Biz paper Barron's suggests plan to fix U.S. woes

NEW YORK (Reuters) - Barron's, the weekly financial newspaper, in its February 16 edition suggested federal authorities consider giving $200 billion of funds already set aside to help heal America's financial system to banks and other institutions holding subprime mortgages and investments.

In a cover-page editorial titled "The Barron's Plan," the newspaper said its plan would require companies use the funds to reduce the principal amount of the country's roughly $850 billion in subprime mortgages by about a quarter.

The plan would surely draw complaints, Barron's said, because of its focus on aiding subprime mortgage borrowers, even those that may not need it, but was a bold step that could put U.S. financial markets in recovery.

Barron's said cutting amounts owed on mortgages would lower payments and the chance that holders would default. Second, it could cut the incentive to walk away from loans since the principal on many properties would be cut to a level below current market value.

Government funds could also be used to give relief to prime mortgage borrowers, which would also help stabilize the economy, Barron's said.

"More than just about anyone, we at Barron's deplore excessive spending by the government, feckless management by chief executives and irresponsible financial actions by individuals. But sometimes the only way to end a standoff is to make bold concessions and move ahead," Barron's Editor Ed Finn said in the front-page piece.

(Reporting by Lilla Zuill, editing by Maureen Bavdek)