Forget the “Bad Bank”. Be the Bank.
The “bad bank” idea that President Obama is considering is bad. Bad for taxpayers and bad in the sense of avoiding consequences for risky and poor decisions on the part of financial conglomerates. A “bad bank” will not even guarantee that banks will begin to lend again. Instead of pouring trillions more into financial conglomerates, why not be the bank. That’s right - skip the “middle man” and go directly to consumers and businesses. This is not permanent bank - just one to get us through this crisis.
This would be part of the a bigger plan to Wipe the Slate Clean and Start Over. Most of the administrative functions to be a lender already exist in the government - particularly Fannie Mae and Freddie Mac. Once the loans are established and performing, Treasury Department can either sell the loans to solvent financial institutions or even responsibly securitize the loans.
This would guarantee that lending would start again. Whether consumers and businesses would borrow the money is another matter?
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