No Bailout

Now that the remaining investment houses have been converted to banks, is this bailout still necessary?

Why not . .

• Eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory?
  • If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately.
  • If it isn't, the FDIC has the bridge bank facility to take care of that.
• Put half a trillion dollars into the Federal Deposit Insurance Corp. fund
  • and as much money into that agency and the FBI as is needed for examiners, auditors and investigators.
• Keep $200 billion or more in reserve, so the Treasury can recapitalize banks by buying preferred shares if necessary -- as Warren Buffett did this week with Goldman Sachs.
• Review the situation in three months, when Congress comes back.

What to do about the housing crisis and restricted governmental spending?

• Create a new Home Owners Loan Corp., which would rewrite mortgages, manage rental conversions and decide when vacant, degraded properties should be demolished. Set it up like a draft board in each community, under federal guidelines.
• Reenact Richard Nixon's great idea: federal revenue sharing. States and localities should get the funds to plug their revenue gaps and maintain real public spending, per capita, for the next three to five years.
• Enact the National Infrastructure Bank, making bond revenue available in a revolving fund for capital improvements.

From "A Bailout We Don't Need" September 25, 2008 by James K. Galbraith, author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too