We keep hearing over and over. If the credit market freezes, companies will not be able to borrow for their standard operational expenses.
And then the leap occurs: so we must bail out a bunch of banks that got greedy.
But why? Do we need those poorly run banks with their greedy executives?
Or do we need good credit markets for good businesses and good people?
There is a better way. Be a bank. The lender of last resort.
In recent past, there was a rate set by banks for various types of loans for various credit ratings. To a certain extent this is related with the discount rate.
So take that margin over the fed rate, hire a bunch of laid off loan processors, and open the Peoples Bank of America. Our bank should charge extra: say 2% more than normal.
Make the taxpayer truly the lender of last resort. And set strong limits on it's use. If you push paper around (financial institution, market research, etc.) forget it.
If you make something, provide a service, etc. then you can borrow money - but only if you run a good business that probably can pay it back.
So a bunch of wall street firms will die. They deserve to die. But there is a backstop against total economic collapse. Because real companies can still borrow money to do what they need to do.
Back that up with $500Billion in solar/wind investment (require 100% made in the USA parts with 100% American labor installers). And this economy will swing around in no time.
Let's not throw good money out the window just so some CEO can buy another boat. Thank God for the GOP. Without them this thing would have already passed. Makes you wonder why we even support Democrats in Congress at all. Idiots.