HEY - Uncle Sam Here's a Thought

The current "financial crisis" is the result of a simple accounting process brought on by your favorite uncle.

Let's assume you have a house that you convince a banker is worth $200,000. You establish a line of credit for $200,000. You rock along borrowing money and paying it back. All is well.

In fact, you have used some of the money that you borrowed to buy another house worth $200,000. Now youhave $400,000 of property and $400,000 line of credit.

One day the banker says "Those houses you have are only worth $100,000 each. Therefore, you need to pony up the $200,000 that is in excess of your line of credit". In other words you have exceeded your limit.

Now you go looking for ways to borrow the $200,000. Problem is, everybody is in the same boat.

The bank that loaned you the money had actually borrowed it from another bank, who had borrowed from another bank, etc., etc.

If I default on my loan each bank along the is going to default. Therefore, Uncle must give me the $200,000 I owe in exchange for one of the houses.

I now have a house worth $100,000 which will increase in value sometime and $200,000 cash to go out and do it again.

Meanwhile, Uncle Sam has a house worth $100,000 that he paid $200,000 for which he hopes he can sell for $201,000 - some day.

Solution? Simply tell the "banker" (in reality the government regulators) that you can claim the houses are really worth $200,000 but one year from now, you must begin reducing your line of credit and sell one of the houses. as a result, you don't need to go looking for emergency money and each bank doesn't have to default. Problem solved without using Uncle's money.

This solution is so simple it TICKS ME OFF no one else has thought of it. Except that as the person with the mythical houses I don't really want this solution because I would rather have the cash and no bad debts.