Pretty much the worst has happened. The largest thrift in the nation has collapsed. The bailout is no longer worth it. Instead, let's cut out the middle man, and get this directly to the people who need it, small business owners. Give $700 billion to the Small Business Administration to lend out to businesses to expand and start.
Then entire point of this bailout was to inject liquidity and create confidence in the markets. The $50 billion backstop for the money market was a great idea, really, but this bailout no longer makes sense for either liquidity or confidence in the markets or the banks.
Number one, there should be no such thing as a bank run anymore. We all know about the FDIC, so WaMu losing around a tenth of their deposits in the course of two weeks bespeaks to how poor the confidence in the banks is. The American people are well aware that this bailout isn't going to directly help them, so it won't restore confidence in banks either. We see through this shit.
Number two, it's not going to help liquidity. Right now, all of these banks are sitting on the edge of their capitalization requirements. They just don't have enough cash to be safe from collapse. They're borrowing heavily from the Fed, and their stocks are sinking because their books are pretty damn bad. If we give them this money, their books will look better, their stock prices will rise, and and they will sit on the money. They're not going to lend it out. And even if they did, we're missing a multiplier.
So, let's do the smart thing. Let's give the money to the SBA. It's been utterly starved under the Bush Administration, and our economy reflects it. I say, $500 billion in loans for small businesses to expand. Any company of 100 or fewer employees that wants to expand, and has been profitable three out of the last five years, automatic approval up to $1 million. $200 million to anyone who wants to start a business, 1990s lending standards apply.
This would help the banks. I mean $700 billion would still get deposited, and that would increase their capitalization cushions, and make their books look better. But think, just think about what $700 billion to small business owners would mean for jobs. There would be a huge multiplier effect as these business owners bought equipment, supplies, and buildings, and as those they hired went out and spent their new salaries. I think it would create millions of new jobs, and an economic expansion that's Main Street, not Wall Street based that would make the golden age of the '90s look like dross, because it would be real.
I can't emphasize that last part enough. It's not paper wealth. It's real, with people making things and doing things. Think about the restaurant down the street being able to open at lunch, or open another location. Think about the plumber who wants to buy a third truck and hire two more guys because he wants to expand into another neighborhood, and from there, open up in the suburbs. Think about the bakery being able to rent the adjacent building, so they can buy more ovens and hire twenty new guys.
That's real. It's not, "My stock went up by $500,000," which is theoretical until it's sold, and if on the secondary market, actually draining capital from another source when it is sold. It's you and me getting a new job and a better paying job or creating opportunities to advance at your current job as they expand and need more managers.
Call your Congressional delegation. I don't usually think I've come up with an idea that's both possible and good, but this is it.