Titus North's Financial System Stabilization Plan

By Christopher Titus "Titus" North

I have a plan to stabilize the financial system based on my 20 years of experience in the financial markets that starts with a full audit of banks and ends with complete taxpayer reimbursement for any expenses. It would stop the foreclosures without rewarding Wall Street fat cats and speculators.

1) Conduct prompt and thorough audits of our banks and insurance companies in order to ascertain the value of their assets. Any institutions that have debts in excess of their capitalization should be seized by the government and either liquidated or put into receivership.

2) Undercapitalized institutions must to take steps to bolster their capitalization or face a partial government takeover. This would be done by injecting public funds in exchange for shares in the company according to fair market value. The management would be dismissed and the institution would have to follow strict guidelines until their health is restored and the public funds repaid.

3) Allow other institutions to sell their toxic subprime assets to the government AT MARKET PRICES, which would be a small fraction of the book values. The securitized subprime assets would be unbundled and the government would renegotiate the terms of the loans so that primary homeowners will be able to make payments. The banks and insurance companies who sell their loans to the government must agree to several conditions, including a cap on executive salaries of no more than the salaries of the President of the United States, the Vice President, or other corresponding government executives.

4) Impose a moratorium on foreclosures on primary homes. Keeping homeowners in their houses and making mortgage payments offers the best chance at recovering the principle of the loans. Most foreclosures were triggered by the jump in monthly interest payments when low teaser rates expired. Foreclosures cause a glut of supply, which bring down home values and inflate mortgage-related losses.

5) All banks and insurance companies must be required to set up and contribute to a fund to reimburse the taxpayers. Also, contributions to the fund will have to take priority over paying dividends to shareholders until taxpayers are reimbursed.

6) Executives at companies that fail or require tax payer assistance should be sued for the pay they received during the years their companies were engaging in the practices that produced the current crisis should be forfeited into the taxpayer reimbursement fund.

7) Hedge funds should be investigated for wrong doing and liquidated should they fail.

8) Establish a very small transaction tax on stock, bond, foreign exchange and derivative transactions. It would discourage speculation and its proceeds could go to the taxpayer remibursement fund.

9) Abolish the Federal Reserve. The structure of the Federal Reserve gives commercial banks too much influence over the vary institution that is suppose to regulate the banking industry. It's founding was unconstitutional in the first place because the Constitution gives Congress authority over the currency. The Treasury should go back to issuing currency, with congressional supervision.

We have the example of Japan's trial and error in overcoming their financial crisis of similar proportions. Let's not reinvent the wheel!