The Government and the People Need to Be The Insurer of Last Resort, Not the Idiot of Last Resort

[babylonsister]

The Government and the People Need to Be The Insurer of Last Resort, Not the Idiot of Last Resort
By: Ian Welsh Sunday September 21, 2008 5:00 pm


That line comes from an excellent summary of not just how the US got here, but how it can get out without turning the United States into a plutocracy. The plan is simple enough:

1) Buy up mortgages at a discount and give people new fixed rate mortgages. The government shares in further house appreciation (only fair since it bailed the homeowner out). This stabilizes mortgage prices and helps people and banks both. It is essentially identical to what FDR did with the Home Owners Loan Corporation (HOLC), and we know how to do it. Initial price tag? Probably around 20 billion.

2) Use the FDIC (the folks who take over failed banks) to take over failed mutual and money market funds, make sure the investors get as much money back as possible, liquidate the funds in an orderly fashion (or keep them operating if necessary) and if they are kept alive, kick the people who screwed them up to the curb and change how they do business.

3) Declare a national emergency, with judicial review (unlike Paulson's seizure of ultimate power) and use the authority to review all purchases of banks. to institute oil rationing if necessary (or simpler procedures like "every street now has a 55 mile an hour speed limit, if it is normally higher). Also allows release of oil from the reserve, if necessary.

4) Expand the safety net such as food stamps, employment insurance, welfare and so on. We know this is going to get worse no matter what we do, so why aren't we taking care of ordinary people?

more...

http://firedoglake.com/2008/09/21/the-government-and-the-people-need-to-be-the-insurer-of-last-resort-not-the-idiot-of-last-resort/

[Waiting For Everyman]

1. Exactly. This is an opportunity to get things right,

instead of getting screwed for nothing. Thanks for the article.

And on the hedgers' derivatives... let 'em all sit down in a circle and cross-cancel them out... whatever's left they can fight out amongst themselves. It's fictional nonsense anyhow, and the ultra-rich said they could handle it. Fine. Let 'em.