A modest proposal
One of the sticking points to any recovery program is what to do with "toxic" assets.
Most of the assets that are "toxic" are labeled such because no one knows how much they are worth, because no one will buy them, because they contain "subprime" loans more likely to fail or a combination of the above.
I'm a firm believer that time will heal all of the above wounds. Some loans will fail, other assets will decline in value, but some will be paid off and other will become marketable over time.
So the question is where can you find someplace to stash these assets for 10-20 years until you have a chance of selling them for more than you can today?
Well, as everyone knows, the Social Security "fund" has no assets in it, only IOUs. It would seem that if the government is going to buy these toxic assets so that lending resumes and confidence rebounds in the financial markets, why not place these assets in the Social Security trust fund? Structure it so that none of the assets can be sold for at least 10 years and when they are sold they have to be sold in such a way as to not produce excess selling pressure (and corresponding price declines) in the market for those assets. (A "sell on uptick" rule, as it were.)
I would think 10 years is long enough to shake out the real value of these assets and improve the chance that taxpayers will see a positive rate of return on their investments. There would also finally be something in the Social Security trust fund other that IOUs backed by the ability to tax our children at punitive rates. Hey, if taxpayers are assuming the risk of these "toxic" assets then they should be the ones to reap any rewards that may come from them.
Most of the assets that are "toxic" are labeled such because no one knows how much they are worth, because no one will buy them, because they contain "subprime" loans more likely to fail or a combination of the above.
I'm a firm believer that time will heal all of the above wounds. Some loans will fail, other assets will decline in value, but some will be paid off and other will become marketable over time.
So the question is where can you find someplace to stash these assets for 10-20 years until you have a chance of selling them for more than you can today?
Well, as everyone knows, the Social Security "fund" has no assets in it, only IOUs. It would seem that if the government is going to buy these toxic assets so that lending resumes and confidence rebounds in the financial markets, why not place these assets in the Social Security trust fund? Structure it so that none of the assets can be sold for at least 10 years and when they are sold they have to be sold in such a way as to not produce excess selling pressure (and corresponding price declines) in the market for those assets. (A "sell on uptick" rule, as it were.)
I would think 10 years is long enough to shake out the real value of these assets and improve the chance that taxpayers will see a positive rate of return on their investments. There would also finally be something in the Social Security trust fund other that IOUs backed by the ability to tax our children at punitive rates. Hey, if taxpayers are assuming the risk of these "toxic" assets then they should be the ones to reap any rewards that may come from them.