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Guest Post: You Want To Fix The U.S. Economy? Here's A Start

Tyler Durden's picture


Submitted by Charles Hugh Smith from Of Two Minds

You Want to Fix the U.S. Economy? Here's a Start

A simple 8-point plan would restore both the banking and the real estate sectors, and end the political dominance of the parasitic "too big to fail" banks.

Craven politicos and clueless Federal Reserve economists are always bleating about how they want to fix the U.S. economy and restore "aggregate demand." OK, here's how to start:

1. Force all banks to mark all their assets to market at the end of each trading day, including all derivatives of all types, including over-the-counter instruments.

2. Allow citizens to discharge all mortgage and student loan debt in bankruptcy court, just like any other debt.

3. Banks must mark all their real estate to market weekly as defined by "last sales of nearby properties" adjusted for square footage and other quantifiable measures (i.e. like

4. Require mortgage servicers and all owners of mortgage-backed securities to mark every asset within each pool to market weekly.

5. Any mortgage, loan or note which was fraudulently originated, packaged and sold, including the misrepresentation of risk, the manipulation of risk ratings, fraudulent documentation by any party, etc., will be discharged as uncollectable and the full value wiped off the books and title records without recourse by any of the parties.

If a bank fraudulently originated a mortgage and the buyer misrepresented material facts on the mortgage documents, then both parties lose all claim to the note and the underlying asset, the house, which reverts to the FDIC for liquidation, with the proceeds going towards creditors' claims against the bank.

6. Any bank which misrepresents marked-to-market asset values will be fined $10 million per incident.

7. Any bank which is insolvent at the end of a trading day will be closed and taken over by the FDIC the following day, and liquidated in an orderly manner via open-market auctions of all assets, including REO (real estate owned).

8. All derivative positions held by the insolvent bank will be unwound immediately, and counterparties who fail to make good on their claims will also be closed, given to the FDIC and liquidated.

You know what this is, of course: a return to trustworthy, transparent accounting. And you know what the consequences would be, too: all five "too big to fail" banks would instantly be declared insolvent, and most of the other top-25 big banks would also be closed and liquidated.

At least $3 trillion in impaired residential mortgage debt would be written off, maybe more, and $1 trillion in impaired commercial real estate would also be written down. Derivative losses are unknown, but let's estimate it's at least $1 trillion and maybe much more.

If $5.8 trillion of fantasy "value" is wiped off the nation's books, that's only a 10% reduction in net household and non-profit assets, which total $58 trillion. Even an $11 trillion hit would only knock off 20%. If that's reality, if that's what the assets are really worth in the real world, then let's get it over with. Once we've restored truthful accounting and stopped living a grand series of debilitating lies, then the path will finally be clear for renewed growth.

The net result would be the destruction of the political power of the "too big to fail" banks, the clearing of the nation's bloated, diseased real estate market, and the restoration of trust in institutions which have been completely discredited.

Bank credit would flow again, and we could insist on a healthy competitive system of 250 small banks instead of a corrupting system of 5 insolvent parasitic monsters and 20 other bloated but equally insolvent financial parasites.

Those who lied would finally get fried. At long last, those who misprepresented income, risk, etc. would actually pay some price for their malfeasance. Criminal proceedings would be a nice icing on the cake, but simply ending the pretence of solvency would go a long way to restoring banking and real estate and ending regulatory capture by TBTF banks.

What's the downside to such a simple action plan? Oh boo-hoo, the craven politicos would lose their key campaign contributors. On the plus side, the politicos could finally wipe that brown stuff off their noses.


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Tue, 07/19/2011 - 10:38 | 1470056 bill1102inf
bill1102inf's picture

#1, the banks would be insolvent immediately.

#2, why not let ANYONE borrow from the government and allow the loans to be defaulted. Lets give out $100,000.00 to everyone.

Tue, 07/19/2011 - 10:46 | 1470105 ElvisDog
ElvisDog's picture

You're missing the point. Government guarentees of debt remove all responsibility from the banks for carefully evaluating a loan application. More loans = more fees, so anyone who can fog a mirror is approved. If the banks really had to take the loss for a bad decision, there wouldn't be as much bad debt swirling around.

Tue, 07/19/2011 - 10:54 | 1470142 Clueless Economist
Clueless Economist's picture

The only "clueless economists" are from the Austrian school of thought.


We Keynesians are all geniuses and Nobel Prize winners

Tue, 07/19/2011 - 10:57 | 1470166 SheepDog-One
SheepDog-One's picture

And its working so well that even the Keynesian overlords are saying 'Yep, we're *fail*'. Hey keep writting those NYT columns though, makes great parrot cage liner.

Tue, 07/19/2011 - 10:58 | 1470178 augie
augie's picture

beau'iful plumage...

Tue, 07/19/2011 - 11:04 | 1470214 66Sexy
66Sexy's picture

Mail every US taxpayer  (and taxpayers ONLY) a check for $25,000. That would stimulate everything, would inflate assets, corporate bottom lines, bank deposits, and consumer goods.

Tue, 07/19/2011 - 13:17 | 1470839 TruthInSunshine
TruthInSunshine's picture

Don't make it soooo complicated.

Everyone can just move in together.



This is not in jest: Real study by BLS:

U.S. Bureau of Labor Statistics

First Quarter 2011

  • Consumer Expenditure Survey: Do two live as cheaply as one? Evidence from the Consumer Expenditure Survey (HTML) (PDF)
Tue, 07/19/2011 - 14:29 | 1471217 optimator
optimator's picture

Better yet, mail every taxpayer a mini printing press and eliminate the Fed!

Tue, 07/19/2011 - 11:06 | 1470230 Ahmeexnal
Ahmeexnal's picture

How about just a one point plan?



