Summary of steps to fix the economy

The root cause of this crisis needs to be addressed. The middleclass must be able to afford the bare necessities out of their wages, without having to borrow.  Giving the banks money so they can extend credit so people can pay their bills is not the answer, it will only make the crisis worse. Sending them even a $5000 check will not help either. It must be something to offset the large credit payments they make each month.

To fix this economic crisis, either a substantial tax cut for the middleclass or the steps below need to be taken.

1.       Reduce all outstanding mortgages below jumbo loan amounts by 25 to 50 percent and reduce interest rate to specified fixed rates, without any fees or costs. In cases where there are first and secondary mortgages or home equity loans, they should be combined to create one new loan reduced by the amount above. An example would be: a $200,000 balance on an adjustable rate mortgage with 27 years left would become $150,000 at 4.5% fixed rate with 27 years remaining. Another example: a $250,000 balance on a fixed rate mortgage with 13 years left with a $100,000 home equity adjustable rate loan would become $262,500 at 4% fixed rate with 13 years remaining.

To ensure fairness, this must be done for all homeowners, and not just for ones that are late on payments. This would also have the side effect of reclassifying all outstanding loans and would allow banks to put a value on their toxic assets. For banks that refuse to participate in this program, Fannie and Freddie would buy the mortgage from the bank and make the adjustment for the homeowner. The offending bank would then be restricted from receiving benefits from any government programs, including selling future mortgages to Fannie and Freddie.

2.       Forgive all outstanding student loans.

People should not have to borrow money to send their kids to college. All public colleges and universities should be affordable, or free, for every family that wants to send kids there.

Starting immediately, the student loan program should be dismantled, and money allocated to public schools so that any family that wants to send their kids to one can do so without needing a loan. Bailout money should then be used to pay off all outstanding student loans for all middleclass and below families.

3.       If needed, the next steps would be to examine credit card debt for a similar type program.