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Give banks vouchers so we get bucks
Benjamin Barber
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Bob Moon: Don't bother stopping me if you've heard this one before -- The government has some new ideas for shoring up the nation's banking system. President Obama has promised that taxpayer bucks which go to banks in the next round must be passed on, to provide credit to businesses and individuals. But the plan to commit more than $1.5 trillion more in public and private funds is short on details so far. How do we make sure we won't have to live through Groundhog Day all over again? Commentator Ben Barber has an idea.
BEJAMIN BARBER: Treasury Secretary Tim Geithner has offered a second phase bank bailout plan that is mostly carrots and no sticks.
Trouble is without sticks, the banks are likely to figure out how to hang on to the big bucks the way they did the first time around last fall. So here's another proposal that no free market zealot can object to: vouchers.
That's right, let's submit the banks to the privatizing discipline of vouchers to which schools have been made to submit. Give the banks the big bucks, but make it so they have no choice but to, well, pass the buck -- the bucks -- on to you and me. Sort of like food stamps, you gotta spend them on food.
It won't be the dreaded feds but the banks that will negotiate and administer the loans. But they will have to work with federal vouchers that can be redeemed only when they are credited to a client who has obtained a home mortgage or car loan or business credit.
Sorry, Mr. Bank CEO, but the vouchers can't be used to pay salaries or bonuses, and are not redeemable for merger and acquisition deals. And if we put a shelf limit of say three to six months on them, these vouchers can't be held in a safe as insurance against future debts and losses when those packages of bad debt are finally opened and evaluated. The banks will have a simple choice: use 'em or lose 'em!
So there it is: The banks get the vouchers, but we the people get the cash. Cause the cash is available only when a loan is approved and the banks pass on the dough to those real folks who, as credit recipients, can get the real economy moving again.
And hey, with vouchers, the government can truly pass the buck without worrying that the buck will stop with the banks. And Tim Geitner can relax because nobody will be able to call him a bank nationalizer or accuse Larry Summers of socialist leanings.
Yes, BUT...the banks have to have skin in the game, or they'll make loans to any goofball that shows up. There was a charity in Little Rock in the '90s that would give private school vouchers to inner city parents, but they wouldn't pay more than half the tuition. The parents made the kids try harder when their own cash was invested.
So who will these vouchers go to? The people who already have old loans they can't pay off? The home owners who want to pull of "jingle loans" (they get a new loan for a new house, and send the keys to the old house to the bank, and take the credit hit)?
Will vouchers balance the bad loans still sitting in the books, and make the banks look solid?
Mr.Barber's suggestion is defacto nationalization that will NOT fix the "credit freeze". As Mr. Barber describes it, the government would be dictating how the capital from the vouchers should be allocated to the economy, as the vouchers must be used for home mortgages, auto loans, or business credit. This would result in capital not flowing to deserving projects that would yield the highest return - and thus aid in economic recovery, but to interest groups that scream that loudest. At best, the banks will not accept the vouchers - or if they do, capital will be inefficiently deployed and the economy will stall at any chance of recovery.
well this idea is the best one I've heard, so I sent a message to the www.whitehouse.gov about it! Hope they listen.
The voucher idea sounds good but... It will only work if banks are not already lending as much as the vouchers value. Otherwise they will just save the money they were going to lend and then lend the voucher instead with no net gain in lending. For an analogy- the gov't gives out $100 Walmart giftcards. That will increase spending for sure since the cards have to be used by the end of the year, right! Not so fast! I can use the card instead of the $100 I was already going to spend on Walmart stuff (or maybe K-mart stuff). Then I put the $100 cash into the bank. Now if on the other hand I wasn't going to buy anything all year then this forces me to spend $100 this year on stuff at Walmart.
YES YES finally some balance forced on banks who seem to have not had any for too many years. I have had to make all personal loans in business and with hard work i succeeded. This is the only way it can work. People investing in banks to make large profits or large salarys is a farce that has to be stopped one way or another. The only thing that makes money or value is the hard work of the people. Rich people who make money on the backs of hard workers are thieves and need to be thrown in jail.
A very simple, innovative, and effective proposal. I heard it just now on the radio and hoped and wondered who in the government might listen to it and put it to work. I did not realize that Mr. Barber is a regular commentator on this program. I thought the book, "Consumed" was right on target, particularly on the subject our culture of infantilization.
