Taking our Medicine

Cod liver oil tastes bad, works good.

Surgery hurts.

Getting a tooth filled is uncomfortable.

If we don't suffer the pain of the cure the cure isn't a cure. I have a sense that we are delaying and numbing the pain of a cure that we need to have in our economy. The so called bailout isn't the answer. What we need is a new regulatory environment which in some cases means less regulation and in others regulation of activities that do not support a free and open competitive marketplace.

The Goal in regulation should be to make certain that all players in a capitalistic marketplace have an equal and opposite chance to make the self advised bets they want to make.

I have a few. It would quickly become esoteric and obscure to discuss them here. The truth is we have some regulations in place that exist because of knee jerk reactions to companies like ENRON.

The government coming nationalizing companies and becoming the default cosigner to every bad loan made in America is trying to heal without pain. It's not likely to happen and it won't work.

It is socialism.

What is worse than all this is when a disease is numbed but not cured it just prolongs the disease. The economy needs to take some aspirin, drink plenty of fluids, get under the covers and sweat it out. Then like Granny Clampet's cure for the common cold after a couple weeks it will get better.

I have considered the whole situation and this would be my prescription. The government should denationalize Bear Stearns and AIG tomorrow. Get out of the ownership of private equity in any form.

Second examine the rules and regulations we trade under and discard those that don't work. We are over regulated.

Then, find 1000 experienced business types who understand markets, who have made a payroll, who know economics, who have significant experience in the private sector as business owners (who are not academics) and put them in business. These must be mavericks and prone to being heartless in negotiation. They must be driven by a desire to make money. Greed.

The business they will engage in is to buy and sell (at a profit) bad loans. They will get a staff for analysis and accountablity. Then when Bear Stearns comes to them and says, Here, buy my loan, they say, How much do you want, they say 70%, he says, 20% and after significant haggling they end at 40%. Then the new owner decides to either redo the mortgage, foreclose or continue the service of the loan anew. If it's a pure bad debt he resells the debt to a collector and they have a shot at it. His money is made in dealing with the pain of the loans and trying to make a profit doing so.

Now, here's the motivation. Not for a paycheck,not for a pension but for profit. This person who is part of this new buysell group gets a chance to earn a commission on money he makes in this process. If after a year he has earned 500 million dollars he gets 15%. If he loses money he gets nothing and is fired without any pension or parachute. It's all or nothing. Make money, you're fine. Lose, you're out on the street. I know lots of people who would take this in a second. I would.

It would be best if this person were of Hebrew origin. I have dealt with some of them and they are very good at this sort of thing.

The trick to making this work is that no academic, no government employee gets to make any decisions. It must be a free market solution. The Barack Obamas of the world have no clue what this means. He has never made a payroll.

People who can do this are out there. Find any pawn shop. Hire them. The meaner and tougher the better. It's just good medicine.