Bottom-Up Capitalism

Editor,

Debtors not paying on overpriced mortgages are the root cause of the financial system's cash flow problem.

The correct solution is to renegotiate each and every outstanding mortgage to a reasonable price the debtor obligated by it can pay. Monthly payments will then flow into the system normally.

Banks that sold mortgage-backed bonds at ridiculously leveraged prices and the buyers of those bonds will lose the difference. That is how casinos work. CEO's can sleep on their sister's couch and eat beans like the people they put out of work, but the financial system will be instantly "unclogged".

The government (we) should also seize all foreclosed properties and do two things with them. (1) Allow foreclosed and otherwise homeless people to live in some until this crisis has passed, which will take 1.5 million or so foreclosed homes off the market, shoring up house prices; and (2) sell the rest, issuing a non-transferable, reasonably priced mortgage on each, which we then auction to banks, again stimulating cash flow through the financial system.

Wall Street's day of stealing huge bucks for doing nothing is gone and must have a legislative stake driven through its heart, but the solution to the current crisis can be accomplished without giving one red cent to Wall Street but rather by stimulating the financial system from the bottom up, which is how capitalism was designed to work.

re: "What About the Rest of Us?" (9/26/2008)