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Nothing But the Truth!

By Will Power

March 24, 2009 (San Diego--If the US Government has learned anything from the botched bail-out, it should be not to trust the bankers to clean up their old messes.

Now comes the real can of worms. Somebody is going to have to take the putrid can of bad loans created by Wall Street, dump it out and sort it out with rubber gloves.

Then the plan is to try to get banks to buy up these toxic debts and investments. You can bet the Megabanks that got bailouts won’t touch these assets with a 20 foot pole. After all, they just conned the US Taxpayer in the biggest shell game in history.

But will other banks line up to buy these stinkers? At least with a pig in a poke you can get some bacon. These assets are more like a skunk in a sack.

Small banks who buy up these toxic assets run the risk of either becoming insolvent or suffering a liquidity crisis. And if the government assigns these toxic assets to smaller banks it could create a situation whereby the small banks would have to be rescued by the Megabanks. Big fish eat little fish. It’s bad for the system.

It might be better for the Government to set up a fund similar to the Resolution Trust Fund that handled the Savings and Loan debacle. The Megabanks could be forced to lift some of the weight so smaller banks don’t get crushed with toxic assets.

Certainly if Washington allows Wall Street to direct the future of the toxic assets, we will see more graft, corruption, influence-peddling and tax avoidance strategies which will help neither the Government nor the consumers. This is the last chance for Obama to get it right!

It might be safer to shoot the skunk, and deep-six the sack. Let Obama issue a Presidential Directive declaring a debt Jubilee for individual consumers and homeowners by banning foreclosures. Let Bankruptcy Courts sort out the rest.

Will Power is a retired teacher who holds a masters degree in creative writing.

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