In the three years since the passage of the TARP legislation, Bank Bailouts have become a sore subject for most voters, regardless of which side of the aisle they see themselves as being on. With time proving their concerns to be legitimate, the fact is that with the exception of academics and those actually benefiting from the bailout, virtually no one supported it to begin with. Now, in 2011, even your average Republican or Democrat agrees that the bailout was at best a bad decision, albeit for different reasons.
Yet the Democrats and Republicans in Congress, regardless of their rhetoric, have shown no interest in doing anything truly meaningful about it. Indeed, there are no real solutions coming from Congress that wouldn’t make an already bad situation worse.
Three years after the bailouts, which were overseen and implemented by both Bush and Obama, the United States is in no better shape than it was in 2008. In fact, it is much worse.
The banks that received bailout money have not resumed lending, foreclosures are continuing, inflation and food prices are rising at alarming rates, and the American taxpayer is on the hook for at least trillions of dollars of toxic derivatives and bad bets manufactured by the international banking cartel.
As reported by The Daily Bail, the real unemployment rate is actually 22% (as of February 25, 2011).
Yet, the solutions to the economic depression, the housing/derivatives/speculation crisis, and the raping of the American people as a result of the banker bailout are not as complicated as one might imagine. The ability to completely reverse the situation is actually right at our fingertips whenever we choose to act.
A comprehensive program that would end the economic depression, free us from the grips of the international banking cartel, and reindustrialize our nation is not feasibly summed up in one article. For this reason, I have written a book titled Five Sense Solutions, which is intended to do just that, as well as to offer solutions to many other problems that currently face our nation. Other researchers like Dr. Webster G. Tarpley, Bill Still, and G. Edward Griffin have attempted to do the same in much of their own work as well.
Nevertheless, for the purpose of applying some level of control to the current crisis of Bailouts, Fictitious Capital, Housing, and Financial Crises, allow me to propose some very basic solutions.
1. The access to Treasury or Federal Reserve funds that are still available by virtue of the TARP legislation to various banks and financial institutions must be removed. The money being funneled to banks and financial institutions as a result of the TARP legislation has not ended and the American taxpayers are still on the hook for trillions of dollars of toxic derivatives and secret bank loans directed by the Federal Reserve itself. The end to the free access to the US Treasury and the Federal Reserve may be achieved by an act of Congress. It may possibly be achieved by an act of the Secretary of the Treasury independently. Regardless of the mechanisms used, all current and future bailouts of banks, financial institutions, or industrial corporations etc. must be ended immediately.
2. The TARP legislation itself must be repealed by Congress. No remnant of the authority to shift the burden of bad business decisions or financial gambles by financiers to the backs of the taxpayer should remain on the books. All backdoors to the US Treasury must be closed immediately, and they must be closed by force of law and by the repeal of the TARP.
3. We must seize failed banks and financial institutions using the mechanisms of the FDIC and other relevant regulatory agencies. These insolvent firms are zombie institutions and must be treated as such. The only reason they exist is because the American taxpayer was forced to bail them out. Their insolvency must not be allowed to bring down the US economy or destroy the pension funds of American workers. Therefore, not only must they be seized as the zombie banks and institutions that they are, their assets must be liquidated. All money loaned or granted to these institutions by the Treasury/Federal Reserve must be returned to the US Treasury.
Those individuals who have lost their pensions or investments as a result of the housing market/derivatives crisis must have their investments and pensions insured to the full extent guaranteed by the FDIC. These payments must be made directly to the investor and not to the bank so as to avoid shoring up the institution and continuing the moral hazard the FDIC has become.
Any remaining money after this process must be applied and paid out to pension funds first. If there is any residual money left over after assets have been liquidated and pension funds returned to the pensioner etc., the money must be transferred to the US Treasury.
This must be the process in the face of any further bank insolvency or shutdowns.
4. Pass a law that bans derivatives. The reasoning behind this is simple: derivatives are not real money, nor are they real assets – they are toxic crap that must be removed from the system so they do not jeopardize the economy ever again. Derivatives were a major factor in the economic collapse and they were a trigger for the current crisis. Derivatives are inherently toxic and, because of this, they are inherently an economic risk. Therefore, in order to prevent such an event from occurring again, we must pass a law that bans derivatives.
5. Levy a 1% trading tax on financial transactions such as stocks, bonds, foreign exchanges, or commodities. This tax must not be applied to small transactions conducted between individuals and their banks (such as check cashing, deposits, or payment by check or debit card, etc.) This tax should be applied especially to program trading, high-frequency trading, and flash trading. This tax should apply to transactions made between financial and banking institutions. This move alone would generate an enormous amount of revenue for the social safety net, infrastructure programs, etc. as well as functioning as a discouragement to further financial speculation.
6. Ban credit default swaps. This will not only remove unnecessary risk from the economy, but it will remove the vast moral hazard to sabotage these financial instruments to accrue profit.
7. Reinstate a form of the Glass-Steagall Act which separates banks, brokerage firms, and insurance firms from each other. These institutions should no longer be allowed to combine and act as one entity. Reinstating these particular provisions of the Glass-Steagall Act will enact somewhat of a firewall of protection not only for the institutions themselves, but for their clients, consumers, and the economy as a whole. The removal of Glass-Steagall was part of the precipitating factors in the economic crisis. We must not allow such a crisis to happen again. For this reason, we must reinstate the relevant provisions of Glass-Steagall.
8. We must reinstate Chapter 11 bankruptcy options for INDIVIDUALS. There are times when one’s personal finances become insolvent and, for this reason, bankruptcy options must be restored. Reinstating these provisions is only fair considering the fact that they still exist for large corporate firms.
9. Ban adjustable rate mortgages. This brand of mortgages, along with the widespread corruption of lenders, was a major factor in the housing crash. Adjustable rate mortgages serve no purpose except, at best, to provide the borrower with temporarily low rates and the guarantee of massive profits for the lender regardless of the outcome of the mortgage. They are particularly hard to regulate and almost always lead to foreclosure. Because of this, they must be banned.
10. Immediately halt ALL foreclosures on primary residences, businesses, and farms. The logic of this move is simple: We are having a problem with foreclosures. Therefore, we will STOP FORECLOSURES.
Foreclosures should be halted for at least five years, or until the end of the depression/economic crisis. This will allow Americans to stay in their homes, businesses to continue operating, and farms to continue producing food. This delay in the process of foreclosure will allow businesses and individuals to survive the crisis until they are able to resume paying their mortgages and repaying their loans.
I would love to hear your proposals for how to restore America’s economic freedom and prosperity. Please leave your comments below and share your ideas with others.
Brandon Turbeville is an author out of Mullins, South Carolina. He has a Bachelor’s Degree from Francis Marion University where he earned the Pee Dee Electric Scholar’s Award as an undergraduate. He has had numerous articles published dealing with a wide variety of subjects including health, economics, and civil liberties. He also the author of Codex Alimentarius – The End of Health Freedom, 7 Real Conspiracies and Five Sense Solutions.