Bookmark and Share    As the nation copes with the perceived economic downturn, conservative pessimists are faced with answering how they intend to lead us out of economic collapse with out accepting socialism as the solution .

antbankbail1Regarding the bailouts of non-government businesses, some have come up with alternatives that would spare private sector businesses from bureaucratic, government takeovers and would allow for assurances that will prevent the collapse of the wealth of almost everyone else.

The recent Treasury plan, has a disturbing effect on how wealth is dispersed and their new plan rescues banks and protect bank shareholders and debt holders, while not encouraging them to lend more.

Currently in order for the federal government to guarantee bad assets at rates above their market value essentially only transfers to those holding those bad assets and it enables them to convert those assets to cash. Ultimately, the plan only preserves the wealth of financial investors and banking insiders. What the current treasury plan fails to do is prevent the collapse of the wealth of everyone else.

A major part of the current crisis is the lack of lending. The lack of lending is causing a tightening up of sales and production and this trend in commerce is rippling out from their.

Part of the solution is to free up credit. Reasonable credit, not the sub-prime type of government mandated loans that helped to create this crisis, but legitimate loans.

One proposed answer to the problem came in the form of testimony before the House Financial Services Committee.

In that testimony it is stated that since “several very big banks are deeply troubled, there is no viable alternative to placing them in receivership, insuring their deposits, replacing their management, doing a clean audit, isolating the bad assets. Since these banks were clearly too large, they should be broken up, and either sold in parts or relaunched as multiple mid-sized institutions with fresh capitalization and leadership. And meanwhile, we keep the economy running by creating a public bank to provide the loans sufficient enough to keep small, medium and large sizes businesses running through the current crisis. This was the function, in the Depression, of the Reconstruction Finance Corporation”.

According to the report “while the need for this today is very clear in the automotive sector, as time goes on a much larger part of American industry and commerce will face similar problems and similar needs. The resulting forced liquidation of the productive sector is a distinct possibility, and is not in our national interest.”

Perhaps Congress would be wise to heed the advice of some of those whom they are hearing from.

Perhaps it is time for Congress to truly realize that a free people are not made richer by a government that mandates financial policies which financial experts would tell you are failed business models. Maybe congress can understand that the answer to the problems they created is not more of what created the problem.

From the testimony given so far, I can easily see the need for the bad assets, which government mandates created and allowed, to be isolated and then have the process revamped. I also see that it more advisable for the federal government to create public banks to get institutions through the current crisis without having the government take them over and move closer to the policies of socialism that we have fought against for so long.

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For those of you who find economics to be a bit complex at times, (like me) you will find this video of economic interpretations quite amusing

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