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How to Keep the Banking System in the Private Sector
Tim Geitner said today, in response to questions about the prospect of bank nationalization, that the Treasury is considering a range of options with the intent of preserving the private banking system. “We have a financial system that is run by private shareholders, managed by private institutions, and we’d like to do our best to preserve that system,” he told reporters.
Well, it all depends on what "private" means. The fact that the Treasury has not sought voting rights or outright control over day-to-day operations doesn't mean the banks are still "private." Nor does it mean that much remains of the former "system" to be preserved. The Treasury now owns preferred shares and warrants of many of the banks that have received bailout money. These can be converted into common stock and cashed out whenever the government wants. Technically, the Treasury has a controlling interest in many of these banks if it wanted to exercise that interest. As to many other banks, the Treasury could easily gain a controlling interest; their remaining common shares are worth so little now that Treasury could buy just buy them up. In addition, the Treasury, as well as the Fed, is monitoring these banks carefully, and the banks are highly sensitive to what Treasury and Fed officials want from them. But "nationalization" is a dirty word in America. More to the point, it's far from clear that federal officials would have any better idea how to manage day-to-day operations than the current managers -- although it's hard to imagine how they could be managed any worse than they've been managed.
Yet the real issue here isn't about day-to-day operations. It's about something much larger. Put simply, the big banks are going under. No one wants to say this out loud for fear of causing even more panic, but the fact is that many of these banks are insolvent. Their assets are worth far less than their face value because so many borrowers can't -- or won't be able to -- repay the loans.
Six months ago it may have made sense for the government to buy up so-called "toxic assets," based on home mortgages that should never have been issued. Three months ago it may have made sense to establish a "bad bank" to store them in, until they could be resold.
But as the Mini Depression worsens, "toxic assets" are no longer all that distinct from a vast and growing sea of non-performing or endangered loans on the banks' balance sheets. Toxicity has spread to loans made to people and companies that were good credit risks as recently as early last year but are now bad risks. You don't have to be an honest financier (no oxymoron intended) to figure this out: Ten percent of Americans are behind on paying their mortgages. Millions more are behind on paying their credit-card bills. Hundreds of thousands of small businesses are behind on paying their own bills. Auto suppliers are can't pay their bills. And so it goes.
A "bad bank" collecting all these non-performing or in-danger-of-becoming non performing loans might well become larger than the rest of the banking system -- nationalization through the back door of lemon socialism, where the government (and taxpayers) own and control this vast sea of junky loans.
Geitner et al have to think bigger, and examine history.
Back in the banking crisis of 1907, J.P. Morgan got all the major bankers into one room and forced a kind of reorganization on all of them. We need the same today -- a giant reorganization of the banks, in which their shareholders lose what little value they have left, their creditors get paid 20 cents or so on the dollar, and their assets are written down to about 20 percent of their face value. In effect, it's an industry-wide reorganization under bankruptcy. This way, bank balance sheets are cleared up, there's no run on any one bank, everyone starts anew, and taxpayers aren't left holding the bag.
To the extent Geitner is serious about preserving a truly private financial system, this kind of broad-based reorganization of the entire sector in the shadow of bankrutpcy, seems to me to be the best alternative at this point.
Well, it all depends on what "private" means. The fact that the Treasury has not sought voting rights or outright control over day-to-day operations doesn't mean the banks are still "private." Nor does it mean that much remains of the former "system" to be preserved. The Treasury now owns preferred shares and warrants of many of the banks that have received bailout money. These can be converted into common stock and cashed out whenever the government wants. Technically, the Treasury has a controlling interest in many of these banks if it wanted to exercise that interest. As to many other banks, the Treasury could easily gain a controlling interest; their remaining common shares are worth so little now that Treasury could buy just buy them up. In addition, the Treasury, as well as the Fed, is monitoring these banks carefully, and the banks are highly sensitive to what Treasury and Fed officials want from them. But "nationalization" is a dirty word in America. More to the point, it's far from clear that federal officials would have any better idea how to manage day-to-day operations than the current managers -- although it's hard to imagine how they could be managed any worse than they've been managed.
Yet the real issue here isn't about day-to-day operations. It's about something much larger. Put simply, the big banks are going under. No one wants to say this out loud for fear of causing even more panic, but the fact is that many of these banks are insolvent. Their assets are worth far less than their face value because so many borrowers can't -- or won't be able to -- repay the loans.
