FDIC Guarantee Fund

A. Objective
To stabilize the economy and to make money for Social Security Fund.

B. Method
1. Use the Fund to guarantee the solvency of those financial institutions who request for the support in exchange for equity in the institution.
2. Control the Board of Directors and through them keeps the management responsible for the results.
3. Sell the equity holdings at appropriate time to maximize the gains.

C. Reasons
1. What the Government does best is legislations to set up rules and regulations for private sector to follow.
2. What the Government needs is stability in the economy.
3. What the Private Sector does best is to manage their business and make profit.
4. What the Private Sector needs is cash infusion and confidence.
5. What went wrong was that some people found holes in the current rules and regulations and greed took over. This can be corrected through legislation. If Government can regulate the stock market, it can regulate anything.
6. What Private Sector doesn’t need is to let Government run their business. Who can keep the loss to the minimum even make more money?
7. What we need is to keep the existing organization and their infrastructures in various financial institutions. They are the good assets which make the financial system work for everyone. Let us don’t let a few people who are responsible for the mess ruin the reputation of all the people work in those institutions.
8. What we don’t need is to build a government agency from scratch to run the bad assets and expect it to run smoothly.
9. What we want to avoid is panic selling. If the Trust Fund can guarantee the solvency of the financial institutions, then they don’t have to unload the questionable assets at huge discounts. This will allow them to manage their business in calm and orderly manner and keep the losses to the minimum. The result is everyone wins.
10. The economy in US is fundamentally strong. We may need to wait for 10 years or longer for the real estate market to come back. With the support from the Trust Fund, we can wait.
11. What the Congress and Government need is time to pass legislations for the Private Sector to follow. The Trust Fund provides that breathing room for them. Hast makes waste.
12. What the Trust Fund shouldn’t do is to purchase the bad assets. The $700 billion can evaporate quickly. It should let the Private Sector keep them and try to minimize the loss. The Trust Fund will help out only on the loss portion so that the financial institutions can stay in business. This way the $700 billion can guarantee much more bad assets, may be $7 trillion. That will calm the market down.
13. The Trust Fund puts tax payer’s money at risk. It should make some money back like other venture capitals. The Trust Fund shouldn’t just benefit a few people in the bailout process. It should also make some money for the tax payers. All profits from the sale of the equity holdings should go into the Social Security Fund. This will strengthen the Social Security Fund. Then this is a worthwhile deal for tax payers to support.