I've gotten a few emails bemoaning my lack of "constructive suggestions" as of late, so I've written out a revised set of steps that need to be taken to repair the world. Fair warning - if you're looking for a foolishly optimistic, well-documented but poorly reasoned, dryly worded, in-depth technical proposal, this ain't it. So now, as I'm somewhat tired, let's just cut to the chase, shall we?
Nationalize the banks - indeed, the entire Federal Reserve system - and put them in bankruptcy receivership and reorganization.
Make the banks and all publicly-listed corporations pull ALL of their assets onto their balance sheets. Everything. No exceptions. The financial system will continue destroying the economy until this happens. Until there is real transparency, the financial system cannot work properly. Until the lies stop, neither the markets nor the real economy will stop falling.
For non-financial companies who are found to be insolvent after the institution of such transparency requirements, place them in bankruptcy as well. All of them. No exceptions. The Enron Era, the New Gilded Age, the Epoch of Criminal Capitalism - whatever you want to call the institutionalized, unpunished theft under the guise of neoliberalism and free markets - ends, and it ends right fucking now.
Break the Citigroup's and Bank of America's of the world up into hundreds of pieces, wipe out the shareholders, convert their debts to equity, and then sell them off without guaranteeing a goddamn thing. The US government is not in the business of insuring usury obligations and gambling debts.
- Government guarantees should be extended to depositors and, if necessary, investments in IRA's, 401(k)'s, and 403(b)'s. Limits on deposit guarantees are already in effect, and exceptions should not be made. For any guarantees of retirement accounts, these should be made in exchange for voluntary asset forfeiture, they should be of very limited size and duration, and they should only be made to those facing destitution. I'm not saying such guarantees are a good idea, but if they are to be done, those are the necessary ground rules. Put simply, if the government is going to be "helping," they must help individuals - not Wall Street, not the investors.
For insolvent firms, can the executives and claw back their bonuses. Every single executive. Every goddamn dime. No exceptions. These criminally incompetent kleptocrats are not entitled to steal with impunity simply because they can pay the $20 fee to form a corporation.
In cases where criminal wrongdoing has occurred, investigate and prosecute the perpetrators to the fullest extent of the law. For those found guilty, incarcerate them for the maximum time allowed by law. And I'm not talking about at Club Fed, either - send these scumbags to a federal pound-me-in-the-ass lockup.
Wipe out ALL unsecured consumer debt and make the usurers eat it - credit card debts and the like serve no productive function whatever. The entire credit card industry is a fraud, and its role in society is purely parasitic. Their "product" is actually a tool of enslavement, designed with for the specific purpose of keeping people perpetually in debt. Immediately zero out all consumer credit card obligations and institute federal usury legislation. Don't like it? Well Capitol One, I guess you should have thought twice before going into the loansharking business.
Wipe out all of the toxic crap on the Fed's balance sheet, wind down the Federal Reserve, and replace it with a National Bank that is truly accountable to Treasury and the people's representatives.
Force real disclosure for mutual funds and other investment vehicles. In big, bold type, every prospectus, statement, or communication pertaining to a mutual fund should list ALL fees, the performance of the fund compared to the performance of the S&P 500, and the amount of the investor's money going to the fund managers every year. If a given fund, like virtually every mutual fund, has underperformed the market, every single communication or statement should prominently display, right at the top of the piece of paper, a disclosure such as the following:
Over its lifetime, this fund has underperformed the market by X%. Had you bought an index fund rather than invested in this mutual fund, your investment would now be worth $Y more. Over the lifetime of the fund, investors have payed Inept Scumbag Investments Inc (or whatever) $Y millions to underperform the market by X%. Over this time, investors in the fund would have $Y millions more had they invested in an index fund instead. You have payed $X to Inept Scumbag Investments Inc to underperform the market by Z% since your initial investment. Over the last 12 months, the fund manager has received $X of your principal and $Y of your returns as compensation for losing to the market.
If they're afraid to honestly report their performance in plain English, perhaps these hucksters ought to find a real job. In the mean time, investors ought to have the right to know how much they're paying these professionally incompetent parasites to destroy their capital.
