September 24, 2008

It's apparent that something needs to be done about the financial crisis on Wall Street, or rather the peril it places on rest of us, due to the economic effects of diminishing credit. It is also clear that, barring a bailout by foreigners, the American taxpayer will bear the financial risk in whatever extraordinary remedy is chosen. But will the taxpayer benefit from buying up these "toxic" financial instruments? "Yes", they say, because it will allow the affected firms to resume providing credit to businesses and Main Street. Fine.

But after the remedy works, who reaps the rewards - the taxpayer who financed the rescue? Actually, the beneficiaries are everyone but the taxpayer. The original gambling investment bankers will be payed off. Their companies will be back in operation. Businesses will get their capital. Life will be back to normal. As citizens, we are supposed to accept this reward. But I don't.

Normal people like me don't understand the money games that Wall Street plays, but we have enough common sense to stay away from the "complex financial instruments" that have blown up in Wall Street's face. We know intuitively that the investments in question never had real value - surely not the way we define it. Normal Americans understand investing in businesses that provide real services and make things.

Today's proposed $700 billion Wall Street bailout forces Americans to invest in bogus "assets" that we would never otherwise buy. It forces us to reward the same institutions that caused the economic crisis. It does so without providing us any direct claim on any financial rewards generated. It's as though the fat cats have gone hungry, so we must give them our food, and hope for leftovers later. This is unacceptable.

To set the stage:

• the crisis threatens the availability of capital, and hence national economic health
• $3000 per citizen is proposed to ensure availability of capital
• the funds will be created from new public debt
• my children and I will have to pay it back

The alternative is simple and fair. Instead of hastily bailing out Wall Street investment firms, give American citizens control of the capital we are ultimately providing. That is, go ahead and print the cash, but put it within the trust of American citizens, so we can invest it in the businesses we see fit to capitalize.

The US government should create an "American Private Trust" program consisting of new "APT" investment accounts for every American, each funded with $3000 of new debt. Then allow individuals and families to decide how to invest the funds, whether in money-market funds, mutual funds or stocks. Finally, regulate withdrawl from APT accounts according to a timeline or measure of broad economic benefit.

This program would allow Americans to directly finance the needs of businesses and control the investment of capital we are providing. This strategy solves the underlying issue of capital availability, while putting the resulting equity and upside directly in the pockets of the citizens who are risking their hard-earned dollars to finance it.

Most importantly, APT accounts, and the liquidation thereof, is how my children will repay their share of the debt soon to be exacted on them.

It's time Americans stood up for our own financial interests as we are forced to bail out others.

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