The American Crisis: Problems and Solutions

       Falling stock market, rising gas prices, unemployment record highs, banks failing and different bailouts are all a part of why our economy is crashing at such a fast rate.  After reviewing different items that could possibly make our economy better and really taking the time to do adequate research on what is reality and what is fantasy on what could actually be done.  Perhaps the three top things that could turn our economy around are the bailouts, correcting the mortgages and loans that banks have made, and reducing unemployment.  We as Americans need to start realizing that mistakes have been made and start taking the time to change our future before it is too late to reverse.  I am convinced these three things are closely related; the bailouts are essential but should have very strict guidelines. Bailing out many including: homeowners, banks, contractors, and the big three (Ford, Chrysler and GM), is probably necessary; however, each should come different rules and guidelines.        

     If we do not start bailing out these companies we will not bounce back from this failing economy. Bailing out the big three should have strict guidelines as I said before such as repayment plus interest.  They should reduce their numbers of senior vice presidents because salaries of around half of million dollars, private jets and other perks are a waste of the bailout money.  The strict conditions I would put on the big three before I gave them a bailout would be requiring them to make fuel efficient cars, more affordable cars (getting back to the basics instead of having all the extras), and last but not least making all SUVs more fuel efficient and greener.   Bailouts are an enormous part of our economy’s progress, but banks’ making wiser decisions on loans and mortgages is essential.        

     The government is in the process of bailing out the federal agencies associated with Fannie Mae, Freddie Mac, and Jennie Mae. The federal government was smart to begin bailout. They are to big not to bailout; if they did not, more banks would start to fail and then it would cause even more crisis. Adding to what the government has already done I would not bailout any other agencies such as the mortgage backed securities (the only thing backing these securities are someone else’s mortgage; so if an owner does not pay on the house or mortgage then the investment does not get paid on and then it becomes a bad investment) or the stated income stated asset loans with limited documentation, “liar loans”. (These people would lie about how much money they made and did not provide tax returns and/or W-2s and would get these loans without proof that they could repay. Banks would lock them in at low interest rates 3-5 percent for two to three years- with what is called a teaser rate. These banks would make the loans and then after two to three years the terms would skyrocket and people would not be able to pay on their mortgage or refinance because their property value had dropped and were not worth as much as their loans was.  My answer to this is to have traditional mortgage products such as fixed rates or non-teaser rate adjustable mortgages. Providing full documentation backing what they can pay for the loans that they are taking out should be required.                 

           Adding to all of this is the increasing unemployment rate caused by this is high gas prices and recession. The unemployment is not just because people cannot find work; it has to do with transportation and high gas prices and became desperate. People could not pay $4.00 plus for a gallon of gas.  People were losing their jobs because they did not have any transportation.  This is where unemployment started to increase, and then with the decline in both aggregate supply and demand people were losing their jobs because they were not needed anymore.  Fewer cars were being sold, meaning fewer cars were needed to be produced, meaning less people were needed to work. Layoffs were happening more often, more people were being let go then hired.  The solution I have is to put more jobs back in the United States and to not ship as many jobs overseas. Instead of raising other countries unemployment; we can reduce our own first.  We need to start thinking about the low to middle class Americans and see where we can improve.    

          Taking ideas from everyone and everywhere we can start to see change. We can start to see the American economy sky rocket instead of crashing into a crisis.  Taking the time to meet with our elected representatives to talk out plans instead of just jumping into action, this is the first answer. We must think before we just respond; think rationally instead of thinking that we can change everything with just one move. Changing the failing banks and other companies into money makers, changing appalling loans and mortgages into secure loans and mortgages the banks will get paid back, and reducing the high unemployment rate into actual American jobs will take America back to its strong economy. Without a strong economy we have little hope if reversing our growing fiscal crises.