage. The banks are no longer in the driver seat on this so this can serve as punitive

Any mortgage that is in arrears, mandate across the board that those mortgages be brought current without penalty with a quick fix of adding the delinquent payments to the end of the term of the loan. (Which reminds me when my father had a mortgage on his home with First Union bank every now and then throughout the year they would send him a letter saying you deserve a break you can waive paying your mortgage this month to pay another bill…hint). The benefit for the banks is they don’t skip a beat in their transactions, they are still making money and receiving money on a monthly basis and eventually they can go back to adjusting interest rates on their mortgage products to their liking that would benefit their bottom line and investors can go back to being happy and fighting with each other on Wall Street and CNBC

I know what I am suggesting may be over simplifying the matter but it just makes sense to shore up the economy by helping the two thirds of the macro economic equation that actually drive the economy. And as an American citizen I believe in this country and every thing this country was founded on. I put my country first by taking the time to write down my ideas about what I think would help because I do not want to see America loose her standing in the world due to a bad economy and due to poor diplomacy. Allies came to our aid on 9-11-2001. This time around they might not be so merciful. From the top down and from the bottom up we need to all do what we can to help each other on the inside of the country so we can be strong to the outside world.