From Janie Sheppard
The Obama administration is about to disgorge the second half of TARP (Troubled Assets Relief Program) money ($350 Billion Dollars) to bail out the banks. The first $350 Billion didn’t do the trick, the second won’t either. But wait, before once again dumping that much money into unsound banks, here’s another idea. This idea isn’t mine, and if it gets some attention, I’ll again ask permission to disclose its origins. For now, we’ll just focus on what I understand to be the substance.
Forget existing banks. Why not leave them to sink or swim? The Federal Deposit Insurance Corporation (FDIC) was created to clean up banking messes, and it has a good record. Let it do its job.
Instead, ask Congress to appropriate money for a NEW BANK. In its charter would be a mandate to extend credit, something no amount of TARP money alone will do, as we have seen.
The NEW BANK would not be burdened with toxic assets like mortgage-backed securities that turned out to have no value and were a bad idea in the first place.
The NEW BANK would not have greedy shareholders demanding dividends from government bailout money. The shareholders would be us, the taxpayers. Instead of dividends going only to rich shareholders, taxpayers would see the benefits in the form of readily available credit. What would this mean? Ordinary people could finance cars, houses, businesses, and get lines of credit. With the increase of economic activity created by the loosened credit, employment would increase. Instead of losing hundreds of thousands of jobs each month, there would be a gradual turnaround.
What else would this mean? No more huge bonuses for executives more concerned about their pay and perks than the welfare of the country. No more incentive to produce short-term stockholder dividends. The NEW BANK’s profits would come from the interest on loans, not from fraudulent financial instruments that through the deceptive magic of “bundling” hid huge losses. This game of “hot potato” went on while the bundlers sold the instruments to our pension funds and, amazingly, to each other.
Congress would set the salaries for NEW BANK employees and managers. Bonuses would be tied to the health of the economy, not bolstered by phony recommendations of executive pay consultants. This could be in the legislation, if we demanded.
There are plenty of people in the federal government who could run the NEW BANK. Recall that the Resolution Trust Corporation and the FDIC employ plenty of smart people. Bankers who made the mess would be prohibited from employment, if we demanded.
To get the NEW BANK going requires a popular revolt. Unless we tell the Congress, loud and clear and with street demonstrations, if necessary, that we’re fed up and not going to take it anymore, the TARP money will be spent, banks will continue to go bankrupt, and the likes of you and I will not see any benefits while the unemployment numbers keep going up.
If you’re fed up, let President Obama know, let Mike Thompson know, let Barbara Boxer and Dianne Feinstein know, and share this idea with your friends. Don’t take it anymore!