Sheila Bair keeps speaking out, and certainly deserves respect as a clear-thinker in these abominable economic times. Bair reiterates the same message week after week, although most likely the cause of a few ‘Paulson & Co’ migraines.

Bair understands something that most taxpayers could have told Paulson a long time ago. While the Treasury busily attempts to avoid what Paulson describes as ’systemic crash-and-burn’, force lenders to lend, and calm investor panic, Sheila knows that troubled taxpayers can neither borrow, nor spend more.

FDIC Chairwoman Bair is an advocate for mortgage modification. She supports steering the helm of mortgages in serious payment delinquency. She proposes modifying them to a 38% cap on income, daring all the way down to 31% of earned income if necessary. In addition, she proposes lowering interest rates on mortgages, and increasing payment time.

Bair emphasizes that in calculating new mortgages, FICO scores will not be considered. It is a beacon of light for all those worry-deep in credit debt. Any modifications will be based solely on the earned, actual income of households.

The bad news is that it is currently too late for many already in the foreclosure line. The good news, however, is that her proposal can save so many more from heading down the same path. Healthy family finances, means greater consumer spending. Isn’t this what Paulson also hoped for? Go figure.

Far from everyone is headed for foreclosure, however, the numbers are not only disturbing, they are an important indicator. We can only imagine the unknown number of subprime households teetering on the edge of one or two delinquent payments.

Sheila Bair provides a necessary solution to the core problem. The second part of the solution needs to come from an Obama investment in immediate job creation, minimizing longterm effects of a lengthy unemployment line. These two solutions would allow the grassroots to once more grow, and the corporate world could restructure their way back to health and viability.

Thumbs up for Sheila Bair.

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