Rather than propping up an unsustainable system with taxpayer money, it may be time to let the private money-making scheme collapse and replace it with something better. Banks that have thrived in an unregulated free market should be left to work out their fates in that market. If they go bankrupt, they can be put into receivership and reorganized in return for an equity interest in the banks, as was done recently with AIG. The government would then own a string of banks, which could issue “the full faith and credit of the United States” directly, returning the country to productivity and prosperity just as Lincoln did.
As for the derivatives mess, there may be some derivatives that serve useful market functions, but most of them should be declared an illegal form of gambling and void. Neither party would owe on the deal; the bets would cancel each other out. True, dodgy assets transformed into “triple-A” investments by fake derivative insurance would lose that rating; but they aren’t triple-A investments, and the pension funds now holding them should dump them. The downgrades could wreak havoc on the balance sheets of some banks, but that’s the free market. If they go bankrupt and we the people have to bail them out, we should do it only in return for adequate quid pro quo in the form of their stock. Like Lincoln, we should say “Thanks but no thanks” to Paulson’s $700 billion ransom.
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