Wed, 07/20/2011 - 16:21 | 1470622 JW n FL
JW n FL's picture

can we instead roll our fat asses off the sofa and fall onto the Criminal, Treasonous, Lobby Whores and just Sit on them?


we will lack popular support to be sure!


if there is to be any sort of heavy lifting and or sweat inducing work.. the majority will be abstaining and watching where's Casey or who's swatting Murdock. if it's Not on Cable.. then they are not interested!


once again.. rolling.. at a slow pace.. their fat asses off the sofa.. and landing on.. the Criminal, Treasonous, Lobby Whores and then just having to sit on top of them.. while still leaning against the sofa with an even better view of the T.V. therefore allowing the cable news info to just wash over them like a warm bath..


thats fine, but anything more strenuous than that? forget it! you are on your own!


exercise is for midnite the first of the month! when they are out of food!


But here's some good news..


If they only get up off their fat asses to chase food! then when the food stamps monies get tied up in the Forced Austerity of the Poor Nation (Wall Street already has Trillions sitting, they dont need any more money right now) we may well see some movement out of the 59% of Americans that receive some form of Government Assistance.. or what about the employees of the Government?


No Worries! everyone with a Gun still gets paid! they have to keep you restless sheep in order some how! LULZ!!

Tue, 07/19/2011 - 11:52 | 1470466 Sudden Debt
Sudden Debt's picture

Any bank which is insolvent at the end of a trading day will be closed and taken over by the FDIC the following day

yeah... that would make... the FDIC... THE BIGGEST BANK IN THE WORLD!!


Tue, 07/19/2011 - 10:40 | 1470061 chunga
chunga's picture

Caligula style "capitalism" would never stand for this nonsense.

Tue, 07/19/2011 - 10:53 | 1470131 chumbawamba
chumbawamba's picture

It's a nice fantasy, at least.

I am Chumbawamba.

Tue, 07/19/2011 - 11:21 | 1470305 chunga
chunga's picture

We won't follow the path of Rome. The Praetorian Guard is much stronger now.

Tue, 07/19/2011 - 12:14 | 1470590 chumbawamba
chumbawamba's picture

Yeah, but this time around the plebes have firearms.

I am Chumbawamba.

Tue, 07/19/2011 - 10:42 | 1470070 dick cheneys ghost
dick cheneys ghost's picture

You had me at hello............

Tue, 07/19/2011 - 12:43 | 1470684 GoinFawr
GoinFawr's picture

Hahahaha! ++

Tue, 07/19/2011 - 10:43 | 1470075 unununium
unununium's picture

Help.  This is so complicated.

I saw on CNBC that marking to market is an evil invention of the Obama administration, meant to kill banks and spread socialism.

I thought more accuracy was always better.  But these media reports make me worry that banks might fail if they have to mark their assets to market.  And I think that's supposed to be bad for me somehow.  Something about 'armageddon'...

  --Confused in USA

Tue, 07/19/2011 - 10:50 | 1470122 Fred Hayek
Fred Hayek's picture

That's kind of odd because didn't FASB sign off to "mark to fantasy" in early 2009, the early days of the Obama administration?

Tue, 07/19/2011 - 10:42 | 1470078 pepperspray
pepperspray's picture

Let's see the Paul Ryan plan on this one.

Tue, 07/19/2011 - 10:43 | 1470080 bigwavedave
bigwavedave's picture

wont happen. there would be no more need to accelerate credit growth and no real reason to print. boring!

Tue, 07/19/2011 - 10:43 | 1470081 ElvisDog
ElvisDog's picture

Too bad Charles Hugh Smith won't run for president.....

Tue, 07/19/2011 - 16:19 | 1471663 GoinFawr
GoinFawr's picture

Too bad you didn't vote for Ralph Nader in '96, '00, '04, or '08; I don't see a single policy on that list that he wouldn't take action on tomorrow, if he were POTUS...

Tue, 07/19/2011 - 10:45 | 1470085 Jack Burton
Jack Burton's picture

Interesting. I see a small problem with the ease of discharge of all mortgage and student loan debt via a bankruptcy. The availability of such loans would sink like a stone. Not saying that is all bad, but lenders would be strict in a sense few Americans alive today have ever experienced.

Pop goes what is left of the housing market!

Pop goes the higher education bubble!

Up goes unemployment by 5% minimum

Tue, 07/19/2011 - 10:46 | 1470102 SheepDog-One
SheepDog-One's picture

You mean people asking for a loan would have to put up collateral, and have to show the loan is very likely to be repaid?

Tue, 07/19/2011 - 12:12 | 1470578 Marc45
Marc45's picture

Yes, no bank would normally loan money to a student.  Student loans are simply another social program.  Without them, the only students able to afford a good college would be scholarship grantees and fortunate sons (think GW Bush).  Student loans are not dischargeable through bankruptcy.  You can argue that college students should not get special treatment but I think it's a positive investment in society (unlike many other social programs).

Note: I would not have been able to afford the college I went to without student loans and now I run a business employing 50+ people and I pay a lot of taxes.  I think it works.

Tue, 07/19/2011 - 12:26 | 1470629 Idiot Savant
Idiot Savant's picture

Student loans are simply another social program.  Without them, the only students able to afford a good college would be scholarship grantees and fortunate sons (think GW Bush).

I would argue that tuition rates wouldn't be as unreasonable if it weren't for student loans. Student loans are a scam to enslave young Americans before they even start working. End the loan programs and watch tuition rates fall.

Tue, 07/19/2011 - 23:55 | 1472867 andyupnorth
andyupnorth's picture

+1. Obvious reasonning is required for the brainwashed folk.

Tue, 07/19/2011 - 12:30 | 1470632 Idiot Savant
Idiot Savant's picture


Tue, 07/19/2011 - 12:31 | 1470642 Idiot Savant
Idiot Savant's picture


Tue, 07/19/2011 - 12:49 | 1470714 earnulf
earnulf's picture

Not So that people would not be able to afford a "good" college.   There are still a couple of "work your way through" colleges out there doing a bang-up job.   College of the Ozarks and Berea College come to mind and the local state colleges are expensive, but not completely out of reach, at least the one's that don't have a major football program.

