Bail out? No – Ideas? a Common Sense Plan from Dave Ramsey

The Common Sense Fix

Years of bad decisions and stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following threestep Common Sense Plan.


a. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity.

b. In order for a company to accept the government-backed insurance, they must do two things:

1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.

a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.

b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while working with the borrower—again limiting foreclosures and ruined lives.

2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don’t do their jobs.

c. This backstop will cost less than $50 billion—a small fraction of the current proposal.


a. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate.

b. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing.


a. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous— and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.

b. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down.

This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to

stand up, speak out, and fix this mess.

Many thanks to

So, what do YOU think of these ideas?


4 Responses to Bail out? No – Ideas? a Common Sense Plan from Dave Ramsey

  1. Don Tabor says:

    Mr. Ramsey’s plan is a considerable improvement over either the rejected House plan or the new Senate “Christmas Tree” plan, but from a Libertarian perspective, it does fall a bit short.

    I. The idea of insuring these mortgages is a good one, but it is not necessarily best for the government to do it. If it is real insurance, then there is profit to be made in offering it and we should see private insurers rushing forward to sell this insurance to worried investors. (sound of crickets chirping) If not, then it is a government guarantee, not insurance.

    At the very least, it should be made clear that institutions that do not buy this ‘insurance’ would have no other government assistance other than bankruptcy.

    II. Suspending “Mark to Market” requirements of Sarbanes-Oxley is a good idea, but why only temporarily and only on certain securities? The method of accounting used by a corporation is a matter that should be decided between the executives and their employers, the shareholders, as represented by the Board of Directors they elect. The only role the government has is to punish fraud.

    III. Abolishing the Capital Gains Tax is a good thing, but does not go far enough. Taxation of income is the underlying problem, and the US is the only industrialized country that still relies primarily on taxation of income. Replace the income tax with a consumption tax, preferably the FairTax, and the resulting growth would reduce this ‘crisis’ to insignificance.

    So, this plan is better than the what Congress is offering, but if we are going to fix this, why not really fix it all the way?

  2. Reid Greenmun says:

    Great points Don.

    However, since BOTH the Republican party and Democratic Party candidates for President voted to adopt a very falwed bill last night, it appears that we will be heading in the wrong direction if either Senator Obama or Senator McCain are elected President – which is the most probable outcome of this election.

  3. Jay says:

    Great ideas and really does Make Sense…..
    This even makes “Common Sense”… Unfortunately that is the reason the folks on Capital Hill will probably not even pay close attention to it……Yet maybe there is a chance…just a chance …one or two of them may use it and reword it just enough to call it their own… Na. Fat chance.

  4. richroberts says:

    I would definatley love to see the capital gains tax go away and the lowering of the corporate income tax. That has worked for other countries.

    How about also returning the Federal Reserve back to what it was orginally designed to be. “A ready reserve of liquid assets & provide a currency that could expand and contract as the seasonal US economy dictated.”

    Instead of being a “lender of last resort”, it seems to me that it has been a money pump which continously injected currency into the markets at an almost no cost of borrowing. Allowing banks to get all this cash whenever they wanted led to the stock market bubble and then the housing bubble.
    Something needs to be done to rein in their lending practices as well.

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