Six months ago it may have made sense for the government to buy up so-called "toxic assets," based on home mortgages that should never have been issued. Three months ago it may have made sense to establish a "bad bank" to store them in, until they could be resold.
But as the Mini Depression worsens, "toxic assets" are no longer all that distinct from a vast and growing sea of non-performing or endangered loans on the banks' balance sheets. Toxicity has spread to loans made to people and companies that were good credit risks as recently as early last year but are now bad risks. You don't have to be an honest financier (no oxymoron intended) to figure this out: Ten percent of Americans are behind on paying their mortgages. Millions more are behind on paying their credit-card bills. Hundreds of thousands of small businesses are behind on paying their own bills. Auto suppliers are can't pay their bills. And so it goes.
A "bad bank" collecting all these non-performing or in-danger-of-becoming non performing loans might well become larger than the rest of the banking system -- nationalization through the back door of lemon socialism, where the government (and taxpayers) own and control this vast sea of junky loans.
Geitner et al have to think bigger, and examine history.
Back in the banking crisis of 1907, J.P. Morgan got all the major bankers into one room and forced a kind of reorganization on all of them. We need the same today -- a giant reorganization of the banks, in which their shareholders lose what little value they have left, their creditors get paid 20 cents or so on the dollar, and their assets are written down to about 20 percent of their face value. In effect, it's an industry-wide reorganization under bankruptcy. This way, bank balance sheets are cleared up, there's no run on any one bank, everyone starts anew, and taxpayers aren't left holding the bag.
To the extent Geitner is serious about preserving a truly private financial system, this kind of broad-based reorganization of the entire sector in the shadow of bankrutpcy, seems to me to be the best alternative at this point.
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What you say makes sense but I have some objection to this beyond the misspelling of Geithner's name (and I apologize for my pedantry there).
Screwing the bank shareholders just isn't okay. Some of the mutual funds in my 401(k) own bank shares and I'm not cool with eating that loss, especially when a lot of this was the result of bad loans being made on either bad research by the lenders or bad data by the FICO score folks. You say the bondholders should get 20 cents on the dollar? I expect that my mutual funds, some of which are index funds and are thus forced to own financial shares, to get way better than that. Their traders and data providers screwed up, they should make my funds whole. There's no reason on earth that I should pay for this.
Still... you're right about the bad bank problem. The assets that the bad bank would buy with our money are so worthless that we will have to buy them at a premium or the banks wouldn't sell them, and that's a true black hole of money.
January 28, 2009 10:55 PM | Reply | Permalink
We need . . . a giant reorganization of the banks . . . .
Sorry -- generalities just won't hack it!
Which banks are you talking about? Names; we need names.
January 28, 2009 11:05 PM | Reply | Permalink
Actually, it would be helpful to take a specific balance sheet, e.g. Citi's and apply Dr Reich's solution to it.
Is he proposing to pay the holders of $290 billion in deposits in domestic offices 20 cents on the dollar? How much of this does the FDIC have to cover?
Is he proposing to pay holders of $484 billion in deposits in foreign offices 20 cents on the dollar? What are the implications for foreign investment and trade with the United States?
Why would other banks be required to only repay $34 billion of the $171 billion that Citi has deposited with them? Many of them are not in as bad shape as Citi?
January 28, 2009 11:31 PM | Reply | Permalink
How much of this does the FDIC have to cover?
Dear Merrill,
Nothing! If we can get Bad Bank USA up and running.
Your friend,
Sheila Bair
January 29, 2009 12:40 AM | Reply | Permalink
Pretty much my thoughts too. I don't have a problem with the equity being wiped out in those banks which are really and truly insolvent. Equity is the first risk tier after all.
Reich's repeated assertians that creditors should be wiped out (or 80% wiped out, in this version) don't compute though. Depositors are, after all, creditors. Or does Reich propose we rewrite bankruptcy law to wipe out creditors we don't like and save those we do like? And why on earth would anyone ever lend money to a bank again if their creditors are treated worse than creditors to bankrupt industrial companies?
January 29, 2009 11:26 AM | Reply | Permalink
Names? Citi and BoA are sufficient for the purposes of this discussion. There others of course, but those two account for about $4 trillion in accounts and more that $ 60 trillion in "notional" value of CDS contracts.
January 29, 2009 12:24 AM | Reply | Permalink
Kudos to Reich. The banking system today is insolvent and that is something that is not being acknowledged with many of these plans.