I do agree that banks would be reluctant to loan for "student" loans, very difficult to guage future earnings based on school work.   But maybe it would also lower student levels and force colleges to trim their "offerings" to studies that actually produce effective students who can help the workforce.

The point is that we have to stop running up 100K debt before the person even enters the workforce.   Talk about a millstone around your neck for the rest of your life

Tue, 07/19/2011 - 12:58 | 1470763 ceilidh_trail
ceilidh_trail's picture

GWB got decent grades in college. Algore and JohnKerry the ketchup man did not do so well. The Oboy? Who the hell knows- I bet not so good or he would have publicised them...

Tue, 07/19/2011 - 13:36 | 1470947 11b40
11b40's picture

You can chart the rise in college tuition's to the increase in the value and number of student loans.  'Education' costs have been far outstripping the rate of inflation for 20 years or more, while college campuses get evermore elaborate & extravagant.  Staffs have become bloated, along with salaries and benefits, while "value delivered" declines. 

I worked my way through college.  No loans, no debt.  It took me 8 years, counting the 2 I gave to Uncle Sam, but I did it.  Now, I personally know young people who have 80K plus in student loan debt with meager realistic chances of making that much a year.  They will be trying to pay off that debt & the carried interest for decades.....just another form of debt slavery with one exception.  The is the creme de la creme of debt slaves - well educated and good prospects for jobs that will allow them to service the debt load.  Bankers bonanza!

Wed, 07/20/2011 - 13:26 | 1471724 GoinFawr
GoinFawr's picture

I notice no one here has mentioned anything about going Finland's or Germany's route on post secondary education. I am Jack's utter lack of surprise, seeing as their obvious successes blatantly contradict all of the narrow-minded Amerhetoric.

Do you lot ever think to look past your own screen doors?

As a rule, a decent education produces a net benefit for the society that provides it. IE. EROI is a positive number.


Tue, 07/19/2011 - 10:49 | 1470120 kridkrid
kridkrid's picture

Good and Good.  By propping up housing and higher ed, working class stiffs are getting priced out (or are being forced into debt servitude to chase the farce called an American dream).  End all supports for everything.  Let rational(ish) people make rational(ish) decisions. 

Tue, 07/19/2011 - 11:13 | 1470265 centerline
centerline's picture

As if none of that is going to happen anyhow?

I do see great moral hazard though in any sort of categorized debt jubilee.  For any sort of real economy to function, it must honor hard work and prudent behavior over pure leverage and reckless behavior.  The mindset right now is too "fiat."


Tue, 07/19/2011 - 12:34 | 1470652 MachoMan
MachoMan's picture

True...  my only question is, all things considered, can an elite group essentially ensure its status in practical perpetuity?  There will be a great many things that get sorted out in our deleveraging and the changes to come...  but, if there is a relatively unscathed portion of us that was also directly responsible for the calamity, then any legitimacy of the exercise is lost... 

I suspect that the environment will be more moral and functional in the future for most people...  but, being a relative measure, that's not saying much...

Tue, 07/19/2011 - 11:21 | 1470304 Raymond Reason
Raymond Reason's picture

@Jack.  Yes availibility of such loans would sink like a stone, debt would have market price other words, capitalism.

On the other side of the equation, getting rid of the FDIC (although the author didn't mention this), would cause depositors to evaluate the banks where they deposit their money.  In other words, capitalism. 

Tue, 07/19/2011 - 11:25 | 1470319 jerry_theking_lawler
jerry_theking_lawler's picture

negative. doesn't the .gov back all student loan debt now....thanks Uncle S....

Tue, 07/19/2011 - 11:29 | 1470330 snakeboat
snakeboat's picture

That's no problem, that's the ONLY solution...   True GDP is at least 12% below what is currently reported.  The sooner we recognize this and get over it, the better for you, me and all our kiddos...

Tue, 07/19/2011 - 20:53 | 1472510 knowless
knowless's picture

and eventually higher education will be open to the adept at cheaper cost, instead of the inept at exorbitant..

Tue, 07/19/2011 - 10:49 | 1470090 SheepDog-One
SheepDog-One's picture

What, you mean peasantry should be even near the same playing field as the 400 elite families that hold 50% of the entire worlds wealth, and have actual rights and ability to discharge debt that THEY have due to the criminality of the elites? AND us criminal banksters would be charged and sent to a dungeon for our massive crimes??

Im shocked! Randolph, hand me another Perrier, Im feeling faint! Here ya go Mortimer...relax! We got our bunker built.

Tue, 07/19/2011 - 10:46 | 1470107 Dr. Engali
Dr. Engali's picture

Want to fix the economy.

1) Enforce the laws and prosecute the criminals.

2) No bail outs period.

3) End the fed

4) Fire congress and the sitting administration.

5) Return to sound money



Tue, 07/19/2011 - 10:58 | 1470171 traderjoe
traderjoe's picture

Without the end of private debt-money creation through fractional reserve banking and the privately-held Fed - nothing will be fixed. Why does a sovereign country borrow its own money at interest from private corporations?

I liked your list better than his.

Tue, 07/19/2011 - 11:31 | 1470341 Raymond Reason
Raymond Reason's picture

Why stop with fractional reserve banking?  Why not get rid of banks altogether?  It doesn't mean there wouldn't be credit.  The whole idea of banking is shit.  When you loan money, you require collateral.  When you loan money to the bank, you get nothing.  They take your money, and loan it with collateral.  There's the fleece.  A bank should broker your loan, and forward your collateral back to you.  If you don't have enough money to make a loan, well you hire the bank to lock it up until you do.  That would be real banking. 

Tue, 07/19/2011 - 11:00 | 1470186 chumbawamba
chumbawamba's picture

"4) Fire congress and the sitting administration."

That's called Revolution.

In fact, I propose the Final Amendment to the Constitution of the United States of America:

Amendment 29: This Constitution is hereby Expunged, and Open Revolt is declared.  All People who have taken an Oath to this Constitution are voided of any power, privilege, position or title therein granted or gained, and are to stand down or consent to becoming a casualty statistic.

