Fabulous idea! Who ya gonna get?

I see the government now wants to create, possibly, its own bank that assumes the troubled assets of financial institutions. They apparently hope this will restore some confidence to the market and attract private investors back to the fold.

Okay, what's wrong with this picture? First, I, among others, floated the idea of a government sponsored bank to do this months ago. It seemed like the only real logical choice then, and it would appear so now. Make sure the institutions pay a fee or dividend for the bank taking on that risk and have them re-assume them when both the institution and the asset is stabilized.

Second, where are they going to find these private investors? Who's going to buy the stock in a bank that put them in trouble in the first place? Follow the transactions: get a first trust deed at a low intro rate on more home than you can afford. Then, get sold an equity line on your down payment, or whatever equity you initially have in the property, to furnish the house and buy that brand spankin' new car to sit in the driveway. Then, because they have two accounts, they become a "premier" or whatever customer that qualifies them for a gold or other credit card account. And, to be nice, throw in automatic overdraft protection. Now, you've got a 1st trust deed the rate is increasing on, you've used up your equity through the credit line and you've maxed out the credit card they gave you to make payments on the other two loans and to pay off other cards you've maxed out "living la vida loca." Then, guess what? The bank turns around and says they can't help you out and you either pay up or they foreclose.

Now, given that abbreviated scenario, which has happened all too frequently over the past 24 months I'm sure, who has either the money, now that bankruptcy is declared, or the inclination, because they've already been screwed, to invest in these banks? Great idea on the Treasury's part to try to promote this investment, but people want their money to be safe, and the banks haven't shown a propensity to be eithr honest or safe recently. They used TARP funds to buy other banks, not bail out borrowers. Why give them the money you've taken out of your investments and put it back in?

Confidence has to be restored first, and Treasury, the FDIC and the Fed have shown little ability to engender such confidence. And Congress has shown their propensity to be idiotic in this whole affair as well; how are they going engage the public? Let Barney Frank do it? Yeah, right, that'll make us invest.

Washington, with all the talk of change, has got to stop listening to itself, as it continues to do and appears likely to continue doing, and start listening to others. Who? There's plenty of ex-bankers out there that weren't crooked and knew what was wrong - the compliance and risk managers, that have a good handle on what needs to be done to stabilize the banks. And what needs to be done to correct the regulatory oversight issues that continue. Have some of your town meetings, Mr. Obama, and get people talking.

You'd be surprised at how smart the public can be, and how dumb some politicians continue to be.