The Bad Bank v. Good Bank Option

[leftchick]

http://consortiumnews.com/Print/2009/013009b.html

By Brian Barger
January 30, 2009

So what's wrong with creating a "good bank" owned by the American people?

The current wishful thinking in the debate over what to do with the failed U.S. banking system is that once the troubled banks are righted, they will not only float, but lift the sinking economy with a surge of loans and investment money.

The latest salvage strategy making the rounds is to create a "bad bank" (as if we didn't have enough of them already). But this one would be different; think of it as mortgage-backed Viagra, unburdening the men of Wall Street of their nonperforming loans, freeing them to again arise to a climactic quarterly finish.

At its most basic level, the plan would buy up bad loans made by bad bankers, rewarding the most inept, incompetent and corrupt Wall Street peddlers with government largesse – leaving them with their refreshed "good banks" packed with profitable loans, while sticking taxpayers with a foul bag of bad loans and other "toxic assets" in what's deemed a "bad bank," government-owned.

Once again, a U.S. government "rescue" plan would not only protect the executives most responsible for creating the whole mess, it would free them from liability for their misfeasance. It's not yet clear how much weight the Obama administration is giving to the plan.

What does NOT appear to be on the table is the creation of a different kind of "good bank," a Central Bank wholly owned and operated by the U.S. government, a bank that Americans could trust not to steal what remains of their savings.

With confidence in the financial system at an all-time low, why not a government-run "good bank"? A Central Bank, unlike today's Federal Reserve which does little more than set interest rates, could offer full-service retail and commercial banking while enjoying the public's trust.