I am Chumbawamba.

Wed, 07/20/2011 - 00:11 | 1472887 StychoKiller
StychoKiller's picture

Amendment 29:  "Congress shall make NO Law abridging the freedom of Production and Trade."

Tue, 07/19/2011 - 13:00 | 1470769 ceilidh_trail
ceilidh_trail's picture


Tue, 07/19/2011 - 10:48 | 1470112 Thisson
Thisson's picture

Some of these points are not thought through very well.  For example, allowing people to discharge mortgages in bankruptcy is absurd.  These are secured debts, not unsecured debts.  Only unsecured debts are (and should be) dischargeable.  You want to discharge student loans in bankruptcy, that's fine, but don't mess with a creditor's right to collect against secured property because that undermines the capital structure of our economy AND it affects pricing (it would make mortgage loans much more expensive).


Tue, 07/19/2011 - 11:08 | 1470243 Woodyg
Woodyg's picture

Actually after the MERS fraud those loans aren't secured - not if the banks have to follow the rule of law like the Little People.

Tue, 07/19/2011 - 11:35 | 1470362 chunga
chunga's picture

Right on!

Seven Head Shots to MERS in one fell swoop

Judicial economy at it's finest.

Tue, 07/19/2011 - 10:49 | 1470118 Idiot Savant
Idiot Savant's picture

Misleading title, as you can't address the US economy without addressing unemployment. Americans can't compete with cheap, foreign labor. Until Americans are willing to pay significantly more for US made goods, it's game over for our "economy".

Tue, 07/19/2011 - 10:52 | 1470124 SheepDog-One
SheepDog-One's picture

Just paid $300 for some Danner boots, made in USA and worth every penny over foreign garbage.

Tue, 07/19/2011 - 11:10 | 1470247 hedgeless_horseman
hedgeless_horseman's picture

I hope you bought the sewn-on welts, and not the glued-on.

Tue, 07/19/2011 - 11:13 | 1470259 SheepDog-One
SheepDog-One's picture

Well, see what the $300 Acadias are, yep stitched of course. And my last Danners lasted thru 12 years of Marine testing, actually theyre still good, just wanted a nice new pair.

Tue, 07/19/2011 - 11:14 | 1470268 hedgeless_horseman
hedgeless_horseman's picture

Good dog.

Tue, 07/19/2011 - 11:49 | 1470449 decon
decon's picture

Should have bought White's.  Higher quality and cheaper in the long run.

Tue, 07/19/2011 - 21:04 | 1472528 knowless
knowless's picture

oregon made, nice, leatherman or gerber?

my danners have lasted me 9 years so far, if i hadn't burned them up on the fireline i would guess they wouldn't look like such shit now, but they're still good.

Tue, 07/19/2011 - 11:01 | 1470195 Thisson
Thisson's picture

As an alternative to Americans being willing to pay more, we could make our labor cheaper by not forcing it to sustain a rentier class on it's backs.  Lower (or gasp, eliminate) personal taxes, reduce the size of government, get rid of all these junk fees people have to pay, and people would have the same real standard of living at a lower nominal wage.

Tue, 07/19/2011 - 11:02 | 1470199 sschu
sschu's picture

you can't address the US economy without addressing unemployment.

Unemployment is the result, not the cause, of our economic problems.  Financial shenanigans, the absurdity of large, centralized government and accounting gimmicks are the cause.  Add a little tort reform and a free market healthcare option and jobs will be plentiful.  After the pain of liquidating the mal-investment that is.

We can hope sanity will prevail.  Hope is all we have left.


Tue, 07/19/2011 - 12:40 | 1470670 MachoMan
MachoMan's picture

The problem is that the third world has exposed america as a speculative bubble...  highly prone to malinvestment...  while fixing that list of things will certainly help, the infrastructure costs associated with our desired lifestyle are hopelessly impossible to pay given labor costs elsewhere...  I am also highly suspect of protectionism...

Tue, 07/19/2011 - 12:20 | 1470613 Marc45
Marc45's picture

It's not game over.  It's a global economy.  Everytime someone blames their misfortune on another country, they diminish thier own.

The game changes all the time.  Figure it out or go find a cave to sit and complain in.  The nature of all life on this planet is adapt or die.  Those who prosper in this world will prosper even when economies collapse and rules change.  Now that's Ayn Rand for you!

Tue, 07/19/2011 - 10:52 | 1470125 SilverRhino
SilverRhino's picture

Such positive naivity is refreshing.   Too bad it will never happen without a lot of bloodshed.

Tue, 07/19/2011 - 10:54 | 1470143 SheepDog-One
SheepDog-One's picture

Exactly, its all academic 'wouldnt it be nice if we were sane and fair', too bad the banker overlords will never release their deathgrip and will keep it to the bitter end even if everyone else has to die trying to overthrow them.

Tue, 07/19/2011 - 10:54 | 1470144 Dr. Engali
Dr. Engali's picture

I would be willing to bet that the first thing that would happen after any revolution is the establishment of a new central bank.

Tue, 07/19/2011 - 10:59 | 1470183 SheepDog-One
SheepDog-One's picture

A revolution? I dont see it...for proof just look at the top 10 hot Google searches.

Tue, 07/19/2011 - 11:15 | 1470270 Dr. Engali
Dr. Engali's picture

Yeah I know there won't be. The masses are happy to be taken advantage of, as long as they have a bag, of chips, a couch and a TV. But I keep seeing commentary about "bloodshed" and revolution. My point was even if there were the financiers would be in power in short order.

Tue, 07/19/2011 - 10:52 | 1470130 TheEmperor
TheEmperor's picture

"Wipe them out....All of them"


Political will is absent, Bankers would have the most to lose, so therefor this cannot happen (willingly).   Does C.H.S. has no stake in the subsequent global impoverishment?

