A Crisis of Confidence
The Bear on Sep 30 2008 at 8:31 am | Filed under: Economy
Instead of one gigantic $700 billion dollar bill with each political side trying to add perks for their favorite donor’s maybe Congress should address the real problem here.
You can’t blame the American Public for running scared because our incompetent political class in Washington lacks leadership and not the forth sight to deal with the oblivious. Two quick fixes can restore order.
Lack of Confidence in Banks – Banks are becoming insolvent and the public is causing a run on cash reserves because the public fears that they will loose their life savings.
The FDIC only insures savings accounts up to $100,000 and therein is the problem. Increase this amount to a million and cash will flow back into the banks. Likewise treat the money market funds the same way. Uncle Sam could even charge an insurance premium for those who want insurance at a higher amount.
Eliminate the “Mark to Market “accounting provision that has caused balance sheets to become needlessly unbalanced. This will eliminate the fire sale valuation of these assets of 20 cents on the dollar to a more realistic figure. The net affect of this will be to free up capital reserves required for under valuation of the assets.
This will add liquidity to the banking system and will not cost the taxpayers a nickel.
SideBear: And putting a sock in Nancy Pelosi’s. mouth would help too.
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The best way to add liquidity to the banking system is to buy bad loans.
Start with all those who have defaulted now, or will be in default within thirty days and have announced their intent to default (I know, you normally don’t get a lot of notice with some, but, with others, you do, take what you can get). Pay for those loans 100% of the amount loaned.
Investigate each loan on a case by case basis. A legal citizen, had a job story and now has a sob story, too bad, so sad, the government required these banks to entice people into these loans, you pay them off. Cash. No Printing!! Cut something, anything, but you pay the bills with the money we have now, no digging the hole deeper behind our backs.
Bad loan, somebody scammed us? Prosecute, hard, fast, to the wall, in jail, bankrupt (and I mean, on-the-street-shirtless kind of bankrupt, no keep-the-malibu-home-and-jet golden parachutes). Life in prison until they can pay every dime of every loan. Once restitution is made (plus interest and penalties, of course…maybe we’ll use the IRS tables….hmmmm…this is getting fun, maybe I’ll run for this job), then they can get out, but they never get to work in the financial sector again. Not even as a bill collector.
Somebody up in the up and up did a bad thing? Ohhhh, now we get to punish the companies, too.
Then, just for fun, we investigate the sale of Lehman…and Wachovia. And all the way back to Bear Stearns. Something tells me those banks were stolen in the middle of the night. I can’t quite put my finger on it, but I’m sure the Central Bankers made a move on those banks, and this was the whole reason for this crisis, in fact…though now, I think they realize they’ve got a tiger by the tail, and if they can tame it, they can make out like bandits, making this their big play instead of just a side move. The real problem with that is, which one is their man, Obama, or McCain?