Are You Tired Of Your Children Being Raped? - The Market Ticker

Yes, the title is deliberately incendiary and it refers to the raping of Our financial system as a burden upon the next oe or maybe two generations. Once you're past that, and amidst a ticker-tape swirl of information and conclusions, comes this idea to straighten out the banking debacle:

"The good news is that we must (and can) protect the financial system without protecting any of the existing players. The means for doing so is in fact quite simple:

--Government should set up ten (10) new federal banks. Capitalize each with $20 billion dollars and immediately IPO off the bank to the public. The capitalization would carry a preferred coupon of 9%, incenting the bank to immediately replace that government capital with private capital, with dividends, executive bonuses and pay beyond $200,000 per annum (total compensation) being prohibited until the government capital is repaid in full.

--This would provide an immediate aggregate lending potential of two trillion dollars into the economy just off the Government Tier Capitalization alone. Private capital would fly into these institutions since they would be established with no debt of any sort.

--At the same time, withdraw all existing support programs by Congressional mandate. This includes Fannie, Freddie, the existing alphabet soup mess and all other taxpayer-funded backstops. The FDIC would be directed to provide deposit insurance only to the extent that it can document the safety and soundness, and expose same to public view, of the institutions it insures.

--If The Fed (which is technically unable to be compelled to comply) refuses, revoke their right to regulate the money supply and replace them, leaving them as simply another private bank forced to compete for funds in the open market like everyone else. They will go along rather than die.

--The consequence of this set of actions would be to force an immediate default of the excess (unservicable) debt in the private sector. Both banks and debtors would go bankrupt immediately, but the lending function would remain intact as the newly-chartered banks would exist to replace the "busted" institutions.

--At the same time Glass-Steagall must be reinstanced, reserve requirements for banks reinstated and enforced without exception, and leverage in the financial system must be strictly controlled at no more than 12:1."

There's plenty of enlightening--and scary--stuff in here. Read it and see.