Here in Los Angeles, the number one economic concern is by far the housing market.   Although unemployment is a close second, people are generally concerned about their jobs as a means to pay their rent or mortgage.

It was nearly a year ago that stimulus money totaling roughly $800 billion (that is $800,000,000,000.00) was approved by the Congress, George Bush, and later Barack Obama.  These funds would become known as TARP money.

At the time, Americans were told TARP money was absolutely necessary in order to accomplish three major tasks during 2009:

1. Stop banks from failing.  Failures which would have stopped all mortgage lending and created systematic and systemic risk (whatever that means).
2. Keep unemployment below 10%.
3. Help stem the tide of foreclosures facing average Americans.

Furthermore, taxpayers were told that this money would be borrowed, but also repaid as soon as possible.   Hard dates were established outlining that money would start to be repaid by the end of 2010 and wouldnever be reutilized.

Currently we know the following to be true:

1. Banks are still failing; there are approximately 200 failed banks in 2009 so far.
2. Unemployment is currently hovering around 10.2% in California.
3. National and State figures about preventing foreclosures are sketchy at best; however, most reading this article have probably heard a horrific story about a friend or family member trying to refinance their home, modify their loan, or prevent a bank foreclosure.
4. The repayment of TARP money has been extended and this $800 billion is now starting to look like the Government’s newest slush fund.

At the time of the stimulus, Senator John Ensign from Nevada (the state arguably hit the hardest by a declining housing market) made the following alternative proposal:

Federally mandate that every mortgage in American be immediately dropped to a 4% fixed rate for the remainder of the loan.  Allow every purchase loan obtained in the next year to be fixed at 4% for 30 years.

The Senator’s plan was supported by several economists, captains of industry like Donald Trump, and touted in the Wall Street Journal as a reasonable alternative to the $800 billion politically driven bail-out.

Senator Ensign theorized that by giving all American homeowners a 4% rate, we would immediately see an increase in consumer confidence.  Furthermore, with the medium home price in America at $200,000, the estimated savings to the average American homeowner would be $4,000 per year for the entirety of their loan.

The total cost to the Federal Government for this plan was estimated at $400 billion.  However, economists speculated that this consumer savings would help stabilize the economy and transfer some of this savings on interest payments into worldwide purchasing power.

Senator Ensign wanted to trust the consumer and the American homeowner, not the banks or the Government, to get the economy back on track.

A year later, seeing how the TARP money has been utilized and loan modifications for struggling homeowners are a nightmare to complete, which plan would you have supported?