Unfortunately accepting this reality does not lead to an automatic cure. There is huge amount of debt out there, short of hyperinflation, will never be repaid. Someone will have to take the loss.
Destor23 I empathize with your concern. Much of this debt is held by the pension plans that were designed to cover my retirement -- which is coming sooner than I hoped. I do not believe that the government has the resources to cover those losses without setting off hyperinflation. Politically, we should be willing to accept those losses, I am afraid that the political consequences of inflation will be worse than adjusting to a lower standard of living.
January 28, 2009 11:07 PM | Reply | Permalink
A) Nationalizing the banks and wiping out the shareholders and creditors will destroy investor confidence, not only in the banking system, but in the government. Before nationalizing the banks we ought to remind ourselves of what happened when the Treasury let Lehman Brothers fail. The banks cannot be recapitalized without private investment; so screwing the current investors is not a good way to start out.
B) Sandra Bair of FDIC is proposing that the FDIC run the "bad" bank. It is the FDIC's business to clean up failed banks and set them on their feet again. She has also been a staunch advocate of modifying loans so that homeowners can keep their homes. Bair's idea has merit. The mortgage backed securities are not worthless; they are just not traded on an open market, so they are hard to evaluate. The "bad" bank could swap treasuries for mortgage backed securities at some kind of "fair" market value. The bank would hold the treasuries, and get the interest from them; the aggregator bank would get the mortgage securities, which are distressed credit instruments but are paying very high yields.
C) The equity injections of the government could be leveraged by selling shares of stock in the "bad" bank to investors: private equity funds, hedge funds, mutual funds, etc. The "bad" bank could then turn around and use its assets to purchase shares of distressed commercial banks on the open market. These shares are very depressed. If the government steps in, private investors will follow. In this way, the equity in the commercial banks will be increased. The "bad" bank could make a big profit on the rising share prices. It would also make money on the distressed assets it buys.
D) Rather than nationalizing the banks, the government should take them under conservatorship, buying shares of the banks, and gaining control of the Boards of Directors, and thereby overseeing the management. With control over the banks, the government can steer them in the direction of solvency. Meredith Whitney, an analyst with Oppenheimer, has been on this case for quite some time. She is now suggesting the banks need to have a yard sale, dispose of a lot of assets (starting with the glitzy bathrooms and corporate jets, presumably), downsize, get their finances in order, and restructure.
The situation is indeed scary, but nationalizing the banks is a draconian step, the financial equivalent of invading Iraq to find weapons of mass destruction. Their are potential profits to be made in this crisis; the trick is to make sure those profits go to the taxpayers, not to the bankers.
January 29, 2009 12:43 AM | Reply | Permalink
I'm really late to this thread, so nobody will read this here. But I essentially agree with your/Bair's idea.
I say, let 'em fail!
We let insolvent banks fail, and we allow the FDIC to take them over. Let the system we have do what it's supposed to do. (And to hell with the "shareholders" of these banks.)
Then we pass new regulations for new banks, limiting their size and or the mix of businesses that any one bank can be in. And let these formerly "too-big-to-fail" companies re-emerge as multiple smaller, non-governmentally run entities, with equity sold to help defray FDIC's costs of restructuring them.
Seems simple, and avoids the nasty "nationalization" label. Did we "nationalize" IndyMac when it failed last year?
-- ARG
February 2, 2009 6:28 PM | Reply | Permalink
Secretary Reich wrote:
"so many borrowers can't -- or won't be able to -- repay the loans."
The main flaw in mark-to-market accounting that, in my opinion, has led to a total mishandling of the financial crisis and banking system, espoused by Mr. Reich and by Nobel-prize winner Paul Krugman in the New York Times, emphasizes and focuses only on today , i.e. what can I sell this loan for, as opposed to tomorrow, i.e. will or wont I be able to collect on the loans. The main flaw is that today's "toxic" paper is judged to have no future antidote. FAS 157 stinks!
On this basis, the Federal Government should be nationalized - oh, it already is! To papraphrase Mr. Reich, perhaps the US "can't or won't be able to repay the loans..." but the actors and audience believe that maybe time will solve the problem, provide the options that permit the toxicity to be cured. Who could repay a loan immediately based on future cash flows and an operational stream? Will the economy be in a depression forever?
