Dealing with the Banks--An outline

[Jackpine Radical]

First--get an accurate accounting of the true value of the assets and liabilities of the large banks. This will require outside auditors, preferably government auditors. If private contract accountants are used, they should be assigned to tasks in such a way as to preclude their co-optation by the entities being audited. For example, accountants from different firms should be teamed together and nobody should be assigned to audit a bank with which they had a prior professional relationship.

Second--nationalize these banks. Using the data from the audits, determine the true present market value of each bank. Shareholders will be reimbursed by the Federal Government for the actual value of their shares.

Third--restructure the anking system as needed for efficiency. The restructuring may remain as an ongoing process so that the banking system can evolve as needed for changing economic circumstances in the future.

Fourth--disassemble the Federal Reserve and reassign its functions to the nationalized banking system.

And fifth--As evidence of prior criminal activity is turned up in the audit and accounting process, prosecutions of the bank executives will proceed. The IRS will be assigned to track down hidden assets. Given the worldwide scope of the financial crisis, the US will seek treaties with other nations that will permit the opening of bank records around the world to investigators for purposes of locating and repatriating the fruits of fraudulent activity.

Small privately owned banks will be permitted to operate, but strict rules will be reinstitute to define their bounds of operation, and they shall in no case be permitted to operate in more than one state.

[ayeshahaqqiqa]

1. You should send your idea to recovery.gov

if you haven't already. It is straightforward and makes a lot of sense.

[MannyGoldstein]

2. Everyone's Trying To Avoid Step One

Because the numbers will be shatteringly negative - which will be scary on its own, but also means that the value in step two will be negative.

Geithner and Summers do not want to see the Predator Class take a hit on this.

[Jackpine Radical]

3. I would never argue that my proposal would be easy, nor welcome

among those in power.

[ThomWV]

4. Some additional thinking on it - possibly too simplistic

Too simplistic on my part perhaps. You're comments will tell.

I understand that banks can currently leverage assets to the tune of 10:1 or 12:1. Reduce that by half to 6:1. Make every bank in the nation document its ability to meet the 6:1 with current assets. Some banks will not be able to bring enough assets to the table to make the cutoff. They must bring all the assets they can value to the table and the Government must inject funds to make up the difference plus a small cushion and at the same time take possession of all of the banks remaining assets in payment for the funds injected. The bank would then continue operation under its current management but with strict Federal oversight. The Government would then set up a separate corporation (much like the Resolution Trust from the failed S&L days) to depose of the captured assets within a reasonable time and at fair compensation to the people. Many of those previously unappraisable debt instrument will indeed pay off. Also, presumably many of them will include homes in foreclosure - and who better to allow people to stay in their homes than the Government, particularly if it already owns the paper?

This is my plan.

[Jackpine Radical]

5. I think the fundamental problem with any private banking system

is that the interests of the bankers do not correspond well with the common good. Nevertheless, when they get themselves into trouble by pursuing their own interests (greed), we are called upon to bail them out because "they are too big to (be allowed to) fail." If they're so vital to our national interest, then it is vital that we own and control them. I see the present as a good time to establish ownership and control because they're awfully cheap right now.

[ThomWV]

7. I agree that now is the time to take them over but not because they are so cheap.

I think their price is irrelevent, if the banks are vital to the function of the nation then they must be in the total control of the nation, hence ownership.

[Jackpine Radical]

9. Right--I'm just saying that this is a golden (so to speak) opportunity.

[Joe Chi Minh]

6. 6: Force them to return to their historic role of holding customer accounts

and providing other customer services. An end to their gambling operations, from which they have never ever made money, accruing it in a "bubble", then losing it all in one fell swoop.

[Jackpine Radical]

10. Indeed.

[BR_Parkway]

8. RE: # 5 - just make sure that's set up so that they can't claim they

didn't get a warrant or some other technical BS to where they get off and don't face justice for their crimes.

Other than that, sounds like a great plan - put back in place all the protections that were put in after the Depression to keep exactly this sort of thing from happening