Okay. What's wrong with this proposal??

[tannybogus]

A Bailout We Don't Need
By James K. Galbraith
Now that all five big investment banks -- Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley -- have disappeared or morphed into regular banks, a question arises.

Is this bailout still necessary?

The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans."

With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So 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.

Next, put half a trillion dollars into the Federal Deposit Insurance Corp. fund -- a cosmetic gesture -- 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. Hedge funds should be left on their own. You can't save everyone, and those investors aren't poor.

With this solution, the systemic financial threat should go away. Does that mean the economy would quickly recover? No. Sadly, it does not. Two vast economic problems will confront the next president immediately. First, the underlying housing crisis: There are too many houses out there, too many vacant or unsold, too many homeowners underwater. Credit will not start to flow, as some suggest, simply because the crisis is contained. There have to be borrowers, and there has to be collateral. There won't be enough.
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/24/AR2008092403033_pf.html

I'm not an economist, but is there no other way to loosen the credit freeze besides this bailout?? The bailout seems to just buy toxic or illiquid whatevers from the

banks at some rate. Nobody knows whether that rate is anywhere near what it should be. They also seem to be pretending that the taxpayers will recoup something

from this bailout if they have equity. Will we and when?? If the credit freeze is the major problem that seems to be causing the hysteria, is there no other way to

approach it, and then take more time evaluating the buyout of these toxic whatevers. Bushco wants a brazillion dollars with no accountability to rescue Wall Street

first, and then leave the taxpayers with a pittance for help. Anybody have some clues??