Part of the process has to be forcing the banks (and similar financial institutions) to recognize their losses, take the consequences,and move on. If that means a new Resolution Trust Corp similar to that used to restructure the S&L industry in the past, then let's do that-right now. Part of the bail-outprocess was allowing the banks and financial institutions to "defer" or otherwise characterize those mortgage-related debts and financing instruments to the net effect of making them their own judge of the safety and likelihood for repayment, a practice normally reserved for the independent accountants supposed to certify the valuation.
And, similarly, the recent and congressionally-approved cancellation of the Glass-Stegall Act-requiring separation of Investment Banking and similar operations from traditional bank savings and loan operations-gave even more license to the high-risk leverage of speculative trading and other investment-related operations, some of which caused the problems.
Banks and related financial institutions MUST be re-capitalized to the 15%-20% area, restricted as to the amount of capital dedicated/invested in each type of bank activity, except for Savings Accounts, and A-rated mortgages, otherwise Prudent Man Rules apply.
Transparency and limiting risk to the equity owners of banks and financial institutions must rule.
Read the Article at HuffingtonPost
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