Okay, the "cut to the chase" TARP 3.0

[Kurt_and_Hunter]

Offered for discussion:

Treasury and/or FDIC can purchase (and hold until it is not destabilizing to liquidate) any bank asset--unilaterally--for 110% of its "marked" value.

Sunset the thing after two years.



My thesis is that the asset problem is largely institution-specific but the most troubled institutions are often the least interested in locking in the low current value-marks, and that the most variable (and thus dangerous) assets are also the best gambling propositions. An institution playing chicken with receivership has skewed incentives... all losing scenarios are the same (receivership) so they're in a "nothing to lose" position that encourages gambling, like clinging to the most variable assets that *could* restore them to health is the housing market had a miraculous turn-around.

And corporations--quite properly--have a narrow set of responsibilities to their shareholders and no responsibilities to anyone else. They are not interested in the health of the overall banking industry except insofar as it affects them. And that's proper... corporate entities are designed to pursue specific interests. The reason the government has to act for the good of the overall banking system is because corporations cannot act on that basis.