A Modest Proposal. Show Us the Money.

Is it too much to ask for a prioritized estimate of the banks which will be participating in this program, and what amounts they might require?

Yes it would be difficult to do, it might take a few days and some serious arm twisting, but in any organization we've ever seen there are no blank checks when there are discrete projects and businesses with varying degrees of needs and returns, probabilities of success and failure.

As we recall there was a course at university called "Finance." When you primarily deal with Other People's Money that sort of hard tack decision making is not naturally used, especially when you are a cost plus organization, but anyone who has been a manager in business will tell you that they do it all the time. We'll bet Hank knows all about it. He doesn't want to show us who needs what.

The banks won't want to disclose their problems. To participate in the program, they must, even if that particular knowledge is kept discreet. One of the Senators proposed an initial sum of $50 billion while the Fed and Treasury get their act together with a more reasonable process, and report back to the Congress with the results. That is a good idea. Certainly better than demanding a figure like $700 billion under duress with the haziest of details. How did they arrive at $700 billion?

Or as another Senator proposed, why not just loan the money to the banks in any amounts required to get their balance sheets in shape, but at some interest rate?

Are there one or two banks that require 400 of the 700 Billion? What if there are a few 'bad apples' that really are insolvent,that overreached to some extreme like Countrywide for example.

Should we save them all equally? Or make an intelligent cost-benefit decision on whom to save and on what terms?

Remember, this is not making loans available at market rates. This is a subsidy we are discussing. Like most welfare we need to understand who is getting what, and where the benefits and costs fall out.

The pushback of course is that this is a Gordian knot, resistent to any unraveling., hopeless entangled. Then perhaps what we need is someone with the strength and the courage to cut it, as gracefully as is possible. Otherwise this subsidy may drag on endlessly as it did in Japan, draining the entire economy.

Why is it that these fellows keep returning to the public trough asking for enormous sums, and now that the days of the Bush administration are closing, with ever more dire threats of financial conflagration? Remember not all that long ago that the Bush Administration kept pushing for the Social Security trust to be placed into stocks with Wall Street? Can you imagine what this situation would be like now if we had agreed to that?

Lehman failed, and the market is digesting the failure. We might be able to afford a few more, but we won't know unless we look at the data, and quit playing games of chicken and hide the losses with Wall Street.