Tue, 07/19/2011 - 10:53 | 1470132 Marx_it_2_market.
Marx_it_2_market.'s picture

Above and apart from the flaws in the details of this plan, is a bigger one.  There is no way to implement it, as the writer admits.  That's la-la land.  What we really need are fresh political parties to replace the duopoly and the fraudulent Democrat-Republican buzzsaw.

Tue, 07/19/2011 - 10:53 | 1470135 augie
augie's picture

Real change starts from within. The system is a reflection of its people, if the people are allowed to remain broken, how do we expect the system to ever operate properly? 

164 million prescriptions were written in 2008 for antidepressants, totaling $9.6 billion in U.S. sales, according to IMS Health.

You tell me if that number is a function of 164 million fucked up people, or one, supremely sick society motivated to harvest 9.6 billion$ from a misinformed populace.

Tue, 07/19/2011 - 11:56 | 1470489 DeltaDawn
DeltaDawn's picture

Bravo. Unfortunately, the erosion of self-reliance and well being has taken many to a place where they won't have what it takes to transition.

Tue, 07/19/2011 - 12:10 | 1470565 augie
augie's picture


some make it, others don't. 

Tue, 07/19/2011 - 10:54 | 1470136 virgilcaine
virgilcaine's picture

Can we add.. "make the Case Schiller Idx magically go back to 2006", then all will be well.

Tue, 07/19/2011 - 10:56 | 1470156 TooBearish
TooBearish's picture

How about obey the Constitution and enforce laws fairly and equally.  Abolish LOBBYing except for a lunch at Mcdonalds.

Tue, 07/19/2011 - 11:47 | 1470432 Andy_Jackson_Jihad
Andy_Jackson_Jihad's picture

Forcing the bribes in the form of the lobbyers product would be a good start.  Having a lifetime supply of chineese trinkets, boner pills and toxic debt would get old pretty fast for our "representatives"


Tue, 07/19/2011 - 14:42 | 1471299 optimator
optimator's picture

Think of all the carelessly dropped hundred dollar bills under the tables!

Tue, 07/19/2011 - 10:57 | 1470163 zee
zee's picture

The word "force" is used quite a bit here.  Looks more like a plan Nazi Germany would use than a nation like the U.S. who supposedly believes in freedom.


Giving government more power to "force" banks into submission will never work.  Why?  Because corrupt politicians will be the one's picking and choosing which banks need to comply.  It just simply won't work.


We need to remove any expectation of bailouts, get rid of the FDIC that way banks know they must make smart decisions or allowed to go bankrupt.  We need private companies rating these banks on their solvency so consumers know which banks are the safest to park their cash with.  The free market will correct this situation.  But too many people have been brainwashed that somehow allowing the most dangerous monopoly there is on the planet (U.S. Government) to have more power to centrally plan our system. 

Tue, 07/19/2011 - 10:57 | 1470165 Woodyg
Woodyg's picture

Considering the predator banksters have BOTH political parties bought and paid for let's add this story to the Rainbow Stew category right along with end the wars, fair taxes for the rich, electornic election machines that actually count votes correctly, an Industrial Policy that makes firms that pollute( hello exelon and bp) pay for the true costs of their damages and a Free Trade Agreement that delivers equal tariffs instead of codifying a 20+% tariff on our goods and a 2% tariff on their goods.

Tue, 07/19/2011 - 10:58 | 1470174 Oh regional Indian
Oh regional Indian's picture

Childish and unworkable, never going to happen ideas, sorry to say.

A crash really is optimistic.

Then, real ideas will find the light of day.


Tue, 07/19/2011 - 11:01 | 1470191 OutLookingIn
OutLookingIn's picture

Agree 100%, We can file this under "woulda, coulda, shoulda, etc.

Tue, 07/19/2011 - 11:21 | 1470306 bullchit
bullchit's picture

Did you mean "optimal" ORI?


Tue, 07/19/2011 - 12:56 | 1470751 Oh regional Indian
Oh regional Indian's picture

Unfortunately I did mean optimistic Bull. A little play on our friend crashisoptimistic here and I feel the tipping point is in the rear view mirror and I see not good days ahead. At all.


Tue, 07/19/2011 - 10:58 | 1470177 OutLookingIn
OutLookingIn's picture

Agree with CD Nice fantasy. Never hatchy!

Tue, 07/19/2011 - 10:59 | 1470179 CaptBuckSnort
CaptBuckSnort's picture

Screw the TBTF banks. Screw the FED! There are plenty of Savings & Loans and small banks who have not made lair loans and engaged in outright fraud out there.

Our bought off legislators at the state and federal level of government, are pressuring the courts to accept fraud as the normal course of business. This is a very slippery slope, where courts are told if they follow the law that the economy will collapse, and their pension fund will go from down in value, to none.

You only need one change to topple these TBTF Banksters, mark to market on assets. Everything else will self adjust.

Tue, 07/19/2011 - 10:59 | 1470182 jekyll island
jekyll island's picture

1.  End the Fed

2. Go back on Gold Standard

3. Require that all seeking political office have worked or run a business for 10 years prior to entering election

4.  Institute term limits so politicians in office will have the fortitude to make decisions based on the good of the country, not on enhancing their reelection. 

5.  Cap welfare, food stamps, disability etc. at 5 years.  These were meant to help during rough times, not become entitlements

6.  Mandate that government balance budget, no deficit spending.  

7. No more bailouts, no more policeman of the world defense policy






Tue, 07/19/2011 - 11:00 | 1470189 zuuuueri
zuuuueri's picture

even more rules don't solve the problem. let it crash, let people who make stupid loans... do so loaning their own money and let them fail. Theyll be very careful the next time. 

all you have to do to end this shit is... let them fail. let them all fail. the big TBTF's, let them fail. the small welfare queens and paperpushers drawing salaries.. let them and their system to broke and fail.. the corrupt machinery that drinks the river of freshly printed money? let it all fail. 



