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After many years of running up debt and deregulating financial markets while real wages decrease and manufacturing leaves our shores, we are reaping the results of this toxic mix of poorly thought out ideology. Now those who have brought us to this point despite their preaching of government is bad now look to the government to save them. The irony is not lost on thinking people. So what is the solution? Give them tax money and pronounce they are saved? No, it's time to look at real solutions, many that history shows us works, but run counter to the Reagan era thinking on modern economics that regulation is bad.
We must set up a rescue of our system, not a bailout. You can't stop a ship from sinking if all you do is bail water and not fix the hole in the bottom. First off, leave the Treasury Department out of the financial fix. Instead, the Federal Reserve should buy the bad debt and not the Treasury (because the treasury will mean the taxpayer). We need to send in regulators to the investment houses, banks and insurance companies, find out which ones are solvent, close the ones that aren't, and transfer their deposit customers to those that are. That way, money will not flow anymore to failures, but to successes. Then there needs to be an imposition of asset based reserve requirements to reduce risk. Then we can inject capital into those institutions with the best chance of surviving long term more along the lines of what Senator Schumer suggested. This can be achieved by bringing back the Reconstruction Finance Corporation of the Roosevelt era and tasking it with this directive.
Reaganomics brought us the concept of low taxes, decreased regulation, decreased spending on the public, increased spending for the military industrial complex and financing by increasing our debt load. Clinton brought us a variation of the same, but paying for it. However, what we need now is what history has shown us will work and common sense.
My ideas are from the articles "Ending Casino Capitalism" by Robert Pollin, "Bridge Loan to Nowhere" by Thomas Fergusen and Robert Johnson which both appeared in The Nation magazine, October 13th, 2008 edition and history. Comments are welcome.
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