The banks are about to get a second infusion of money to make them do what they were supposed to do with the first infusion: Loan money. The first time, instead of loaning money, they kept the cash to make their financial ratios look good, or used it to buy other banks. This time Congress is trying to figure out rules that will induce or force them to do what they should have done initially.
On KPBS Radio today, heard the answer. Although I can’t find it on his website, it was reported on the radio that Benjamin Barber, Distinguished Senior Fellow at Demos, a public policy research and advocacy organization, proposes that Congress provide the banks not money, but vouchers which could be redeemed only as a part of a loan transaction. There would be no way for the banks to hang onto it as cash, or to use for some other kind of transaction. Barber suggests a three to six month expiration period for the vouchers, “Use it or lose it”. I see no problem with letting the vouchers be valid up to a year.
This is the banking version of the debit card proposal for the taxpayers that I proposed in an earlier blog. I think both deserve serious consideration. Both proposals have the advantage of getting the money where it is needed and getting it there fast.