Bankrupting the Banks & Libertarian Welfare

After the Chief Justice flubbed the only thing he had to do today—administer the oath of office to the president, which is one of the better known parts of the constitution—Barack Obama gave his inaugural speech.

For one of the great orators of his generation it was not his best, but one would not have thought it was so bad that the stock market would tumble as he spoke.

But it did--and ended up tanking by more than 300 points.

The economy is so sick, that it is no longer even responding to the oratory of Barack Obama.

President Obama, of course, recognized the need to address the economy. And he once again pledged his version of non- ideological, pragmatic solutions:

“The question we ask today is not whether our government is too big or too small, but whether it works - whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified."

What he means is that those who advocate smaller government are just too nutty to participate in the dialogue, but if they are willing to discard that quaint notion, then feel free to toss in your ideas.

And that is pretty much in keeping with the mood of the nation—these days no one but the most cheeky dare utter the words "free market."

Over at Bloomberg, blow bag scrivener Michael R. Siset is actually using the word “socialism” when laying out his blueprint for the banks.

There is no question that pinko is in, and right thinking is out. But just the same, I would like to throw out an alternative that is neither Marxist nor the creed of Mr. Potter and Scrooge.

The first part is bankruptcy, one of the rights established in the constitution.

As I have mentioned before, the secret , that the Fed and Treasury do not want us to know, is that the financial system is essentially insolvent. The solution is not giving them more money. The federal government can not come up with enough money to bail them out without totally debasing the dollar. And this idea of forcing the banks to make loans is pretty ludicrous. Isn't giving ill-advised loans a big part of what caused all this?

Since the federal government is now a creditor of most of the banks, they could force them into a traditional Chapter 11. But, it would probably be better if some special receivership could be created by Congress to deal with the entire financial system.

Under bankruptcy protection, all the worthless and toxic assets could be written down, and the banks reorganized—merged, split up, or flushed down the crapper.

I have a stimulus package also. It is drastic tax cuts for everyone, and as close to zero as we could get on business taxes. There would be no greater stimulus than putting an extra hundred dollars a week in the paychecks of American workers.

Unlike Obama or Bush's tax cuts, I tend to think it would be responsible to do a corresponding spending reduction --but since our president doesn't want to hear that, I will hold my tongue.

The last part my program is what I like to call “libertarian welfare.”

The stimulus packages that have been proposed, or implemented to date, are not only an historically colossal waste of money, but will ultimately be seriously destructive.

However, there is no question that a lot of people are suffering during this “correction.” The government needs to do such things as provide unemployment, food, shelter—and amend the bankruptcy code so that judges can rewrite mortgages on primary residences, just like they can any other loan.

However, none of this would be done under the guise of stimulating the economy or coercing good behavior out of businesses and ordinary citizens. It would be handed out only because the government does have an obligation to provide for the general welfare of the people—the intent would be to tide us over --with no expectation of immediate economic benefits.

Now, I also think it would be advisable to start dismantling much of our “empire” (do we really still need troops in Germany), shrinking the government, balancing the budget, making the saving of money a viable option and etc.

But since Obama thinks that is looney talk I won't go there.