Tuesday, September 30, 2008

The progressive Dems have a plan

Posted By on 09.30.08 at 03:46 PM

A group of Democratic House members are announcing a new plan based not on the original Paulson plan but on ideas put forth by former FDIC head William Isaac that would allegedly have bipartisan support--the Republican Study Committee sounds like they're into Isaac's ideas.

This might be the consensus of the ends against the middle that's seemed possible for awhile. It's based around the principle of the net-worth certificate program (PDF), which I'm still pretty hazy on, but here's how I understand it:

1. The FDIC "buys" net-worth certificates from troubled (but not fucked) banks with promissory notes

2. As part of the deal the banks submit to more intensive regulation

3. The bank "pays back" the FDIC as it regains financial health

I.e. no real money changes hands. All of this sounds kind of mysterious to me--the best I can do is that it sounds like the government gets to say "you actually have more capital than people are saying because we trust you and your books look okay." Feel free to correct or annotate.

Update: How they do it in Iceland.


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