So, in secret, the Fed subsidizes big banks to the tune of over $250 million dollars (So That's Where the Money Went, Sunday Business, December 5, 2010:1,5). What did Main Street get? Nothing!
A much better way to stem the panic induced by failing mortgages would have been to do one of two things:
1. Force the lenders, as a condition of the subsidized loan, to enter into Shared Appreciation Mortgages (SAMs) with the distressed homeowners, or
2. Have the government itself enter into such arrangements (SAMs) with the distressed homeowners.
This would have removed virtually all risk of default. The rickety pyramid of derivatives would have been underpinned. The housing market would have been stabilized. People would be able to stay in their homes and schools. Neighborhoods would have been stabilized.
What a failure of imagination; what a failure to institute a pollicy with multiple winners.
I have one request of the Big Bankers. The Federal Government is willing to accept gifts to reduce the debt. We bailed you out in your hour of need with these subsidies. Now that banks are profitable, give back that money to the Treasury rather than paying it out in bonuses to executives; really the Treasury by providing those subsidies earned those bonuses.
Sent to New York Times