Lehman Bros & Merrill Lynch Learn a Lesson.
The International Institute of Nonviolence
By: Rev. Jermano
158 year old Lehman Brothers filed for chapter 11 Bankruptcy today with 60 billion in debts, and Bank of American has offered to bail out Merrill Lynch with 50 billion in a stock acquisition.Merrill shares in 2007 were above $98 to now at $17.50 a share.
Also hit was AIG..one of the biggest Insurance Companies in the USA, who is said to have an inside hand on the happenings of 911 saw their stocks decline by 45%...They are on the prowl to find ways to soften the landing. I predict they will be sitting in the same room as Lehman Brothers figuring out a way to bring real prices to the market place.
Other top financial Banks that can not claim imunity from this failed market; they are:
Ten banks -- Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley and UBS. http://biz.yahoo.com/ap/080915/financial_meltdown.html
What would you do? This is what I would do......
Banks will be required to give zero percent loans to bank members.
All bank loan equity becomes property of the entire membership, until paid off.
All members pay dues and said dues are paid toward interest on savings accounts. In other words depending on how much you put in your account depends on how much your dues or interest payment you give to yourself.
Since you can get zero % interest loans, you can use the loan to pay your membership dues. Inflation will be held in check because goods will be more available due to zero interest loans.
Deflation will not occur because the market is based upon the Banks membership ratio. This means people will strive to keep zero interest loans while being able to give themselves higher rates of return for interest rates. Some people will get more interest because they hold more savings in their accounts. People will want to have savings because of the zero interest loans they can get.
If you have no savings you can not take out a loan. You can take out a loan to put the loan money in a new savings account. But you have to pay interest/dues payment on it.
You can take out loans that are higher in value than your savings account, provided the bank gets ownership documents until the loan is paid off. You can withdraw your money from your savings, but you will be asking yourself why, when you can get a zero interest loan.
This is the beauty of my Bank@Zero%Loan Policy at Bank of Jermano. The Bank makes its money through the same procedure it gives the people. Corporations will be required to pay taxes.
The Stock Market becomes an asset equity market, where people buy ownership stocks, or sell them. Companies can not increase their stock shares to spread out or inflate their equities.
Nor can they show profit margins because they fired workers. Firing workers indicates they have losses, and any returns are declared stationary dividends, for up to one year depending on paying off loans, and other financial circumstances.
Then instead of using the Real Estate Market as the main engine to the Economy I would make homeownership a real American idea, with people staying it their homes instead of using their homes as a pawn to get rich on......which gives false value to projected home equity.
We also need: The 2 Loan Mortgage Statue Stability Act:
The way to fix the problem especially for home mortgages is to forget the one loan that is always given to home buyers. What is needed is to give two mortgages to the home owners. Just like we need two arms, two legs, two ears, and really two brain hemispheres to think in this world; we need two loans. One loan is for buying the house. The other loan is used to make payments on both loans. This way no one ever faces default. Sooner or later the money runs out, but it is enough time to prove a worthy credit history, then another loan is taken to replace it. This can go on indefinitely because banks will always be in the loan business. Home values should not be based on equity accumulation. It needs to be based on Credit Worthiness or Credit Appreciation.
Banks will not have to worry about losses because investors will look to bank profits from a dual interest accumulation from a 2 Loan Mortgage Policy. And what will really drive the economy is the ability to write off both loan interest rates from your annual income taxes. Now I don’t know about your thinking, but that is a sizable tax benefit, that can be permanent and real, never mind the mindless GW Bush tax relief rumblings.
In other words it will not be so much the value of the home that is the consideration, but the serviceability of the banks that support the loans. In fact the more loans a bank has with flowing capitol the more value that bank acquires, and the more value to the Homes Credit Appreciation.
Really the banks and politicians create this crisis when they don't promote home ownership secure from our work place economic factors. People end up buying a house hoping to build equity so they can have the security to use the money for something else, such as buying another new home, or using it as a basis to have better credit to pay for other things, be it education, medical bills, wedding, a new car, since the work place economic factors always seem to fail due to politicians egregious errors. People use their homes as a buffer against failed economic policies. And since there is no security plan for homes from the work place economic factors, people default on their loans.
