Gary Barnett has a plan to rescue the economy.
A one-time diamond trader whose Extell Development is now one of New York City’s most active real estate firms, Mr. Barnett feels strongly that the government has not yet done enough to counter the economy’s downward spiral, and the country is at strong risk of depression. Healthy businesses are laying off workers en masse; stable borrowers cannot refinance, and are forced to turn to default.
So in recent days, Mr. Barnett has been circulating and pushing a proposal—in the form of a two-page letter—that calls for the federal government to take specific, interventionist measures to staunch the ever-declining levels of confidence in the marketplace.
“It is not working, and it is not going to work,” he wrote in the letter. “The Federal Government pouring money into big banks is not the answer. … We need real change.”
The plan—which has been passed to Mayor Bloomberg, Larry Summers and David Axelrod, among others, according to Mr. Barnett’s spokesman—has three components.
-Mr. Barnett wants the federal government to temporarily block large corporations from laying off workers unless they can show they are in danger of financial collapse. This measure, which he likened to price controls put in place in the Nixon administration, comes as large, profitable companies are preemptively laying off workers, boosting unemployment and adding to the vicious cycle. “To me it’s outrageous that Pfizer is buying Wyeth in order to fire people,” he said. “They’re making billions, Microsoft is making billions, never mind that it’s essentially a monopoly. They’re letting people go. This is just not the time to do it. A) Have a heart. B) Be a patriot. The wave of firings breeds more firings, and more firings, and we could spiral into an extremely serious depression.”
-He also is calling for a three-year extension of all mortgages that are current on their interest payments, a measure aimed in large part at the commercial real estate sector, where even landlords with stable assets are unable to find lenders willing to refinance loans. By extending mortgages until the lending markets get some liquidity, Mr. Barnett reasons, there will not be as many seemingly needless defaults and foreclosures on large properties, which has been fueling some of the downturn.
-The third measure calls for government spending of what Mr. Barnett reasons is about $10 billion to $15 billion a year to subsidize mortgages, allowing homeowners to take out 30-year loans at 3 percent interest, with the government picking up the remainder of the interest.
The overriding theme, Mr. Barnett said, is strong action to boost confidence. He supports the actions the federal government has taken so far, he said, though more is needed.
“I think everything that they are doing is good,” he said. “I’m concerned that it isn’t going to work.”
As for the future of his plan: “I’m sending it around to various people who I know, and hopefully they’ll start pushing it too,” he said.
His letter in full: