How To Solve The Current Finacial Crisis

1198 words - 5 pages

The financial crisis that is currently affecting the United States of America is the result of several factors, including the growing number of foreclosures, all of which converged into a “perfect storm” of a severe magnitude. The end result was not only the exacerbation of the already looming housing crisis, but the overall bleak outlook on America’s financial system. The integrity of the financial system was put into question along with the future of America’s economy, including its once thriving housing market. In my opinion, I think that like all crises that our great nation has faced, this too shall pass. The question is how quickly will it pass? One of the first steps that we can take toward solving the financial crisis is solving the foreclosure situation that has sprawled across our country. If we can stop the continual insolvency of our nation’s homeowners, then we may be able to reverse the vicious cycle of banks needing to seize a toxic asset, put another loss on the books, packaging this asset either in the form of a bad mortgage or an unwanted property, and putting it on the market so it can collect dust until our economy turns around and an investor purchases it. It is my belief that we can solve the foreclosure calamity by two actions; 1) creating a quasi-governmental agency that will give tax credits to banks entering into a lease-to-buy program for people who are either currently in foreclosure, or those that are about to enter foreclosure and 2) allowing the free market to eventually recoup the losses via the form of investment and spending.

The concept of a lease-to-buy option is that a tenant may rent a property with the hope of being given the first right to purchase the property at the end of the lease, if they’ve saved enough money for a down payment. If we can create an agency that issues and administers tax credits to banks entering into lease-to-buy agreements with foreclosed individuals, the end result is that we can create a potential win-win situation. The banks will be able to recoup some of their mortgage payments back, while also still owning the deed on the foreclosed property, both of which while receiving tax breaks. This will help the banks to rejuvenate their reserves and it will help loosen up credit to the free market. Once we have credit spilling over into the free market, we will have more spending which will in turn create more jobs and once again, a thriving economy. At the same time, the free market while acting in its truest form will help to create opportunities for those who wish to purchase foreclosed homes, whether it’s for investment purposes, or for their own personal objectives. Another potential bonus is if the banks decide that they would like to participate in the program, but would not like to have all of the responsibility of acting as a landlord. In this situation, even more jobs can be created by the outsourcing of these responsibilities to either another governmental...

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