Tue, 07/19/2011 - 11:01 | 1470190 rubearish10
rubearish10's picture

Does anyone have a candidate to campaign on this??

Tue, 07/19/2011 - 11:01 | 1470193 jekyll island
jekyll island's picture

8.  Flat taxes, no more hide and seek with tax code 


The End

Tue, 07/19/2011 - 11:04 | 1470215 jack stephan
jack stephan's picture

John Swartzwelder for president

Tue, 07/19/2011 - 11:06 | 1470224 mmlevine
mmlevine's picture

Try this:  "Do unto others as you would have them do unto you".  It goes a long way.

Tue, 07/19/2011 - 11:06 | 1470226 juggalo1
juggalo1's picture

The plan would allow for (demand) the collapse of all major financial institutions.  This would cause Lehman not x5 but ^5.  While the last two years have been painful, do we really want to go back to 2008?  Would we really want to go back to 666 day in 2009, and then flip the next two years?  This would be the collapse of capitalism.  I realize many on this page would espouse it, but can you at least mention it?  How many banks would really survive this armageddon?

Tue, 07/19/2011 - 11:18 | 1470283 LawsofPhysics
LawsofPhysics's picture

You still think capitalism exists?  Sorry but capitalism died as soon as government started picking the winners and losers.  "Financial products" are now greater than 20% of the American GDP, despite the fact that this adds NO REAL VALUE.  The world is quickly remembering this and local people see gold and silver as the only safe store of value because it actually takes REAL WORK to produce.  Fuck the banks, we still need farm workers and my guess is these guys have had the best gym and country club memberships for some time now, I am sure they are in good shape.  Put them to work in the fields.

Tue, 07/19/2011 - 13:25 | 1470876 Woodyg
Woodyg's picture

The financial sector is well over 30% - if not 40% of gdp - it was historically less than 10% of gdp - a means to an end - now it's the end itself. So, much of the supposed gdp is BS - meaning our gdp is well under the purported 15 tril - welcome Great Depression # 2 - if it wasn't for snap, disability and SS it would be obvious.

Tue, 07/19/2011 - 11:22 | 1470309 Scisco
Scisco's picture

Some banks would have to survive because there has to be value somewhere. I would postulate that it wouldn't include all the big ones. As for wanting to go back to 2008, hell I wouldn't want to but that is not the point. The proper question would be is it not inevitable. Finally, you mention the collapse of capitalism, is that an honest question or do you only poke in here on an very infrequent Basis. Just today there were two articles posted how the biggest movers of markets are now central banks and governments. Capitalism is long dead.

Tue, 07/19/2011 - 11:13 | 1470262 LawsofPhysics
LawsofPhysics's picture

Two things that this rant is grossly overlooking,  1) American labor costs and 2) 1 trillion in derivatives?  Get real this number is now over 200 trillion.  Be it civil war or WWIII, this is quickly becoming the only "exit".

Tue, 07/19/2011 - 11:14 | 1470272 latizziforchizzi
Tue, 07/19/2011 - 11:36 | 1470367 MrBinkeyWhat
MrBinkeyWhat's picture


Tue, 07/19/2011 - 11:14 | 1470274 Derpin USA
Derpin USA's picture

This is correct, and the fact that it will never be implemented is the reason why I don't want to try and fix this mess any further.

We ought to do everything in our power to destroy it and convince others to join us.

Tue, 07/19/2011 - 11:18 | 1470288 laosuwan
laosuwan's picture

Johnny Carson's politician lie detector

Tue, 07/19/2011 - 11:20 | 1470301 Calculated_Risk
Calculated_Risk's picture

#1 End income tax and that barbarous relic irs.

Tue, 07/19/2011 - 11:20 | 1470302 Blithering ORSA
Blithering ORSA's picture

We already have a Sherman Anti-Trust Act.  We lack the guts and the honesty to effectively use it.

Tue, 07/19/2011 - 11:27 | 1470325 Zymurguy
Zymurguy's picture

01.)  End the Fed'.  Eliminate the central banking system

02.)  End fractional reserve lending

03.)  End fiat currency.  Establish a new currency valued against the output of the country.

04.)  Separate banks from financial/investment groups

05.)  All higher level federal political races recieve a set amount of campaign funding.  No other funding allowed.

06.)  No special interest or lobby money allowed into higher level federal employee (politician) accounts.  Accounts monitored and audited.  Essentially, politicians financials are frozen while in office.

07.)  Elimination of SIVS, CDS, etc.  No more speculative purchasing of financial instruments.  All purchases paid at the closing bell, everday.

08.)  No more career politicians.  Term Limits.  No special laws or provisions provided to any federal employee.

09.)  Pull back the countless armed forces bases and embassies.

10.)  All persons pay a flat rate tax, regardless of whether you are a govt. employee, welfare recipient, etc.  Everyone has skin in the game.

Tue, 07/19/2011 - 11:39 | 1470384 MrBinkeyWhat
MrBinkeyWhat's picture

Outstanding plan. Only thing missing is the guillotines for the miscreants.

Tue, 07/19/2011 - 11:41 | 1470402 Hubbs
Hubbs's picture

The bottomline: End the Fed and end the fractional reserve banking system which  promotes creation of fake money which bankers et al exploit to concentrate wealth for themselves and eliminate the PRODUCTIVE middle class while feathering the nests of politicians, who essentially do two things with it:

1.)Appropriate money to their cronies who in turn reappropriate some of it back to the politicians in return for more favors.


2.)Buy popular votes through promises of "free lunch programs" enabled by an unlimited supply of money.

 Beedebeedebeedebee-that's all folks.

Tue, 07/19/2011 - 20:11 | 1470346 newworldorder
newworldorder's picture

A major reason as to why the global TBTF banks are allowed to exist, is their total integration within world investment markets.

Too much money is invested in these financial institutions by private, state and government pension funds for these entities to be allowed to fail.

