The theory goes that the simplest solution is always the best. We agree and believe this applies to economic recovery and stimulus.

The recovery of the U.S. economy does not require complicated and extensive legislative or financial processes to take effect. The Capital Injection Program, first outlined on this website as "Invest In America" had the desired result of putting capital back into the banking system to offset the losses on banks' books due to bad loans. It has helped to bring LIBOR back in line within a matter of weeks, as well.

Banks are capable of lending again. So why aren't they? The answer lies in the valuation of real property and other assets. Banks are still unable to determine the reality of appraisals, and believe property values are down so far that loans cannot be made against the appraised value.

If an applicant has an appraised value of $500,000 on a property being used as collateral, the bank is likely to devalue the appraisal by some 30 percent or more, bringing the loan value down to $350,000.

If the applicant already has debt pledged against that property, and banks are presuming so now, whether true or not, then the bank is likely to further reduce its valuation. Lending would be done at the maximum level of reduction for the safety of the bank, and then at only 70% of that final figure. If the bank, for example, believed the applicant to have a few credit cards, they might present a total loan value of $250,000, and only lend 70% of that figure, provided the applicant's credit score was high and there was no sign of impending difficulties.

For business owners, this becomes problematic because banks are equally worried about the prospects of any business when the larger businesses are in deep trouble.

For mortgage applicants, the property value is not being based on the price being paid but on a devalued estimate done clerically as a desk-top appraisal, and not relying upon written appraisals by licensed professionals.

Even the inventory of companies is in question at the moment, with banks worried that such goods cannot be sold in future, particularly in a cash-tight economy.

The solution here is to simply set the value of property as the sum paid for it in the past 5 years. An item is worth what someone was willing to pay for it - a simple precept of business.

Rather than getting into the complicated world of re-appraising everyone's homes and commercial property, the Treasury and FED should simply make the "recommendation" to the banks to accept the last paid price as the basis valuation.

That would allow the banks to work with regulators to craft a refinancing program where the borrowers, whether businesses or individuals, could refinance properties, if needed, for anywhere between 30 and 75 years, in specified increments, thus lowering the principal costs.

There's no need to go to bondholders and stockholders seeking permission for this, it can be mandated by order of the FED under the Housing Reform Act passed in July.

Moreover, this reform would allow banks and investors to earn greater, not lesser sums of interest over the long-term, while reducing the payment sums in the short term.

Someone paying a 5/1 ARM now, might refinance the outstanding sum on the loan into a 50 year note. While that sum might have payments of $1000 a month (for example) normally, the payments could be reduced to $700, making the payments less expensive. Loans could be rebooked at 5.25%, making the loans attractive to property buyers, spurring more housing purchases, wiping out the existing foreclosure inventory in a matter of 6 months or less.

Furthermore, by setting forth this simple plan, property values are stablized, so that other portions of the credit sector can resume.

With provisions already in place with that Housing Reform Bill, there will be no more "Liar Loans" or No-Docs loans made in future, and with independent verification of loan processing as previously proposed by the Institute, loans would once more become safe.

That would allow investors to buy loans, without Credit Default Options or Swaps, and the investments made would, as we've previously suggested, be gilt-edge securities.

When it comes to business lending, we believe it is absolutely essential for banks to get business plans and have them independently reviewed for soundness.

We're not proposing anything that isn't absolutely fundamental. The entire U.S. Government is based on a system of checks and balances, yet our banking industry is expected to police itself, and that Federal or state regulators will catch problems. That is not a realistic approach and fails about every 20 years.

We must instill confidence in the public and the systems and the proposals outlined here will do that, quite precisely.

Congress and President-Elect Obama are urged not to overmedicate the patient, for that might do more harm than the illness itself. Sometimes when a patient is ill, you just have to give the condition minimal treatment and allow the disease to work its way out of the body.

Our economy didn't have a stroke or heart attack. It has a viral condition - where everyone's caught the bug of economic pessimism. Putting confidence back into the system requires only the most minimal injections now.