Monday, March 16, 2009

One Step Forward, Two Steps Banks

Whether or not you believe in the stimulus plan, the new budget, all of Obama’s ambitious plans, one thing is fundamental: If Obama cannot solve the banking problem, he’s dead in the water on anything else. Treasury Secretary Tim Geithner has been struggling ever since presenting a vague outline of a plan for fixing the banking system, an outline that sent Wall Street stampeding for the exits. He and President Obama need to step up to the plate and flesh out the plan, or there will be no continuing confidence.

Now, I’m no economist, but I’ve been following this story, and I think I’ve outlined a possible plan to fix the national banks. Try to follow; this is important. I’m going to be using a lot of technical terms, but if you stay with the broad concept it’s just a number of common sense solutions applicable to the financial world. Here’s what we’ve got to do.

Take the bad money in the banks, and transform it into good money, through financial transactions in a system. Pay for the bad money, transfer the bad money, then replace the bad money with the good money. Use taxpayer funds to pay for the bad money, and when the bad money is transferred back, use that money to pay back the government.

Look at the banks, and determine which banks are solvent, then transform the assets of those that are not. Resolve the insolvent banks. Replace all bad assets with the new assets, taxing the interest to pay for the transference of the new assets. Asterisk the risk assessment, and accessorize the liability.

Buy the malignant mortgages from the insolvent banks, and benignate the most malign, while bundling them into transferred assets. Pay for the lost interest with taxed bundled interest on good money. Sell the bad mortgages through a transactional procedure. Carry the one. Insure the assets and transform all bad money.

Remove toxic assets and tax the interest, using that to buy the bad capital. As new capital flows in, merge the flow of money transference through market forces. Withhold the good assets, but tax the interest on the withholding. Insure the remaining assets with withholding assets. Assetize the insurance, and withhold the remainder. Once the flour has blended and the liquid is bubbling, add the rest of the withheld assets.

Once buyers are found for the transferred assets, capitalize the procedures so that refunding is paramount. Remake the money as capital assets, which you then transfer into usable assets. Maximize the good assets. Tax the transference to recapitalize the good money. Transfer the maximalization to capitalize the reformation of the asset transfer. Repeat if necessary.

Avoid full nationalization by using privatized nationalization. Nationalize the bad assets while refinancing the banks with privatized funds. Accrue new assets, which will be reprivatized through the nationalization of those assets.

That’s it in a nutshell. Of course, it’s a gross oversimplification of the countless procedures that need to be implemented in order to refinance the economic infrastructure. As a last resort, you could nationalize the privatization process itself, and pay for the whole kit and caboodle with the revenues from the capital exchange. There are reasons why you wouldn’t want to do that, but that’s a little too complicated to address right now. Another time.

--Dan Kilian

---------------------------------------------- Soup's (Not Dan's) Positions

---------------------------------------------- Economic Hope

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