Phil Anthropy

Why the Bailout Cannot Solve a Thing: Nobody Is Blaming the Right Culprit

Let all the banks fail if they can't compete or made poor decisions. Let the Treasury set up a U.S. National Bank that will make commercial loans and write mortgages to creditworthy people all day long at fair interest rates. Have the FDIC insure the deposits of the failing banks, but if the banks have not maintained adequate reserves to pay the under $100k depositors, put the bank presidents in jail for a decade or two on fraud charges or other criminal charges (they must be guilty of something; if nothing else, we can detain them indefinitely as financial terrorists and send them to Gitmo). I suspect the number of bank failures would magically diminish overnight, with executives taking pay cuts, reducing dividends and taking other measures to ensure financial stability. Meanwhile the U.S. National Bank would be making huge profits to generate a surplus. Foreign investors would swoop in and buy up the failed banks from the FDIC for pennies on the dollar, and we'd be back in business (after a severe recession, I admit). Then we could dismantle the Fed (a private, for-profit bank), since we'd have a national treasury from our surplus. Once the surviving commercial banks got rolling again, we'd liquidate the U.S. National Bank and turn it into a sovereign wealth fund, and have it be a national endowment for America, investing in profitable energy research companies and other real assets. After a few decades, if properly managed, the average American would pay no taxes, because we'd have enough growth in the endowment to start subsidizing our people. The Kuwaitis and Saudis do it. Why not us?