Collectively, they are the catalyst for maintaining the status quot. Although individually they can fail and cause containable pain, a domino affect is likely, once failure starts. Industrialized nations, will not willingly choose this path in order to clear the system. There is no voluntary short term solution acceptable to governments or their power brokers.

Tue, 07/19/2011 - 11:34 | 1470353 MrBinkeyWhat
MrBinkeyWhat's picture

This plan is curiously similar to one I recommended to the RTC during the S&L bailout. BTW I am a 30+ year commercial real estate appraiser/analyst.

Soldier on Sir. The banking system is much more corrupt than in the 90's. (Who would have thunk it?).

Tue, 07/19/2011 - 11:38 | 1470383 web bot
web bot's picture

Great. So where do I sign?

Tue, 07/19/2011 - 11:47 | 1470421 Cortez
Cortez's picture

The one change that has occurred since 2008 is the mindset of those without wealth - they would rather live a simpler life and say F*ck the Joneses.  Those with good credit ratings have no interest in taking on new debt.  They would rather continue to pay off their outstanding loans.  Regular people known damn well that they aren't getting raises for sh*t, that food and gas and utilities and bogus hidden taxes are eating up more and more of one's income.  PT Barnum said "there is a sucker born every minute."  However, when every sucker alive over the age of 20-something has been f*ucked, then it takes a good generation or so to create new "economic suckers."  

Tue, 07/19/2011 - 11:48 | 1470439 chistletoe
chistletoe's picture

none of this has even the faintest chance of passage.

Nice fantasy, though.


One small point -- Zillow can, and IS, being gamed.

Tue, 07/19/2011 - 11:48 | 1470442 rsnoble
rsnoble's picture

What?  A plan that doesn't put all the blame on grandma, disabled and unemployed? Say it isn't so. 

Tue, 07/19/2011 - 11:53 | 1470471 theotheri
theotheri's picture

What if all nations erased sovereign debts completely and started again?  Who would be the net winners/losers?

My guess is the People's Rebulic of China would be the biggest loser, followed by the People of Japan, and America the biggest winner.

Why would this be terrible for the USA in the long term?  The USA doesn't really need imports to survive. We have everything we need right here provided we can get shale oil from Canada.


Tue, 07/19/2011 - 11:55 | 1470482 web bot
web bot's picture

If things get really, really bad... it's an option. But you'd likely see the start of military aggression and the emergence of new "chold" war.

Tue, 07/19/2011 - 11:58 | 1470501 theotheri
theotheri's picture

As a corollarly, every US citizen with any kind of mortgage debt gets to reduce their mortgage in proportion to the amount lost on their US savings bonds.

Tue, 07/19/2011 - 12:13 | 1470587 Milestones
Milestones's picture

If this fantasy became a reality, Wall Street would be littered with bodies; those who jumped and those who were thrown.       Milestones

Tue, 07/19/2011 - 12:27 | 1470636 pods
pods's picture

Well unless you remove private issuing of debt money with interest, this merely just puts us back to before the last runup.  It will happen again.  And again, and again.

Simple exponents.  


Tue, 07/19/2011 - 13:52 | 1470787 MachoMan
MachoMan's picture

1.  Prosecute white collar crime: (a) government enforcment agencies eat what they kill and are purposefully given limited budgets; and (b) increase rewards for reporting FFCA, et al, violations.

2.  Elected officials are randomly nominated from voter pools: (a) campaign contributions are limited to a de minimis amount and only for persons (warm bodies); (b) public option for campaign fund; (c) american idol knockout style voting; and (d) they may not sell, barter, or otherwise exchange any inside information nor utilize it in any way for their own gain.

3.  Lobbying is prohibited except in ridiculously arcane formats and, under no circumstances, can any gifts, donations or any other monies or objects be transferred either directly or indirectly to any politician or his/her proxies, associates, or related parties.

4.  One half of each congressional session will be solely dedicated to removing laws (other than those in the constitution) from the books...

5.  Businesses with less than ~$1,000,000/year in profits are exempt from virtually every workplace rule (other than taxes of course).

6.  Tax rates rise slightly on all individual wage earners earning more than $500k/year and capital gains in excess of $250k/year are taxed at ordinary income rates.  Tax code completely revamped to remove many exclusions and deductions.

7.  Anyone may choose to opt out of social security, at the expense of losing all contributed monies.  Any waived amounts MUST be kept in trust for social security and may not be invested in any financial product of the united states government or its proxies.

8.  Welfare becomes a stopgap measure rather than a mainstay.  Those who choose to accept welfare, if able bodied/minded, must accept work from a list of needs provided by local businesses with less than ~$1,000,000 in annual profits...  said "employers" must submit a performance review for the worker, which will be utilized to determine whether welfare benefits may continue...  limits must be made to ensure certain businesses do not gobble up all the available "free" labor.

9.  Banking deposits are no longer guaranteed for any reason by the federal government or its agencies.

10.  Congress controls the issuance of debt/money and this function is not outsourced to private banks.

Tue, 07/19/2011 - 14:21 | 1471179 Zymurguy
Zymurguy's picture

ooooooh, yeah!

I like a lot of those ideas... the welfare idea is brilliant!

Tue, 07/19/2011 - 13:19 | 1470849 Rusty_Shackleford
Rusty_Shackleford's picture



Not a chance. 

Might as well say that all of our problems could be solved by using magic beans.

Tue, 07/19/2011 - 13:24 | 1470866 Raymond K Hessel
Raymond K Hessel's picture

This article is all drivel.  What an ass hat!  I wish I could junk the whole thing.

Tue, 07/19/2011 - 13:36 | 1470948 hidingfromhelis
hidingfromhelis's picture

Rube Goldberg, anyone? Geez, we don't need an 8-point plan with massive bureaucratic and administrative requirements. That's part of the existing problem!

How to address the issue of the TBTF's? Stop supporting them...period. Currently, they enjoy:
1. Discount window "teat" (free money)
2. Legislation (bailouts, anti-competitive benefits, lack of/selective enforcement of existing laws, beneficial laws, preferential tax treatment, infinite loopholes, advance knowledge of policy, etc. etc.)

