Great minds think alike (a solution)

I've mentioned him before, I think his videos are amazing. Here's Sal Khan on CNN, discussing a possible solution to the crisis.




More on the possible solution (from KhanAcademy.org)



The videos are relatively long. Essentially its using the bailout money to build new banks free of toxic liabilities (thus making credits more readily avalaible to the public) rather than pouring it into 'insolvent' banks that aren't guaranteed to free up as much credit as the government would want anyway. The argument is that considering their balance sheet, the banks are more likely to either keep the money or be very stringent in lending (ie. high interests).

New banks would mean bankruptcy of certain banks that are operating now. I don't know about the systemic risks involved, but he thinks it wouldnt be such a bad thing.


Tun Dr Mahathir gave a speech in London on 1st April 2009, at an event preceding the G20 summit. He too calls for a stop in the bailing out of banks and suggests the set up of new banks. Excerpt from The Star:


The Alternative G20 Agenda: Real Financial Fairness

LONDON: Tun Dr Mahathir Mohamad has called for the closure of banks that caused the global financial crisis instead of bailing them out.

The former prime minister lambasted the West for pumping in billions of dollars to resuscitate these “failed institutions”.

He said they should be allowed to go under as bankers were rewarding themselves with fat bonuses rather than be punished for their inefficiencies.

“Let’s start new banks. We don’t need to have banks with those names anymore as they are a disgrace.”

He questioned the logic of rewarding bankers who caused the economic crisis, saying those who created trouble were normally put in prison.

Dr Mahathir also took a dig at hedge funds, saying their borrowings should be limited and not be 20 or 30 times more than the investments.