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Paulson's Plan – Is it right for America?

There have been many discussions on the "Henry Paulson's plan was to $ 700 billion U.S. dollars of the taxpayers' money invested in U.S. mortgage-backed securities. Opinions are divided, some totally oppose it while others vehemently it happen.

Here is my, how we have to take in order to adopt this situation and why America should be Paulson's plan.

The present mortgage market crisis was created when interest rates fell in 2002 and and made mortgages affordable for many families that do not normally have qualified for them based on their income. Further, many of the perpetrators of these subprime mortgages, Banks and other lenders, had no intention of keeping these mortgages till maturity. They had made a business model profits without the risks associated with the Implementation Loans found. What they did was their package subprime mortgages to mortgage-backed securities and sold them to other banks. The leaders of the Shopping, banks have their calculations and found them very profitable. It was great for their bottom line and its lower end of the year awards and the acquisition of such securities Quality was at this time, probably a no brainer. " As rates later rose, more and more homeowners could not afford the mortgage installments and had their properties excluded. This led to an oversupply of homes on the market with the resulting house price crash. The banks that had purchased these securities now uncollectible Demands on their books, as she had become non-productive assets.

Paulson's plan envisages purchasing these securities in the vicinity of maturity rates, therefore, can The banks off the hook. He also sees the freezing of prices for some homeowners to prevent further foreclosures. Those who want to see the plan, however, that the Fed to purchase securities in the present market rate, which is not much of a help to any body. It would probably mean more bankruptcies in the financial sector as the weakest Lenders would not have the liquidity to survive.

In the last 6 months, have 3 of the biggest names in finance Bear Stearns, Merrill Lynch and Lehman Brothers, gone forever. There were familiar names with a long history. Can America afford to waste any more of such institutions? Granted that the executives running these venerable institutions has had bad decisions made, but that means that 150 years old organizations with solid brand equity reduced to nothing? The better way would be to prevent more bankruptcies and force banks and other financial sector firms more transparent about their company, which is what the Paulson's plan.

Consider also another perspective on Paulson's plan.

America has spent 3 trillion U.S. dollars on the war in Iraq and some estimate that the final bill, including the health care of mentally and physically wounded veterans, probably 5 trillion. Moreover, America spends Close to 350 billion U.S. dollars net per year) (after deduction of exports to these countries to finance imports from China and Japan. If America can spend so recklessly on the countries that are never going to pay everyone back that money, there is no reason why it should not spend on its own welfare?

My final argument, why the U.S. should support its financial sector is that this is one of the industries in which it is still competitive. Over the past Century, America has its dominance in many of its labor-intensive industries – steel lost, cars, electronics and textiles to name only a few, and finally would lose funding, adding that long list. I do not think that America is an industry which should not depend on wage costs of losing its competitiveness. What needs to be done now is to save and harder to bring legislation to the industry more transparent and accountable.

I guess you would have no Comments on this article.

Zeke

About the Author:

I am a mortgage broker and financial adviser.

Article Source: ArticlesBase.com – Paulson’s Plan – is it Right for America?

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