The right way to fix the banks

All the bailouts are not about lending. It is about saving the debt holders. This guy has the right idea to
convert all debt to equity. Almost all the banks will become solvent overnight. Why we are not doing the right way?
Because we are socialists for the rich which is worse than socialists for the working class.

http://clusterstock....s-the-right-way

Actually kind of an interesting proposition. Reading a few comments, however, it is unsurprisingly more difficult to impliment properly than it is to suggest. Mark

So you want to cause a nationwide bank run? This would cause massive panic on the behalf of depositors and bondholders across the country.

Edited by CHAx, 01 February 2009 - 10:53 AM.

So you want to cause a bank run? This would be the way to do it.

Deposits are quaranteed by FDIC. So it won't cause of bank run. It will actually make banks more sound.

Bond holders will suffer short term doe to loss of dividend. But common stock will bounce back hard so they will actually make
some money out of it.

Some smart people have been saying for some time that current bond holders should be involved in the bailout before the federal government.

Paulson, etc are too happy to pull the tigger to spend tax payer money so existing management will not be harmed.

The problem is not mom and pops depositors fleeing. It is businesses of all sizes having no way to protect themselves and a new wave of fear. Even small companies can have very large sums of cash on deposit that are earmarked for invoices and payroll. Frankly we don't want businesses worrying more about the safety of deposits then of managing their businesses. I'm sure you can see the logic in this very simplified argument. These types of policies are redistributionary in nature. They cause fear because of uncertainty, not refound faith in shiny new balance sheets.