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Stephen Kaus Headshot

Make the Banks Pay the Government Back or Foreclose on Them

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Among the many details, actually more like major foundational points than details, that have not been disclosed in the huge socialism for the banks program is the price that the government is going to pay for the "troubled' assets that these Einsteins bought.

If the problem, as "Hank" Paulson repeated all over the Sunday morning shows, is that there was no way to value the assets, the price is obviously going to be arbitrary. So, why don't we consider it a loan?

Whatever the banks get now is a provisional advance against the collateral of the assets. If the government can sell them for the price it paid, then all is square, except the banks should pay some interest on the money they are using. How about 2% for the first year and then, oh, LIBOR plus 5% after that.

If the assets are not worth what the government paid, then the banks should pay the difference, over time, with more interest. If the banks cannot pay it, then the government forecloses on the banks. No bonuses either.

Sauce for the goose.