Tuesday, October 14, 2008

Let's Rescue "The Bank of You and Me"

All this ruckus over the financial rescue package is prompting many people to cook up their own plans for saving our economy. One innovative idea goes like this: Screw bailing out banks, give money directly to the American people.
Internet message boards are chatting up the idea. Callers on talk radio are asking about it. One of my closest relatives rang me up this weekend to discuss it and I, in turn, brought up the concept during a dinner with friends.
Yes, there's something inviting about investing in "The Bank of You and Me". The plan is so simple, especially when compared to the government's complex, daunting and time-consuming rescue attempt. Or as Sarah Palin might say: "Heck, what's not to like?"
Yet, before getting carried away, let's concede there will be no mass giveaway. After all, we're not bankrupt banks or insurance firms. But just for yuks, let's follow the plan's populist logic.
Basic premise: Instead of pumping $700 billion into the banks and into buying toxic mortgage securities, the U.S. Treasury gives every red-blooded U.S. household one million bucks. There's about 112 million U.S. households, according to the Census Bureau, so providing each a cool million could end up being a comparative bargain. Backers contend it will deliver the same results, or better, than the current bailout.
Since money doesn't flow like water, some restrictions will apply. For example, any household behind in its mortgage must use the proceeds to make that bank note current or to pay it off. Result? End of the mortgage crisis.
Other debts must also be paid. That means home equity loans, credit cards, student loans, child support, medical bills or other long term obligations have to be drastically whittled down. Presto! Credit crunch resolved.
Everyone would be required to plow a percentage of their million-dollar windfall into a safe retirement account. The payoff? Recapitalized banks and, as a bonus, the end of Social Security's troubles.
And because everyone needs a little fun in life, any remaining cash can be used for discretionary spending. That takes care of lagging consumer confidence and the recession.
You know if John McCain or Barack Obama wanted to wrap up the presidential election, all they have to do is come out in favor of this Million Dollar Baby during the next debate. Hell, maybe President George Bush should consider this option. It's gotta help his approval ratings.
Sophisticated financing types and macro-economists will dismiss this bailout brainstorm as costly (the actual tab for this plan is $12 trillion--high even by Bush Administration standards) inefficient, inflationary and unpatriotic. They may even say its just plain stupid.
Apparently, it's smarter to print up nearly one trillion dollars in new currency in order to shore up the sagging lenders that made awful loans, didn't properly assess risk, and concocted exotic and unsafe credit instruments that nobody will ever understand.
Yes, let's hope the government's current economic "rescue" attempt works.
But if it doesn't, we can always put "The Bank of You and Me" plan into action.

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