Best alternatives to the bad bail out?

[jonnycsd]

I saw this post on another board. Both ideas seem much more effective than the current proposal, and both have the benefit of a successful track record. What other best alternatives do the Piggingtons have? You guys should be in Washington sorting this mess out, not our congress!

___
From Comment #2 posted by Tim Tempest:

Regarding Treasury Secretary Paulson’s bailout plan for the banks: wouldn’t it be possible to reactivate the March 1933 Emergency Banking Act which authorized the Treasury via the Reconstruction Finance Corporation to provide money to any bank in exchange for preferred shares. Essentially if a bank needed $XX million, it would issue preferred shares to that amount which the RFC would buy.

This provided the bank with fresh capital without having to sell or pledge their best loan assets, and there was reduced risk for the government. It became a shareholder which would sell the shares back when the bank returned to profitability in addition to any dividend paid (although I don’t think many of the banks helped this way in the 30s’ were paying dividends). Some banks failed anyway, but most who participated survived.

In the current situation, this approach would avoid paying cash for toxic trash (which individual financial institutions could then mark to market and dispose of in an orderly way) and still stabilize the system while protecting the taxpayers.

The same thing could be done with the old Home Owners Loan Corporation was another New Deal agency established in 1933. Its purpose was to refinance homes to prevent foreclosure. It was used to extend loans from shorter loans to fully amortized, longer term loans (typically 20-25 years). Through its work it granted long term mortgages to over a million people facing the loss of their homes. There were some restrictions, I understand, only for nonfarm homes, and worth less than $20,000. HOLC also assisted mortgage lenders by refinancing problematic loans and increasing the institutions liquidity. When the HOLC ended its operations and liquidated assets in 1951 it returned a small profit (using a quick Wikipedia search).

[kewp]

Give everyone with a social-security number a credit card with a 5k limit that lets them borrow directly from the Fed at current interest rates. If you default you get sent to a work camp.

Same thing with mortgages. Every legal citizen with documented income is allowed one mortgage from the Fed @ 2.5X their annual income. And again, you go to jail if you default.

Socialize the consumer credit market.

[kewp]

Give everyone with a social-security number a credit card with a 5k limit that lets them borrow directly from the Fed at current interest rates. If you default you get sent to a work camp.

Same thing with mortgages. Every legal citizen with documented income is allowed one mortgage from the Fed @ 2.5X their annual income. And again, you go to jail if you default.

Socialize the consumer credit market.

[kewp]

Give everyone with a social-security number a credit card with a 5k limit that lets them borrow directly from the Fed at current interest rates. If you default you get sent to a work camp.

Same thing with mortgages. Every legal citizen with documented income is allowed one mortgage from the Fed @ 2.5X their annual income. And again, you go to jail if you default.

Socialize the consumer credit market.

[kewp]

Give everyone with a social-security number a credit card with a 5k limit that lets them borrow directly from the Fed at current interest rates. If you default you get sent to a work camp.

Same thing with mortgages. Every legal citizen with documented income is allowed one mortgage from the Fed @ 2.5X their annual income. And again, you go to jail if you default.

Socialize the consumer credit market.

[kewp]

Give everyone with a social-security number a credit card with a 5k limit that lets them borrow directly from the Fed at current interest rates. If you default you get sent to a work camp.

Same thing with mortgages. Every legal citizen with documented income is allowed one mortgage from the Fed @ 2.5X their annual income. And again, you go to jail if you default.

Socialize the consumer credit market.

[sdduuuude]

Give ’em $150 Billion first and see what they do with it. That’ll make sure they conserve their resources and it’ll force them to come back for more and beg again for part of the remaining $650B.

[sdduuuude]

Give ’em $150 Billion first and see what they do with it. That’ll make sure they conserve their resources and it’ll force them to come back for more and beg again for part of the remaining $650B.

[sdduuuude]

Give ’em $150 Billion first and see what they do with it. That’ll make sure they conserve their resources and it’ll force them to come back for more and beg again for part of the remaining $650B.

[sdduuuude]

Give ’em $150 Billion first and see what they do with it. That’ll make sure they conserve their resources and it’ll force them to come back for more and beg again for part of the remaining $650B.

[sdduuuude]

Give ’em $150 Billion first and see what they do with it. That’ll make sure they conserve their resources and it’ll force them to come back for more and beg again for part of the remaining $650B.

[34f3f3f]

As I understand it, Bernanke was at pains to explain to Congress, that insolvency is not the sole issue. There is a crisis of confidence. So the plan is also a laxative for current retentive lending. What’s actually being discussed behind closed doors right now is anyone’s guess, but one would hope alternatives such as the above get a look in. However, I think the time bomb is ticking and the pressure is on for a quick fix. It doesn’t seem fair, or right, and never again, but it looks like it’s going to happen, and history will judge if our leaders deserve the confidence entrusted in them. No, I’m not going to say be careful who you vote for. There I just said, darn it!

[34f3f3f]

As I understand it, Bernanke was at pains to explain to Congress, that insolvency is not the sole issue. There is a crisis of confidence. So the plan is also a laxative for current retentive lending. What’s actually being discussed behind closed doors right now is anyone’s guess, but one would hope alternatives such as the above get a look in. However, I think the time bomb is ticking and the pressure is on for a quick fix. It doesn’t seem fair, or right, and never again, but it looks like it’s going to happen, and history will judge if our leaders deserve the confidence entrusted in them. No, I’m not going to say be careful who you vote for. There I just said, darn it!

[34f3f3f]

As I understand it, Bernanke was at pains to explain to Congress, that insolvency is not the sole issue. There is a crisis of confidence. So the plan is also a laxative for current retentive lending. What’s actually being discussed behind closed doors right now is anyone’s guess, but one would hope alternatives such as the above get a look in. However, I think the time bomb is ticking and the pressure is on for a quick fix. It doesn’t seem fair, or right, and never again, but it looks like it’s going to happen, and history will judge if our leaders deserve the confidence entrusted in them. No, I’m not going to say be careful who you vote for. There I just said, darn it!

[34f3f3f]

As I understand it, Bernanke was at pains to explain to Congress, that insolvency is not the sole issue. There is a crisis of confidence. So the plan is also a laxative for current retentive lending. What’s actually being discussed behind closed doors right now is anyone’s guess, but one would hope alternatives such as the above get a look in. However, I think the time bomb is ticking and the pressure is on for a quick fix. It doesn’t seem fair, or right, and never again, but it looks like it’s going to happen, and history will judge if our leaders deserve the confidence entrusted in them. No, I’m not going to say be careful who you vote for. There I just said, darn it!

[Author]

Posts