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A Quick Note to Fed Chairman Ben Bernanke

UPDATE 9-13-2012:

Fed Chairman Ben Bernanke just announced QE3
(Quantitative Easing – You can get an explanation of QE3 from Ezra Klein of the Washington Post)
.

While I’m sure that it will be better than doing nothing, especially since there’s no jobs legislation coming out of the House of Representatives (Shut up and pass the Jobs Bill, Boehner!), I have a better idea.
This is something that I’ve brought up before, so I’m revising this article with some additional info and a new suggestion for the Chairman of the Federal Reserve (or anyone capable of implementing it).

First, here’s some negative equity mortgage information about the 2nd quarter of 2012:

The housing market is finally showing signs of life, with many metropolitan areas having hit the elusive bottom and seeing home value appreciation, however negative equity remains a drag on the housing market. According to the second quarter Zillow Negative Equity Report, 30.9 percent of U.S. homeowners with a mortgage are underwater (see Figure 1) – 15.3 million people – in the second quarter of 2012. Recent home value appreciation in many markets across the US has pushed negative equity levels down from 31.4 percent last quarter. However, negative equity is still slightly elevated from the 2011 Q2 percentage of 30. In total, underwater homeowners owe $1.15 trillion more than their homes’ worth. Over 40 percent of underwater homeowners (12.5 percent of all homeowners with a mortgage), owe between 1 and 20 percent more than their home is worth. On the other end of the spectrum, about 2.2 million underwater homeowners (4.5 percent of all homeowners with mortgages) owe more than double what their home is worth (see Figure 2). On average, U.S. homeowners in negative equity owe $75,235 more than what their house is worth, or 43.9 percent more (see Table 1). While roughly one out of every three homeowners with mortgages is underwater, 90.8 percent of these homeowners are current on their mortgage and continue to make payments.
– Zillow.com

$1.15 TRILLION DOLLARS!
Yes, that’s a lot of money for your average American, but for the Federal Reserve (or the Big Banks or many SuperPACs) , it’s a DROP IN THE BUCKET.

With QE3, you’re buying up treasury bonds and mortage backed securities and other stuff like that.
This doesn’t fix the housing market and only puts a minor dent in that $1.15 Trillion.
30.9% of all U.S. homeowners are still underwater in their mortgages and banks have little to no incentive to help those homeowners.
Stop giving these jerks money if they’re not going to help us! Instead, try one of these ideas:

 
Establish a National Mortgage Bank to lend people the negative equity difference at zero percent interest so they can pay down and/or refinance their current mortgage.

 or…

Split the negative equity difference with the Banks and Wall Street and mark the mortgages to their current value
What would that do?

It gives more people the opportunity to refinance their mortgages, lower their payments, and have more money to put back into the economy.
Consider it an investment in the restoration of the housing market and the economy, which both of those entities benefit from.

Alternately, you could go with my previous suggestion:

(Content Below Originally Posted on 10/17/2011)

TO: Mr. Bernanke

SUBJECT: HOW TO FIX THE U.S. HOUSING MARKET

1) Estimate the total amount in $ of negative equity in “underwater” mortgages
(aka the amount of $ it would take to bring all of the underwater mortgages down to their current value).

2) Divide that number by 2

3) Make Congress (and their 501c4 / SuperPAC money) pay for half and make the big banks pay the other half.

I call this plan: Operation TWIST-AND-SHOUT

You’re welcome.

Please feel free to contact me for any further advice on repairing our failing economy.

Sincerely,
Me

(debt solutions provided for free)

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