Can We PLEASE Just Fix Banks The Right Way?
The latest bailout-for-bonuses and cap-Wall Street-pay-at-$400,000 storms have demonstrated the absurdity of our current approach to fixing our bankrupt banking system:
What's the alternative?
Fix the banks the right way:
We've tried halfway measures. They don't work. So it's time to just step up and do the right thing.
See Also:
Wall Street: We Deserve Our Bonuses
Senate Threatens To Cap Wall Street Pay At $400,000
Why Are We So Afraid To Fix Banks The Right Way?
For some reason, our software has decided I am a spammer and refuses to accept my comments, so I'll have to add them here (at least until it is determined by the court of public opinion that I AM a spammer). Here's my response to Porter's smart comment below:
Thanks, Porter. Good point.
I think this issue could be managed by just giving an appropriate haircut to the carrying value of every type of asset--with the haircut determined by the fair value in the marketplace at the time (and not some theoretical value).
I still think you'd have to apply a "likely future loss" haircut to those values, however, or we'll still be in the same death by a thousand cuts nightmare we're in now. Until investors are comfortable that we've acknowledged the worst, you won't get new capital coming in.
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