Dear President Obama

October 3, 2012

 

Dear President Obama,

            The financial crisis of 2008 is still being felt today, and as a citizen of America, I feel certain actions must occur to inhibit future financial crises. At the start of the millennium, banks were borrowing massive amounts of money from other banks and investors gave money to the banks with insurance from AIG which AIG could not pay back. This led to our recession. Before the recession, the some common house holds borrowed about 99% of their house’s worth so when the crisis hit, the family could not pay their mortgage and their house was foreclosed.  This happened because the banks did not worry about their monetary losses since it was not their money. Their money came from the investors who were insured against monetary loss. So banks kept steadily signing deals no matter how risky because they earned money for signing those loans and investor’s got money because of their insured investments.

            A solution to our financial crisis would be to go back to a simpler method. Nobody invests in the banks. Growing up, my mother told me that the bank uses your money which earns you interest. So I thought the bank only used their customer’s money. I was wrong. Not investing in the banks would give a situation where the money the banks has, or gets through its customers, is the money the bank has. No more no less. This way the banks do not give out risky loans because it is the customer’s money and they must protect it. Then, a family that can mostly afford that new house can buy it because they only need to borrow a small amount of money. Their loan for the house can earn the bank money because they get interest off the loan. What about the investors? They can invest in companies but not banks so they can still earn money. Also the investor will not be able to get huge loans to buy out companies because the bank, using only its customer’s money, will not finance such a risky investment. This might slow down the economy a little but at least in the future, America’s finances will be less debt and more economic growth.

Thank you for your time,

Randi Carter