GREAT IDEAS  TO  STOP THE WORLDWIDE CREDIT  CRISIS

By Dr. Bill Wattenburg

The Open Line to the West Coast  show

KGO Radio AM810,  ABC, San  Francisco

October  12,  2008

  1.   Bob Brinker, on his syndicate radio show  MONEYTALK,   has suggested that the US  Treasury  should simply   make (guarantee)  payments on  mortgages in default so that the banks do not have to list  foreclosed loans  as bad debts that reduce  a bank’s capital reserves.   This would immediately remove the basic cause of the credit crisis in the financial industry.   As soon as the world knows that  bad mortgages can not bring down a bank and that the foundation for other derivatives based on mortgages is secure,  much of the normal credit  industry between banks can continue.   

This could be done much more quickly than the time that will be required to audit each bank’s total bad debts.  And it could cost much less compared to buying large parts of  the debts owed by thousands of banks.  

The Government would  acquire an  automatic interest in the property covered by any mortgage that the government  is paying.     The existing mortgage service companies  have all the records and procedures in place to implement this plan immediately.  

No new bureaucracy is required to begin Brinker’s  plan  immediately.    In fact,  this plan can be put in action tomorrow with a simple proclamation from the US Treasury.     The US   Treasury must  give real consideration to this  excellent idea.

2.      A caller on  Dr.  Bill Wattenburg’s KGO  radio show  on October  11,  2008,  (Bill from Oakland)   made the excellent suggestion  that  investors anywhere who are willing to buy the toxic debts or  foreclosed  mortgages from banks  should be relieved of all capital gains taxes on the properties or debts when they sell the assests they bought.    This could be a great incentive for  private investors to  do the job instead of  tying up taxpayers’  money forever.  In fact,  it will motivate many investors and banks to  go to work on their own to  relieve the credit crisis. 

3.   Bill Wattenburg has suggested that  Congress must immediately  pass a law that makes it a felony for any executive of any financial institution to  fail to report  any and all debts owned by  his or her institution that  could affect the credit worthiness of the institution.   Right now there are many  types of “toxic debt”  that are not regulated by existing law.   That is the reason some large financial institutions have already failed.    Fear that  many banks are holding  unknown toxic debt is the main reason that  all banks are not loaning money to each other in the normal fashion that  fuels the worlds credit markets.