Banks Are Still Requiring a Hand Out...When Will It All End?

Today it was announced that Bank of America (BOA) is receiving another cash infusion from the Treasury to help offset losses that were acquired from their acquisition of Merrill Lynch [http://finance.yahoo.com/news/Treasury-Bank-of-America-apf-14088688.html]. I am a finance man and I really am not understanding why we keep giving money to banks when banks are not attempting to aggressively stem the problem. Without banks beginning to cause an end to a means, the end will be prolonged to a point where there may be no coming back.

-Home Foreclosures-
It is my opinion that banks need to institute a moratorium for no less than 180 days on all sub prime or creative mortgages as long as they are not in bankruptcy court or the final stages of foreclosure. During this period of time the bank would require all creative mortgages that are behind, in danger of being behind, or have fallen behind at any given time within the last year, or in communities where significant value has been loss would be require to refinance. Banks would have to take some minimal losses upfront which should equate to under a couple hundred million dollars (all being offset by the fed money that has been provided). For example, If I bought a home for $250,000 and I have $240,000 remaining on the loan and the home value dropped to $225,000; I would refinance the house for $220,000 write down $20,000 on the books as losses, finance the home out 40 years at a fixed rate of prime plus 1%. This should provide the homeowner with some relief from what they are currently paying. I would only do this if they had verifiable income to sustain the mortgage payments.

If the home had to be foreclosed upon, as a bank I would offer special foreclosure financing and sell the home for at least 80% [under my example which would be $176,000] of the current value or less to get the debt off the book and lived in as soon as possible.

-Business Credit-
I would begin re-lending to small and medium size business however, using the backing power of the SBA. I would run business financing programs through the SBA and make at least $2Billion Dollars at competitive finance rates with 2-6 month morotium on interest payments to hopefully begin to finance upstarts from individuals with legitmate business ideas that were laid off. The goal is to get as many people back to work and generating income, tax revenue, and free capital.

Apathy is not going to resolve this crisis; a pro-active stance is required to be taken to force a end to this issue. Will it take further Government invovlement? Yes it will, however the money needs to be provided to other industries, entities, and individuals rather than Banks unless Banks are going to stop sitting on their thumbs and do something.