I’ve got a message for the House, Senate and President Obama. I don’t think you understand the problem yet! They are trying to give money to the banks to loan the money to businesses and consumers for car loans and homes, but for most of those in trouble they are too late for that solution to work. Those that have been affected by this economic downturn the most, either businesses with huge sales drops of 50% or more, or the employees that have been laid off from those companies have already had their credit rating shredded in the last year.
Small businesses have felt the slowdown in the economy as early as the summer of 2007, but no matter how hard they tried to catch up with the falling sales, it kept getting worse. And now after one failed stimulus package and another set to roll out soon, the very businesses and consumers that need the help, cannot qualify and the ones that do qualify, don’t need it.
My approach would be to do an across the board lowering of interest rates for business loans, home loans and credit cards and a break from monthly payments for a time period of several months or more depending on the need of the business or consumer. This would give both businesses and consumers time to ride out the worst of what’s left of the recession and save for when payments start again. And maybe for the first time in months, spend a little money also.
The benefit for the debtor is easy to see, but the creditor and our country will come out ahead also. In most cases if the debtor does not get the relief, they will not make the payments anyway, they may file for bankruptcy as many are today. Then the creditor is left with a tax write off for the loss, costing the government a loss of revenue and the debtor a fraction of what he may have been able to collect if the debtor had been given the relief and paid off the debt in time. And remember, the debtor will be spending some of the money they are saving with local businesses, helping the economy.
So the banks and credit card companies would use the money already given them to cover both loses from the missed payments and the small interest rate they will earn. That’s a small price to ask since many of these same creditors caused this problem in the first place. And hey, we all have to do our part to help, right?
If nothing is done, we’ll continue to see businesses both small and large fail, laying off employees in record numbers, continuing the foreclosure mess and slowing the recovery. And don’t ask me to believe a dime of the stimulus money will ever trickle down, it never has before, and most of those in business wouldn’t even loan themselves money right now. They just need a breather, it’s been a very long time since the summer of 2007.