There are too many generalizations flying around. The big question on each specific loan should be:
Are the loans current? When they come due in 2010,2011,2012, etc, how much money will we get back?Do the borrowers have options to manage the underlying property, etc. etc.?
To place all bank balance sheets and the value of a hitherto and well-respected institution on a market valuation that depends on the willingness of another schmucky institution to buy it in a collapsed market, has been and continues to be insane, whether you're a Nobel prize winner or college professor.
January 29, 2009 8:21 AM | Reply | Permalink
I think President Obama needs, like, J.P. Morgan, call all the bankers into the oval office, and like a judge overseeing a chapter 11 give them specific instructions on how to conduct their business, starting with executive pay reductions, no bonuses, no corporate jets, fancy offices and lavish trips. And, no useing our money to lobby the government. Oh, and no stock dividends until the taxpayers are paid off.
If they don't like what he says then give us our money back. If stockholders don't like the deal then they can sell. If over paid executives don't like it, get another job, if they can find one.
January 29, 2009 8:25 AM | Reply | Permalink
Maybe some of the toxic paper had value, but much of it really, absolutely, truly doesn't. It has no income stream, because too many of the homeowners being securitized aren't making their payments, and it has no hope of principal repayment, because the values of the underlying assets have declined irrevocably. (Once the bank makes a foreclosure sale or accepts a renegotiation, that principal is gone forever.) But it gets worse, because the next step is that the CDOs and instruments built on them don't have any value at all either, because the counterparty obligations are coming due and the counterparties don't have the money.
Shoveling in more cash because you don't want pension funds to have to recognize losses is a bad way to do things. You could make whole the "innocent" shareholders and creditors for a whole lot less than it costs to keep the whole system on a ventilator.
January 29, 2009 10:07 AM | Reply | Permalink
"Maybe some of the toxic paper had value, but much of it really, absolutely, truly doesn't."
I'm not trying to pick a fight with you, but so much of the argument is based on "maybe" and "much of it" and too little is based on hard numbers. If one reads the published statistics on foreclosures, defaults, etc - numbers cited like 12%, 15% etc - those don't corroborate "most". Most is a minimum of 51%+ by definition and you're not suggesting that we're there, are you. And other experts cite that the collapse of commercial real estate will occur in Q4 2009 and bring a new crisis. This has to be under the heading of "maybe". Maybe the economy will be showing signs of life in Q4 09 and lenders will allow for the possibility of recovery and that a mid-town Manhattan building may have some value yet, or at least a higher replacement cost and allow the borrower to roll-over the debt. I realize this is all very vague but certainly you and others must admit that fire sales to shore up balance sheets may produce distorted values.
January 29, 2009 10:29 AM | Reply | Permalink
"Maybe some of the toxic paper had value, but much of it really, absolutely, truly doesn't."
I'm not trying to pick a fight with you, but so much of the argument is based on "maybe" and "much of it" and too little is based on hard numbers. If one reads the published statistics on foreclosures, defaults, etc - numbers cited like 12%, 15% etc - those don't corroborate "most". Most is a minimum of 51%+ by definition and you're not suggesting that we're there, are you. And other experts cite that the collapse of commercial real estate will occur in Q4 2009 and bring a new crisis. This has to be under the heading of "maybe". Maybe the economy will be showing signs of life in Q4 09 and lenders will allow for the possibility of recovery and that a mid-town Manhattan building may have some value yet, or at least a higher replacement cost and allow the borrower to roll-over the debt. I realize this is all very vague but certainly you and others must admit that fire sales to shore up balance sheets may produce distorted values.
January 29, 2009 10:29 AM | Reply | Permalink
prmco:
You don't seem to understand the concept of leverage. If we were talking about mortgage-backed securities based on the entire income and pricnipal repayment of a pile of mortgages, you'd be right. But when you slice things up so that one tranche gets first claim on all the repayments, and then pyramid a few layers of leverage on the deal, you can indeed wind up mostly underwater.
Consider, for example, what happens if you buy a property with 10% down and then sell shares in the appreciation of the 10% you actually own. (Your models assume that the market will go up 10% a year, so if you sold at the price you paid, people would be getting 100% return a year. Instead, you sell for five times what you paid, and the model says everyone gets 20%.) Then the price declines 10%, and you and everyone you sold those shares to is completely wiped out. And that's just a simple one-level deal.