Make most forms of financial speculation a crime, with long prison sentences for offenders. Establish a minimum holding time for all exchange-traded securities of not less than 5 business days. No exceptions.
Slap a 50% surtax on all capital gains from the sale of securities held less than 6 months. 25% for those held between 6 months and 1 year. The evidence is clear that one cannot beat the market using so-called "technical analysis," or more accurately, financial astrology. The purpose of the capital markets is to allocate capital to productive uses. If you want to gamble, go to a casino.
Immediately pass and sign a Shareholder's Bill of Rights mandating that owners be allowed to directly vote on executive compensation. Prohibit compensation practices which encourage executive malfeasance and short-term focus.
Institute a two-tiered financial system, with a wall of separation between the chartered community banking system and investment banks, hedge funds, private equity firms, and the like.
Create a tightly-regulated exchange for credit default swaps. No more unregulated, over-the-counter credit insurance, period.
Regulate the countless forms of financial derivatives, such as the fraudulent Ultra ETFs. Get the hyperinflating derivatives bubble under control, stat.
Establish strict leverage and capital requirements, and apply them to ALL market actors - individuals, investment banks, hedge funds, ALL OF THEM. Absolutely no exceptions.
Put together a real mortgage plan, one that involves multi-decade prison terms for the fraudsters. It might not be what you want to hear, but the fact is that there's no possible way to save the vast majority of the people who now find themselves underwater. As Karl Denninger very aptly points out, one in five mortgages written in the last 7 years is now delinquent or in foreclosure. To put that in perspective, that is 20 times the normal failure rate, and we're probably only now approaching the beginning third or so of the storm. There is absolutely no way government can ever "backstop" or print its way out of this - it is a mathematical impossibility. What we must do now is force the liars holding these securities as "level 3" mark-to-fantasy assets to disclose their real value. A lot of people and companies will go bankrupt - that is unfortunate, but there is nothing that can be done to save them.
Immediately repeal the Orwellian Bankruptcy Reform Act of 2005, more appropriately called the "Debt Slavery Authorization Act." This law is simply a travesty; it is blatantly feudalistic in its intent, and it is an affront to the very founding principles of these United States. As if filing for Chapter 7 and dealing with the long-lasting effects of bankruptcy wasn't punishment enough, the Debt Slavery Authorization Act throws up a vast number of dubious and arbitrary hurdles such as detailed income reporting requirements, high fees (I guess they really bought the usury industry spin that the bankrupt aren't really broke), compulsory credit counseling, and the Dickensian "means testing."
Create a new, stable, possibly commodity-backed international monetary regime to replace the now-defunct Bretton Woods II system. In any case, the goal of this system should be to facilitate the production and exchange of useful goods and services, not to line the pockets of criminals, gamblers, and economic leeches.
In summary, while some of these things are not immediately critical, and a few others are matters of opinion, broadly speaking, this is not optional. We are so far past the point of being able to afford the luxuries of petty partisan bickering and masturbatory debates over ideology that even the sheer absurdity of such spectacles is no longer humorous. The reality is this: The financial system is totally, hopelessly, irreversibly bankrupt. No number of tweaks is able to change this. No amount of piecemeal reform will ever make it un-bankrupt. If the government attempts to keep holding its fingers in this collapsing levy, it will ultimately fall as well.
If any of the money-grubbing usurers I've eviscerated herein end up reading this, I have a suggestion for you: the ship is sinking, so stop trying to haggle for a better stateroom. You people are delusional fucking morons, seriously. You think you can just keep this shit up without consequence? I don't think so. Keep up your bullshit, keep corrupting the political process, keep charging 30% interest rates and $50 fees for payments arriving a day late, keep trying to rig the game in your favor, and you all will get your heads cut the fuck off. No, I'm not fucking joking. No, this is not fucking hyperbole. If you people - you know who you are - plunge the world into destitution in an attempt to preserve your pretend money and imaginary power, the people you've impoverished will figure out they've been had, they will figure out that they've been psychologically manipulated, they will get very angry, they will rise up in unison, and they will kill you. It might not be by guillotine this time around, but literally, they will kill you. And they can. And they will, if you make them mad enough - I don't know, just something you might want to consider.
Cross-posted at my (semi-)new blog, The Daily Elitist.