I have come to depend heavily on DKos to alert me to important news. But I also browse elsewhere. I was surprised this morning to find an important article in the Hill that has not been diaried on DKos.
Specifically, the liberal philanthropist has proposed that government funds should be used to recapitalize the American banking system by purchasing equity in banks and investment firms.
I have now found the article article in the Financial times. But the simplest elements are well described in the Hill article.
"Instead of purchasing troubled assets, the bulk of the funds ought to be used to recapitalize the banking system," Soros wrote.
"The Treasury secretary would rely on bank examiners rather than delegate implementation of [the Troubled Asset Relief Program] to Wall Street firms," he wrote in reference to the plan first crafted by Treasury Secretary Henry Paulson. "The bank examiners would establish how much additional equity capital each bank needs in order to be properly capitalized according to existing capital requirements."
"The recapitalized banks would be allowed to increase their leverage, so they would resume lending," he wrote.
Moreover, Soros makes clear
Banks deemed to be insolvent would not be eligible for recapitalization by the capital infusion programme,
So, if properly implemented, this would not throw good money after bad.
I don’t pretend to be an expert. But my intuition tells me this is a very attractive proposal that meets the needs of stabilizing banks in the current crisis and incorporates market based principles that would also be attractive to many Republicans. By attracting private investment it would dramatically amplify the power of the investment by the Federal government.
This plan could (and should) be supplemented by one of the several progressive proposals for homeowner relief (such as the ability of bankruptcy court judges to renegotiate terms of mortgages).
I am posting this to generate a discussion on DKos of this plan.