You hear it once in a while in a comment, under one’s breath, in frustration or at an Obama event the other day: “Send the check to my mailbox!” It is not an option that is seriously being discussed — yet. But why not? When former treasury secretary Hank Paulson came running to Congress last fall with his three-page bank bailout plan in hand, Congressman Kucinich, for a brief moment, shone a bright spotlight on the obvious lunacy:
Take $700 billion of taxpayer money and give it to “the ailing banking sector,” so banks will start lending money again — to taxpayers. In other words, we are giving our money to the banks so that those banks can then turn around and lend our money to us at oftentimes outragous interest rates.
Aside from the obvious lunacy, this approach so far has not worked! The first half of the TARP money, given to banks, was used to buy other banks (Wells Fargo bought Wachovia etc.), pay for expensive junkets (AIG etc.) or to pay bonuses, or as they are now preferred to be called, “retention awards” (Merrill Lynch, just before Bank of America bought it).
On top of all of this, the banks are now saying they can’t start lending just yet because many of them are “undercapitalized.” Meaning, they can no longer make loans and then turn around and bundle and sell these loans to investors in order to recapitalize and make new loans, because nobody is buying.
So now they need more money. The second half of the TARP $700 billion. More of our money to perhaps start lending our money to us at outragous rates. Maybe these banks need to do business the way our local community bank does business: loan out the money of its customers to those who need it and qualify for it within the community. No bundling and selling of loans out the back door. And then again, maybe we need a new banking system altogether.
Coming back to the beginning of this whole thing, I am really warming up to the idea that got me writing this piece in the first place: Rather than bailing out banks, automakers and whoever else from the top down, why not develop a fair approach to paying each us households a six-figure sum of “TARP.” It will stimulate the economy from the bottom up — a grassroots stimulus package that actually works! People will not only be able to keep their houses by paying them off fully or in part, which will help put money back in the banking system, they will also be able to buy goods and services of all kinds, which will, among other things, restart automakers’ assembly lines. Too simple? To me that’s the beauty of it.
Why not. After all, it’s our money. Right?