Monday, September 29, 2008


I wanted to call attention to the proposed "super-bond" solution. This solution, presented by John Hussman, solves many of the problems discussed in previous posts. It recapitalizes banks, it does not play any games with the nonsense regarding "price discovery" that actually debilitate such discovery by knowingly putting inflated bids into the market. And, this plan actually has the potential to re-compensate the lenders (taxpayers) with a mechanism recognizing the risks they've taken. Most of all, the 'super-bond' is relatively easy to over-see and administer as it fits in with the existing financial framework, is relatively simple, and thereby, transparent. Have a look at the link and poke some holes.


  1. Government offers to loan banks money but if they banks go under, that money gets paid back first. Thus government does not buy anything, just loans. Do I have this right?

    But the companies who step up and take it will look bad, a public admission of guilt. This will cause stock prices to drop and possibley wash out the positive effect of the loan. I thought the nice thing about Paulson's plan was that it gave everyone money equally, a helicopter drop.

    I have little market understanding, this is all meant as a question.

  2. And isn't this what the Fed is suppose to be able to do, without congressional approval?


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