January 29, 2009 10:53 AM | Reply | Permalink
I'm sorry, but I HAVE NO PROBLEM WHATSOEVER with nationalizing banks, for the near future anyways. Let them buy their way out of "nationalization" as they become able to.
January 29, 2009 11:01 AM | Reply | Permalink
The investors in the banks have lost their money... they dont know it yet - and the govt is pouring good money into a broken system to prop it up in the hope that somehow there'll be some sudden magical resurgence of confidence.
The only way to get new investment into this system is to clear the decks. Wipe out the investors - follow the Baring Crisis model - and new money will feel they have a safer place to invest (just as what went down in 1890).
And yes - they'd best not stop at the banks. As Krugman was pointing out in his talk at Northwestern a couple months back, you have to go in and take out the shadow banking system too - because it's failed as well. We can jump into the pool - and start fixing the mess - or we can bleed out for a while on the table... right now it looks like the powers that be lack the courage to make the right decision and start using the 'nationalization' word.
January 29, 2009 12:13 PM | Reply | Permalink
I don't know about "industry wide", assuming you mean the whole banking and financial business.
The institutions which are going to go under are largely those which over-leveraged and/or bet strongly on the credit bubble and housing bubble to continue to inflate. They need to die, plain and simple. An orderly death will allow healthier institutions to take over their assets while leaving stockholders, bondholders, and party/counterparty deals out in the cold.
I'm not saying those classes get nothing at all. Maybe 20% for some is right, maybe 50% is right.
How much pressure from foreign investors is affecting how the new, and old, Administration is handling this? I keep mentioning the Saudi prince who is said to own 5% of Citi common stock, and I saw today someone else suggested sovereign wealth funds may be lobbying effectively.
Are we slaves, with lip-service to sovereignty but in fact having our government's strings pulled not only by Israeli lobbyists but Saudi, Chinese, and others?
January 29, 2009 9:39 PM | Reply | Permalink
January 27, 2009 (LPAC)--Lyndon LaRouche today called for Nancy Pelosi to immediately resign her post as Speaker of the House for her role in the bank bailout swindle, "which was nothing less than highway robbery of the American people on behalf of special interests.''
"At a moment when our newly inaugurated President, Barack Obama, is enjoying 74 percent support among the American people,'' LaRouche declared, "our Congress, under the mis-leadership of Speaker Nancy Pelosi has the support of less than 20 percent of the people. This abysmal level of support is well-deserved. The moral authority of Congress is in question, rightfully so, because Nancy Pelosi sold out to the likes of George Soros, the biggest dope pusher in the world, and Felix Rohatyn, to ram through the bailout, which has been a total failure, as I knew it would be from the very beginning.''
LaRouche cited his own July 25, 2007 international webcast, where he spelled out the specifics of a bankruptcy reorganization and freeze on foreclosures, which came to be known as his Homeowners and Banks Protection Act (HBPA). "I provided the solution, to get the United States safely out of the very crisis that we are now in. Those allied with Rohatyn and Soros--led by Nancy Pelosi--sabotaged that effort, just as Pelosi earlier sabotaged my proposals for saving what was left of the machine tool and productive capacity of our auto sector. In the case of auto, Pelosi committed a flagrant conflict of interest, because she was working directly with Felix Rohatyn who, at the time, was working to take down the auto sector and turn it over to a bunch of hedge fund predators. That conflict of interest, alone, warrants Nancy Pelosi's immediate resignation as Speaker of the House.''
However, LaRouche continued, `"the greatest crime that Pelosi committed was her role in sabotaging the HBPA and ramming through the bailout, which was highway robbery against the American people. This is one crime that you cannot blame on former President George W. Bush, or on his Treasury Secretary Hank Paulson, alone. Pelosi was the engineer of the bailout bill's passage. It would have never passed the House were it not for Pelosi.
"We had the solution on the table, as of July 2007. We had the backing of state legislatures and city councils all over the United States. We could have avoided the disaster we are now facing, if the HBPA had been passed in September 2007. But, Pelosi, and others in Congress, like Barney Frank, sabotaged it. Pelosi and company were in bed with a class of special interests, personified by Soros and Rohatyn, and instead of protecting the American people and protecting the legitimate chartered commercial banks, through a bankruptcy reorganization, Pelosi presided over the robbery of trillions of dollars in taxpayers money.
