It would be great to see my bank competing with other banks, rather than with banks getting tax money.

The somewhat populist comment by Antiochian makes sense: the trouble sems to be concentrated in the big banks.

Nationalize those or at least put them under an administrator, swap the existing equity for some form of residual value certificates without voting rights, offer the marketable parts of their business to healthy banks (but take your time and meanwhile feed them well) ), and retain only a bad bank, with staff incentivized to work out or sell, not market to clients. Private customer information and private information about CDOs (yes, there is systematic knowledge within the investment banks, and it should be highly marketable) should be put in a separate entity which could provide contract services for work out groups and involuntary holders of CDOs etc.

The idea would be to (1) indeed give space to the undergrowth, the NY crowd have made too many messes (and regulate them heavily at the same time) (2) wipe out the managers and equity holders of most of the NY giants (3) break up their businesses and sell the parts that can be sold for more than book value (4) put the remaining assets (not businesses) in bad banks with contract management and (5) each bank’s customer and risk management information (incl CDO analytics) in a separate entity, with people maintaining it (as the customers are all in the bad bank, they must continue to inform the bank) and providing it on a contract basis to private and public agents running the bad banks’ workout programs.
Ultimately those consultancy teams and asset management teams could become the core of a few dedicated investment banks and privatized.

Finally, the gvt should design an offer for the most toxic CDOs, MBS and whole loans still stuck in the pipeline and held by healthy banks, that is both not too generous and whose refusal would lead to severely close, continuous inspection by the regulators. Those loans should go to a national central bad bank under policy guidance (i.e. th gvt could decide to offer relief to the debtors involved, prosecute frauds (aggressively) with the evidence contained in those records, etc) and have access to all the information and consultancy services available under (5) above.

Just a pity that this is imposible, due to political and legal reasons.

antiochian – that is a telling image. surely this is a great time to start a bank, or to identify a small bank that has stood aside from the property madness and condo flipping and mortgage salami scams – and support it.

surely there is an opportunity for some small bank to write into its own constitution basic safety rules about lending ratios and transparency, and attract customers who fear to deal with the big banks that have possible concealed risks ?

when vladimir putin of russia, formerly of the soviet union, stands up at davos to lecture the west on too much state interference – it is surely time to take stock ?

Pour encourager les autres…lets put Citi, Chase (no-one in the financial sector was fooled that Bear and WaMu weren’t reverse rescues of Dimon’s empire) and BofA out of their misery. A whole new generation of banks will rise in their place to replace them. Selling off Citi’s assets overseas (Banamex for example) would be a start in recouping funds. The root problem is these three banks.. Remove them from the game and the shrubs in the understory of the financial forest would grow to fill their places.

The self-same thing is happening in the i-banking/securities industry at the current time. It is being blasted back to before May 1975, when a score of mid-tier firms ruled the market. Darwin rules and the brontosauri have had their day..

“Pulling interest rates to near zero is also a form of currency manipulation, trying to make the currency less attractive,” Mr. Merk said. “Beyond lowering interest rates, the Fed is trying to weaken the dollar with its purchases of agency securities and government bonds.”

http://www.financialpost.com/money/story.html?id=1230717

http://www.financialpost.com/money/story.html?id=1230717

China’s yuan could depreciate sharply if the government were to remove capital controls and the managed exchange rate, resulting in quite the opposite effect to what U. S. lawmakers have advocated, an economist said yesterday.

Charles Dumas, a director at Lombard Street Research in London said China’s capital flows have turned negative as a result of a collapse in its foreign trade in autumn and a removal of capital controls amid current economic conditions would exacerbate the situation by encouraging a large outflow of money from the country. He said this would devalue the Chinese yuan, which is also known as the renminbi.

The comments follow criticism of China’s currency controls by the new U. S. Treasury Secretary, Timothy Geithner, who was sworn in on Monday.

“China also has comprehensive capital controls that confine its huge savings within its domestic financial markets. Full abandonment of manipulation would mean scrapping these controls, at which point the cumulative savings of 1.3 billion excess savers would become potential capital exports.”

So that means $350B for equity is $350B too much.

But I have my worries too about how a nationalized banking system would run in the US. Congress already decided to “fix” interest rates for F&F loans at 4.5%. If they want to re-flate their Georgetown homes and Virginia McMansions, they can vote up the conforming F&F loan limit to a couple million and “fix” interest rates at,say, 1%. That should do it. They could do similar things for their constituencies.

In Sweden they have to worry about government balance sheets and CA deficits. This never seems to be a concern in the US, which would give the Federal Bank of USA far too much operating latitude.

However I do like the idea of clerical pay for clerical work. I just don’t know why private stock holders can never enforce that.