The following Open Letter appeared in Friday’s editions of the New York Times, Wall Street Journal and the Washington Post.

Even those political leaders that support the current bailout proposal don’t like it very much. The American people like it less. It creates a complicated bureaucracy, does not directly help homeowners and does not address the foreclosure crisis.

Amend the bill to allow the Treasury to provide direct mortgage assistance to all American homeowners.

If the Treasury were to pay the first $250 of every American’s primary residential mortgage each month for five years, the value of all mortgage-backed securities would rise immediately. The housing market would stabilize and the banking system with it.

The $250 monthly payment would be made to all homeowners who pay the rest of their monthly mortgage bill. It would help families and create a strong incentive for them to pay their mortgages.

Those homeowners behind in their payments could be given a window of time to bring their payments up to date and receive the subsidy retroactively for a specific number of months.

The program could be extended to current and future buyers with a declining subsidy as we go forward and further stabilize real estate markets.

The monthly subsidy would act as an economic stimulus, helping us to avoid a protracted recession and eliminating the need for a separate stimulus package. The cost would be manageable. There are roughly 40 million mortgages, accordingly the cost of this package would be about $10 billion per month. This is a reasonable expense to bear considering that through Fannie Mae and Freddie Mac (and AIG and Bear Stearns) American taxpayers are already on the hook for hundreds of billions or more if mortgage defaults continue to accelerate.

• This proposal would give immediate and direct help to those who need it most: American homeowners. Wall Street would benefit indirectly.
• It would be easy to administer. Mortgage servicers would receive the payment from the Treasury after receiving the remainder of the monthly mortgage bill from the homeowner. As a result, banks would receive almost the same amount of money as if the mortgage crisis never happened.
• It is progressive. For those with modest homes, the $250 monthly Treasury payment would cover a much greater proportion of their mortgage than for those with expensive homes.
• It would be easy to oversee: There will be little place for lobbying or political pressure since government officials will not be required to value particular securities or strike individual deals with banks to buy their distressed assets. When mortgages and housing are stabilized by the program, market forces will determine the values of mortgage-based assets.

The program outlined above is simple, achievable and equitable to all Americans. It puts families and homeowners first, solving the problem from the bottom up rather than the top down.

Interactive Brokers Group, Inc.
Andrew Wilkinson, 203-913-1369
awilkinson@interactivebrokers.com