CHICAGO (CBS) — You may have seen it Monday morning: A full-page, $37,000 ad touting a plan to give homeowners a 1 percent, fixed-interest rate for 30 years.
CBS 2’s Dorothy Tucker set out to see who’s behind the proposal, what it says – and whether it’s a genius idea or a crazy concept.
No pretty pictures, no snazzy caption. Just a simple ad that spells out what’s being touted as a simple plan.
Backers say the average homeowner would save about $700 a month.
“When that money is spent, it creates jobs,” says Dennis Paulaha, an economist who helped write the proposal.
Paulaha represents the group that is behind it, but the organization wants to remain anonymous.
He will only say they’re not with the banks, a mortgage company or real-estate firm, and they don’t represent any political party.
“Nobody in the group has anything whatsoever to gain if this plan is adopted,” he says.
Paulaha says the backers of the plan believe the best way to boost the economy is for the government to spend $10 trillion bailing out homeowners.
“If they can give loans to large banks at zero percent, why not to people at one percent?” Paulaha says.
Rebel Cole, professor of finances at DePaul University, opposes the plan for a couple of reasons.
First, he points out that government loans to the banks were short-term, 90 days, and most banks have repaid the money. He says a 30-year loan to homeowners would mean the government would have to borrow from the banks and could lose $200 billion a year.
“The alternative is to have the Fed print money, but that’s going to be massively inflationary. It’s going to cause interest rates to go even higher,” Cole says.
In addition to newspaper ads that are running in some 30 cities, there is also a website.
The backers are hoping they’ll get lots of positive feedback and the attention of Congress.