Now here's a man with a plan! The more I read of this guy, the more interested I grow. James K. Galbraith's column ("A Bailout We Don't Need") in today's Washington Post makes just plain good sense. Some quotes:
Now that all five big investment banks -- Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley -- have disappeared or morphed into regular banks, a question arises.If there are no more investment banks, who, then, are we bailing out?He argues we should take that $700 billion and
The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans."
(1) increase the $100k cap on FDIC deposits;
(2) put $500 billion in the FDIC and those agencies investigating fraud;
(3) put the remaining $200 billion into a reserve fund for recapitalizing banks, much as Warren Buffett did in taking preferred shares and warrants from Goldman Sachs;
(4) create "a new Home Owners Loan Corp., which would rewrite mortgages, manage rental conversions and decide when vacant, degraded properties should be demolished. Set it up like a draft board in each community, under federal guidelines, and get to work;"
(5) "Reenact Richard Nixon's great idea: federal revenue sharing. States and localities should get the funds to plug their revenue gaps and maintain real public spending, per capita, for the next three to five years" to aid ailing state and local governments which are feeling the pinch;
(6) "enact the National Infrastructure Bank, making bond revenue available in a revolving fund for capital improvements. There is work to do. There are people to do it. Bring them together;"
(7) supplement the dwindling Social Security fund and retirement funds invested in the stock market by imposing a transaction turnover tax on stocks;
(8) then, the clincher,
"If the 1960s were about raising baby boomers and the '90s about technology, what should the '10s and '20s be about? It's obvious: energy and climate change. That's where the present great unmet needs are.
So, let's use the next few years to plan, mapping out a program of energy conservation, reconstruction and renewable power. Let's get the public sector and the universities working on it. And let's prepare the private sector so that when the credit crunch finally ends, we'll have the firms, the labs, the standards and the talent in place, ready to go."
Indeed, instead of corporate socialism (or corporatism) which favors the very perpetrators of this alleged crisis, use the rescue to position the economy for future growth in profitable and mutually, publicly beneficial areas. Plus, this plan has the beauty of addressing the presumed cause of the problem (underwater mortgages and fragile bank assets) rather than the whole over-leveraged mortgage-backed securities house of cards that fueled such enormous profits over the past several years and which have now dried up precipitating the President* to call a 'crisis'.