A way out
Looks like some folks are finally putting their thinking caps on and coming up with solutions.
``The Federal Reserve and the Treasury are realizing that we need a more comprehensive solution,'' Schumer, a Democrat who chairs the congressional Joint Economic Committee, told reporters in Washington today. ``I've been talking to them about it.''
Schumer urged forming an agency to inject funds into financial companies in exchange for equity stakes and pledges to rewrite mortgages and make them more affordable. His remarks indicate momentum is building for some wider plan after the Fed and Treasury's takeovers of Fannie Mae, Freddie Mac and American International Group Inc. this month.
Schumer advocated a Great Depression-era Reconstruction Finance Corp. model, different from the Resolution Trust Corp.- type plan others have floated. Another RTC, which was a 1990s agency that sold devalued assets in the Savings and Loan Crisis, would ``simply transfer excessive risk to the U.S. government without addressing the plight of homeowners,'' he said.
Full story here. These ideas are all good, and I believe the Senator is right that we need to do more than simply transfer the risk to taxpayers. But I don't think this is going to be a silver bullet, by any stretch. Seems to me that encouraging savings, encouraging capital investment in productive capacity, and encouraging some ethical reforms are all going to need to be addressed as well. But all in all, this is good news. People aren't standing with their finger in the wind, they are trying to figure out a way to solve the problem. Good sign.
