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Originally Posted by Villages Kahuna
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Unfortunately what needs to be done, in one way or another, is to remove the bad loans from the bank's books so that they can use their capital to make new loans and keep the economy moving--not necessarily growing for awhile, but at least moving. Basically, the government--you and me--will be required to dig deep into our pockets and the pockets of our children and grandchildren to provide the capital to buy the loans and remove them from the banking system. That needs to be done NOW. Correcting the causal factors and getting rid of the people who were behind this mess will have to wait until later. I'm hopeful that will happen and that the public will maintain its collective anger until things are done--but that may be wishful thinking.
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I disagree. The government setting up the "USA Bank and Trust" to buy these loans doesn't remove them from anywhere. The loan contracts simply find themselves held by a government entity, and the publicized plan is to eventually sell them back to private banks. The loan contracts just don't disappear.
Unless the causal factors are identified and corrected as part of any bailout, the problem continues despite the bailout, meaning the open hand just comes around again looking for more money. Going after the people is a job for the Attorney General, but not eliminating the root causes of the problem is like pouring more motor oil into a leaking crankcase. The engine may continue to run for a while, but it will seize up once the oil drains out again because the problem (the leak) was not fixed.
Until the fixes occur in the banking system to insure this type of greed and stupidity is stopped, the problem just keeps going even after the $700B has been allocated.