Bailout Redux
by JS
My congressman on the bailout.
Here’s an idea: capitalize a couple of new banks with clean balance sheets under a new and intelligent regulatory structure. Treat these banks as safe havens for deposits transfered in from the FDIC from other failing banks. Let everybody else fail.
Key advantages:
- Eliminates moral hazard.
- No secret handouts or price inflation.
- This is a market based solution – government merely introduces new competitors.
The new banks proceed with an implicit government guarantee until things settle down. Then they can privatize (and hopefully make the government some money).