"Now, Congress must right all the wrongs that they have done since July 2007. And the first step must be for Pelosi to be forced to step down as Speaker. Congress will never restore its credibility with the American people until she is gone. She must be removed from a position of control, because she betrayed the American people. We certainly need a new Pecora Commission, to investigate this greatest bank robbery in American history, but do not kid yourself. No competent Pecora Commission probe can take place, so long as Pelosi is in the leadership of the House.''
LaRouche called upon all of the state and local elected officials, who mobilized since July 2007, on behalf of the HBPA, to take on the Congress. "The Congress bears the responsibility for sabotaging all of your efforts to win passage of the HBPA, the measure that would have averted the total financial collapse that we are now facing. Almost all of the problems that local and state officials are facing today can be traced to that Congressional betrayal. The Congress must be confronted on this betrayal, and I call on all state and local officials, who have seen their constituents suffer, as the result of the Congressional corruption and cowardice, to take on this problem. And the only appropriate place to start is with the removal of Nancy Pelosi.''
http://www.larouchepac.com/news/2009/01/30/lpactv-pelosi-should-resign.html
January 30, 2009 9:25 PM | Reply | Permalink
Oh those poor shareholders, who snoozed while their MOTU employees put a pile of high-risk turds onto their balance sheets, into SIVs where the huge leverage could not be seen, and into the hands of a whole raft of investors, sophisticated and utterly naïve.
Who approved those huge bonuses for actions that bankrupted their employers? That would be the Compensation Committee of the Boards of Directors (elected by, and responsible to, shareholders). Who approved the accounting standards, the business plans that levered up the firms? Why the CFO, who presumably gets Direction from the Directors.
Depositors are protected by the FDIC because the companies pay insurance premiums to the FDIC for insurance against depositors' getting a haircut. In exchange, banks are protected from a run by depositors. Banks that relied on other hot money did so knowing it was a monster risk if their loans dropped a little bit -- again, a conscious business strategy that didn't work out so well. It turns out to have been too leveraged, and the shareholders were (responsible to have been) well-informed about the risks inherent in the strategy their employees were following.
Screwed shareholders? Hah! They took chances, got fat dividends and capital appreciation, approved while their firms piled on more risk, then finally lost it all by betting on double zero. Taxpayers? They got negative dividends on the TARP subsidies, and are now being asked to take MORE THAN 100% of all the capital depreciation.
Yes, I have bank stocks in my 401(k) and IRA. But I'll happily take losses on those if it helps make the rest of the economy healthier and more responsible with my money in the future. I respect Dr. Reich's concern for preventing a panic, but the word is out: the banks gave all their shareholders' money away in loans that were almost guaranteed to fail. Sure looks like the circumstances of Akerlof & Romer's "Looting.." paper.
February 1, 2009 8:14 PM | Reply | Permalink
The only people who should want to keep the American banking system in private hands are the bankers receiving excessive pay packages and bonuses.
The current banking crisis is a signature symptom of a typical pyramid scheme collapsing as it reaches its mathematical limit. Looking carefully at the US monetary system, reveals the structure of a very large, but very simple Ponzi Scheme, one using debt in place of investment.
With the exception of coins, all US money is created as debt and extended into the economy as loans that must be repaid with interest. Since banks lend only the principal of these loans and no one issues additional money to pay the interest, the banks must continually issue new and larger loans creating an illusion of solvency by using the new money to service the old loans. When banks cannot issue new money fast enough to keep the system going, the scheme collapses as it has throughout history resulting in the roller coaster economy euphemistically termed the “normal business cycle.”
In order to provide the stable currency necessary for a sustainable economy, the federal Government should nationalize the Federal Reserve making it a true department of the government, issue all of America’s money as a public utility, buy the commercial banking system (at book value), extend credit through these newly acquired banks, redirect the interest earned on loans and mortgages from the profits of bankers into the treasury for the benefit of the American people, then issue and spend money directly into the economy to replace interest payment on loans and to accommodate economic and population growth. In the current economy the total money supply is about $50 trillion with an estimated interest rate of 6.0% adding an additional 3.0% for economic growth, directs government spending should be on the order of 9.0%, or $4.5 trillion (not including tax revenue) to stabilize the currency. Since $4.5 trillion exceeds the current federal budge, most, if not all, taxes could be repealed.
The choice is clear: keep the current Ponzi scheme and suffer, or create a stable government currency, create abundant money for government programs and repeal most taxes.
October 25, 2009 1:35 PM | Reply | Permalink