Without "free" money and beneficial legislation, they're dead and gone.

Tue, 07/19/2011 - 13:59 | 1471083 linrom
linrom's picture

Delist S&P 500 companies from any US exchanges. Problem solved.

Tue, 07/19/2011 - 14:39 | 1471279 Geoff-UK
Geoff-UK's picture

Please rescind Charles Hugh Smith's posting privileges.

He's not running for office, so who gives two shits what his solution set is?  Nobody's going to stop this train anyway.  His postings don't educate me nor stimulate debate on what an individual can do to prepare for the imminent unpleasantness.

I aware him no points, and may God have mercy on his soul.

Tue, 07/19/2011 - 14:46 | 1471310 Ura Bonehead
Ura Bonehead's picture

Respectfully, none of these 8 points would ‘fix’ anything.  They might, perhaps, extract some measure of revenge for past transgressions against current versions of the TBTF (which, I assume, is the point of the list) but would only serve to create an even larger problem for the economy and taxpayers (those of us that are left).  If the intent is the ‘fix’ what is wrong then the list needs to be less focused on balance sheet fixes and more on legislative and what I would refer to as moral fixes.  For example:


* Bring back Glass-Steagall.  This has to be #1 and #2 on ANY list.  To be fair phase it in, giving financial institutions (e.g.) 10 years to fully comply.  Separating the banking system from the shadow baking system MUST be the first priority.  Let ‘banks’ spin-off their Wall Street, prop-trading…. activities so that they can survive or fail on their own.


* Institute requirements on mortgage origination where the originator must retain AT LEAST 10% ownership in any mortgage/loan originated.  Additionally, the originator should have to maintain servicing responsibilities for a minimum period of time.  You made it, you service it, you make it work.


* Make a requirement that a loan sit on the originator’s books (basically un-securitizible) for a minimum initial period of time (i.e., 12 months).  Having been involved in the biz I can promise you that keeping current a loan stuck on my books for at least 12 months would be my first priority.  It’s not enough to simply have a contractual ‘put back’ provision as buyers rarely do their homework when buying loans (maybe it’s a little better today), relying purely on the contract (read: “We have 30 days to put it back if we don’t like it, docs are missing, etc.”).  I’ve had calls from securitizers to, “Send me everything you have that’s current.”  To which I would reply, “But they weren’t current 6 months ago,” or “Many of the files are a mess.”  But they didn’t care because they could shove anything current TODAY into a securitization and never have to look at a file.  “We’ll relying on the ‘put back’.”


* Get Fannie and Freddie back in the biz of conforming loans only.  There was a time when it was easier to escape prison then it was getting questionable loans through the Fannie and Freddie pipeline.  There was NO tolerance for missing docs, underwriting issues, excessive LTVs…..


*  Increase capital requirements WAY beyond current and recently recommended levels.


* Etc., etc., etc.


This is the type of stuff that needs to be on a list - who cares about what happens on the financial statement.  If you don’t solve the problems BEFORE it hits the balance sheet then you’re not ‘fixing’ anything.


Congress needs to return to the Glass-Steagall era of regulation and set strict laws that help to eliminate as much self-regulation as possible.  In short, Congress needs to save the TBTF institutions from themselves and, in turn, save you and me from their excesses and their inability to police themselves.

Tue, 07/19/2011 - 15:08 | 1471415 Lmo Mutton
Lmo Mutton's picture

No student loans and the entitled fortunate sons would have to actually get a job to pay for school or worse yet learn how to be an entrepreneur real quick.


So much for X-box and iPad sales.

Tue, 07/19/2011 - 15:16 | 1471439 Peak Everything
Peak Everything's picture

Not so simple. Net energy is in decline. This means growth is no longer possible and long term contraction has begun. This means the value of most paper wealth is in long term decline. This means rigorous mark to market policies will simply chase a never ending spiral. We need fresh thinking and a new system that can cope effectively with a contracting economy.

Tue, 07/19/2011 - 15:20 | 1471457 Peak Everything
Peak Everything's picture


Tue, 07/19/2011 - 17:32 | 1471994 Bicycle Repairman
Bicycle Repairman's picture

It's too late.

Prepare for impact.

Tue, 07/19/2011 - 22:22 | 1472698 malek
malek's picture

Discharging loans as uncollectable because of origination fraud would be rolling the dice to let some mortgage holders get away with a free house.

That cannot make sense in as it would reward imprudent borrowers who bought at the top, no down, and maybe with an ARM, against outhers who bought 15 years ago with 20% down, at reasonable prices, still have half of their mortgage payments outstanding, which for some reason didn't get securitized in a fraudulent way.

So mortgages must stand, with some resolution authority owning them after most banks fail in a domino effect. However foreclosures must go on in an orderly, but speedy way, and REO houses be put onto the market and letting prices clear where they may.
This means prudent savers who can pay cash, or 20% down besides their non-ruined credit score within strict lending rules, can pick them up on the cheap. We might need temporary limits for a few years, how many houses in an area can be bought up by hedge funds, the very rich, and similar.

The resolution authority will automatically be dismantled after 6 years.

If all banks fail anyway, we can also void all OTC derivatives and enforce standardization, clearing houses and capital provision for new ones.

I fully agree on point 2.

Wed, 07/20/2011 - 04:01 | 1473038 dolly madison
dolly madison's picture

Should happen.  The too big to fail banks should have been allowed to fail at the beginning of this.  Iceland let theirs fail, and the world didn't swallow them up for it. 

We should get it over with and get past it.  All this trying to keep the banks from failing just prolongs the agony for the people.

Wed, 07/20/2011 - 06:41 | 1473101 Ace
Ace's picture

Mark to market for banks is a bad idea. No other businesses do that. Mark to market assumes a willing buyer and an unwilling seller. This isn't a plan to fix the economy, it's a plan to destroy the banks.

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