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November 30, 2007

 

Establish a Federal 'Credit' Insurance Corp.

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2006 Wall Street bonuses; $25 Billion. 2007 Sub prime losses: $25 billion.

As the big boys on Wall Street direct trillions in capital flows to derivatives, rank speculation and the latest hot packaged products like sub-prime mortgages they wet their beaks, like the mob, at every turn.
Why not place a one one hundreth of a per cent tax on these flows to fund the financial and social dislocation costs caused by the the financial industry's recurring greed driven excesses?
It would be a manifest boon to American workers who toil at multiple jobs to create this capital and certainly smooth out a glaring economic pratfall.
The banks and major financial institutions go on binges as a matter of their nature. REITS, Latin American lending, S&Ls;, hi-tech bubble and now sub prime loans have each wiped out an enormous amount of the financial industry’s equity capital. To rebuild equity, subsequent financial instruments such as car loans, mortgages and credit cards must carry higher profit margins. Thus Jane and John Doe have to pay a penalty to rebuild this equity base.
We know these binges occur and have a deposit insurance mechanism in place (the Federal Deposit Insurance Corp -FDIC) which forces the bankers to set aside emergency money so that the deposit base of banks and their customers will not evaporate.
Likewise we need a Federal Credit Insurance Corp so that when these binges wipe out financial equity there is a source of credit (i.e.loans) available.
Banks do two things. They hold deposits and they offer loans. We insure that these bingers will not take American’s deposits with them as they go bust from time to time. Why not extract a minuscule fee from each credit offering in order that the availability of credit will not be so totally hemorrhaged as to affect gross interest rates, the dollar’s standing, prices and inflation?

ps. I mentioned this idea to a bright staunch corporate conservative friend who said that the idea is 100% valid and worthy; but without a guaranteed mechanism that the dreaded Dems could not keep increasing the tax, for him it was dead on arrival.

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Comments:
Thanks for the information on topics.I was excited for this article.
Thank you again.

Insurance information for good ideas.
 
Can they just use their bonus to pay off the ginormous debt?

I just was speaking to a friend who is friendly with some 34 year old hedge fund type.

Ms Hedgefund said that between her job and her husband's high end attorney gig, they will never, ever have to worry about money and that they have more than they could ever, ever spend.

That made me ill. Then give it the fuck away please.

Sorry it just infuriates me.
 
Merry Christmas for the few.
 
lol @ "then give it the fuck away please"

Giving people money doesn't help them, it only hurts them. Welfare hurts people.

...Personally if I had that kind of money I'd invest it and live off the interest. ...And I wouldn't feel bad about doing so.

Have you ever read/heard of a book called, "The Creature from Jekyll Island" It's about the Federal Reserve, and our lousy monetary system. I highly recommend it.

Did you know the Federal Reserve isn't a part of the government? I learned a lot from that book.
 
There is a semi-autonomous federal institution in charge of credit unions. I believe they insure credit unions. Bank accounts are also insured up to a certain amount.

There is the moral hazard issue. People who make bad loans should suffer for them. Likewise people that take them out. The problem occurs not when people screw up, but when lots of people screw up in the same direction at the same time. We can absorb a certain amount of consequences of stupidity and greed, but now we have to subsidize them just because of the obvious positive feedback loop. The large numbers will destabilize the economy if allowed to run its natural course.
 
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