Thursday, February 12, 2009

To President Obama, regarding the 'stimulus'

Dear Mr. President

It is not clear how your financial rescue plan addresses the major problems: home foreclosure, job losses, and banks not lending. Nor is it clear how the plan's performance will be measured.

I suggest that you examine the plan put forth by The Wisdom Fund, and make this a model for presenting your plan to the public.

ONE, NATIONALIZE THE BANKS: Reinstate the separation between commercial and investment banks. For a limited time, suspend the mark to market rule. Give commercial banks the option to remain independent, sell out, or be declared insolvent and nationalized. Have the remaining commercial banks contribute amounts sufficient to keep the FDIC solvent. Homeowners facing foreclosure could go to nationalized banks for loans they can afford, and banks could take an equity position in the home to make up for any shortfall. Investment banks would compete in the "free market."

TWO, CUT MILITARY SPENDING 10% PER YEAR FOR 5 YEARS: Our reported military spending is about equal to that of the rest of the world combined. Military spending hidden among other budget items is estimated to be equal to that which is identified in the budget. Get out of Afghanistan and Iraq in 2009. Forget about war with Iran.

THREE, GIVE THE BULK OF THE "STIMULUS" TO THE STATES: States, being closer to the problems than Washington, can better decide how to spend the "stimulus" than Washington. Set strict guidelines for spending the stimulus, and establish measures of performance. Set up a Federal Business Administration (FBA) similar to the Federal Home Administration (FHA) to make loans to businesses through channels similar to those used by the FHA.

FOUR, EXTEND JOBLESS BENEFITS: Cuts in military spending will cause more to lose jobs. However, extending jobless benefits would provide time and funds for retraining. Those accepting jobless benefits could be required to provide some hours of work free to organizations interested in utilizing their skills. This may lead to regular employment with these organizations.

I look forward to seeing your transform your plan into something that is clear, and measurable, by us ordinary Americans.


Enver Masud
Founder and President
The Wisdom Fund

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