Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Paulson's bailout plan makes no sense to me.  Now I understand why.  They are deliberately describing the problem in false terms.  How is that not misleading and a breach of fiduciary responsibility to the taxpayer?  Or is there truly no such responsibility in this great game of "Emperor's New Clothes."

What I cannot see is how giving Paulson $250 billion will do anything but flush the $250 billion. How many times will we have to do that before we can actually do something useful? Why not insure that credit flows regardless of dying financial entities on and off Wall Street.  The lie that we can save Wall Street from its own follies and that we must in order to save the economy is, in fact, preventing us from saving the economy.

There are 538 members of congress: senators + representatives. With $266 billion out of the proposed $700 billion Congress could create 538 new banks, one per member of congress, in their states or districts. If this money were furnished, via Public Preferred Shares, to these banks, at a 3% reserve the banks would have $16.8 billion of new loan capability, for a total national new loan capability of $8.86 trillion.  

Require these banks to make loans to credit worthy businesses.  This would solve the lack of commercial paper. Require them to make a certain percentage of consumer loans to qualified borrowers for durable consumer goods--cars, refrigerators, etc.  Require them to make low interest government guaranteed student loans.  Require them to make a certain percentage of alternative energy loans. Allow them to fund loans for home mortgages to qualified buyers.  This would force solvent existing banks to re-enter the loan market to preserve market share.  Is there any reason, economically, that this will not work?  Would this not allow the economy to function regardless of what happened to existing financial institutions?

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Sep 27th, 2008 at 08:11:33 PM EST

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