Monday, February 9, 2009
How to fix the banks and the financial sector
a) Eliminate mark-to-market asset pricing for all commercial banks
b) The Fed should lend open-ended, without limit and uncollateralized to all commercial banks as needed
c) FDIC guarantees all deposits, without limit
d) Eliminate all gov't help to non-bank intermediaries and let most fail
Result: Commercial banks resume role as credit conduit between gov't and private sector. Non-bank intermediaries go away along with real economy's dependence on this structure.