Obama must renegotiate directly with troubled Mortgage payers

Through Fannie, Freddie and Ginnie, the Obama administration should renegotiate payments
with all troubled mortgage owners and fix the mortgage crisis first. Once it becomes clear that
home prices will not decline any further as the govt, has stubbed that leak, the rest of the
credit crisis will start to slowly resolve. The banks will stop making reservations of capital in
anticipation of future losses. And will start to lend money into the public economy. Once home
prices have a floor, the govt can then reopen the securitization channels initially through Fannie
and Freddie. Keeping a low interest environment in place offers a good opportunity for some
kind of borrowers, when the economy starts to turn around.

Look at it this way. The Govt sees a social role in ensuring everyone is covered for health insurance. Why not see mortgage also in that light. Lend to those who are not able to get a lender
thus becoming a lender of last resort. The other side of this is a Govt that slowly and surely
becomes both a bank and finally the biggest homeowner with a large bureaucracy in its payroll
which is letting and servicing all those foreclosed homes. Better to keep the homeowners there
in the first place. Some homes can be given to homeless veterans. Shinseki can help create a
plan that allows homeless vets to own a home that is anyway foreclosed and sitting in govt.
hands waiting for someone to move in. Why not a veteran?

Fixing mortgages will not directly fix the rest of the rot that seems to be setting in. Employment
is in rough water. The steep rise in unemployment is perhaps just as alarming. Obama needs
to ask how he is going to "stimulate" employment again. Employment has usually followed from
the availability of equity capital and credit. What this means is that investment lead to jobs,
more often with more dollars ploughed in per job. Today, the ability to create cheap jobs is
needed. Cheap jobs can be created possibly by farming govt. land, manufacturing drugs and
in rejuvenating the public health care system. Govt. needs to ask how it is going to enter into
energy. The Govt. for one could create its own technology and manufacture panels and install
them. The general idea that you need a Boone Pickens to do it is really old-fashioned and silly.
A clean public energy grid should not be called Communism. As long as people are productively
employed and are creating clean energy that is adding to the national infrastructure, it is
no longer a bad idea. In fact, it can help save the govt. money as it does not need to buy clean
energy or wait for a credit crunch challenged private economy to do anything substantive.

It is time for Obama to think originally and be visionary and bold. A 100 billion dollar mistake
or two that create jobs, healthcare and energy can not do harm. Nor can a program that keeps
people in their homes.

Instead, TARP programs that bailout one investment bank but not another, - continuous
loans that move govt. into single companies have gone on and not yet done anything.