People have no other choice but to expect to have rising appraisals because many have low equity accumulation and hope when they buy they can inflate the house value under a false assumption the market will support it, and ultimately end up losing. People always expect a profit from Real Estate, instead of thinking homes are something we intend to keep forever.
Banks and Politicians set the market values, with their nefarious plans and unfruitful tax schemes with wars and catastrophes happening because they failed in their foreign policy objectives, and now we see what is happening. We are building Default City USA.
Banks are in the business for giving out loans. People want credit, so it is not about equity we build. It is about credit worthiness or Credit Appreciation in making payments and never thinking about defaults.
If banks adopted :
2 Loan Policies for Mortgages, we would never have these issues. People would not be worrying about how to pay their loan, because the bank offers a service in how they can keep their homes. This makes the bank more secure, and it makes the housing market more secure and stable. We need to separate our homes from the economic factors work place. One can not rely on the other. Presently both are unstable. But if we have our homes secure with the 2 Loan Mortgage Policy; having to deal with an outside unstable work place economic factor; we are assured that methods to provide secure work place economic factors, can come to being.
With the 2 Loan Mortgage Policy people won't have to worry about being laid off from work, since most people are on fixed incomes. As long as payments are made, and the banks obligations are met, then banking and home buying will go on indefinitely. Bank plans now to tighten banking loans because of questionable risk is more of a disaster than our present situation; because it causes shut downs and deep despair in communities.
Presently Banks create the risk, because they don't provide a means to cover it. Banks can't blame the public. Banks need to step up and do their best to create a system that can not default or fail. Many economists will say we gave out lots of loans and they failed. And now they think they need to tighten access to loans; which is totally wrong.
Financial Institutions need to provide much more loans, to pull us out of the mess. Having loans pay loans is a long term plan and it can be setup so banks can always be assured to get their money. When loans are paid, this establishes new Credit Appreciation, and the ability to establish value to the said properties.
Equity hedging is becoming a thing of the past, because in reality it is not security to a bank. Security to the bank is having stable housing appraisals, which neither increases nor decreases in value.
In fact Banks have everything to gain in such a new standard, because actually their books will reflect double mortgages on a single residence or property, giving them greater returns and maneuverability toward other market relationships.
If banks don't do their job as I suggest; housing markets will never recover, and the same old problem will remain. We need to get banks to loosen up and enact a 2 Loan Mortgage Policy so home mortgages remain stable. This plan is not like taking a 2nd mortgage on a loan. It is the idea that one loan covers the house, while the other loan makes payments on it and itself, until the money runs out. Then you will have a solid history of repayment, qualifying the homeowner to take out a new loan again to keep making the payments. This is Credit Appreciation.
In today's world we do it with credit cards all the time, by paying ones installment with the other. Borrow from Peter to pay Paul is a strategy that saves the markets, and saves creditors their credit ratings. So open up the loan system and provide the 2 Loan Mortgage Policy instead of tightening it up as they are doing now. This will establish a new banking regulatory called The 2 Loan Mortgage Statue Stability Act.
To assure banks get their money; banks don't have to make the money available to the people on the outside. In other words the 2nd loan mortgage policy would be held in a Bank Management Fund, where these funds are strictly used for making payments on the 1st loan. This is so the banks don’t worry about losing the money, in which people maybe using it for something else.
Banks need to make a 2nd Loan Management Fund so money is easily transferred to pay on the 1st loan. People and Banks will not have to worry about outside economic forces ruining the pay back process to the banks. This creates security and stability. When people have their homes assured in being paid, they can go about doing other things in making money, and creating products for the economy.
Where we fail is when we do not have the 2nd Loan Policy, and we leave everything up to the production forces in the economy, hoping that we will keep our jobs, and make the needed money to make the monthly payments on the loan. Things inevitably fall apart, people lose jobs, they can't sell the home, and they have to move. America is a gypsy society always on the move, no wonder economics fail, neighborhoods disappear, and no one knows each other. We need to stop this.
There is just too much pressure on the individual to do all these things, and banks hope and think they are going to maintain some sort of worthy credit rating?
It doesn't work and certainly that is why everything is crumbling. We need the 2 Loan Mortgage Policy. Our financial services are changing from Equity in acquiring a loan system, to a Credit Appreciation system in acquiring a loan. This only means the needed relief all Americans and Banking Institutions are in need of.