Maybe we should create "another way" so next time (and there will be a next time) the engineers of the problem are not in control of the choke points and therefore in position to reap yet another big payday when things blow up. Which is what just happened.
We know that Goldman (and a few others) were extended the privilege of borrowing money from the Federal Reserve bank at close to 0% and this privilege was extended as a way to get money flowing into the banking system. Goldman's latest profit numbers show they made a huge amount of money "trading". Some of that "trading" was just borrowing at 0% from the fed and buying bonds or stocks yielding something. To make money when you can borrow at 0% is child's play.
So why not have an emergency plan in place that gives 0% access to federal reserve money to all Americans. It may sound impractical but it's not. And the benefits would be largely the same as funneling the 0% borrowing through the Goldmans of the world: money would flow into the banking system. The big difference is that no one would be in a position to reap a windfall by controlling the choke point(s) - as Goldman clearly has.
According to http://cop.senate.gov/reports/library/report-040709-cop.cfm " as of April of this year, "the fed extended 1.5 trillion in loans in conjunction with the financial stabilization activities"
That is $5000 for every person in America.
Wouldn't it be better if the fed had just lent that money to individuals directly? The very same effect would be achieved. At present they can't do it because the mechanism is not in place. In a crisis you have to act fast and use whatever mechanisms are available. It just so happens that the Goldmans and Bank Of America's of the world made sure that they had the kind access to the fed that put them in position to reap the windfall.
It would be very easy to create an emergency plan that would allow *anyone* to borrow at 0% from the fed next time. And as I said above there will be a next time.
All you have to do is sell deeply discounted Treasury securities online. Right now anyone can purchase treasury securities online from treasurydirect.gov.
In a financial emergency like last fall they could be deeply discounted and there is your lending.
Perhaps a $5000 note could be purchased for $1 and you owe $4999 to the Federal Government which will be paid via an increase of $4999 in your tax burden over the next 3-5 years. In other words you are borrowing $4999 interest free and get the 'loan' immediately by purchasing the discounted note.
There would of course have to be limits or the Goldmans and Bank of America's would just swoop in and buy up the entire allotment of discounted securities before average joe had finished his cup of coffee. Maybe a limit of 10,000 per borrower or something like that would be in order.
If you can buy a security for 1$ you pretty much open it up to anyone.
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