Set Up FDIC Guarantee Fund and
Make $Trillions Profit for the Social Security
By Citizens for The FDICGF
http://www.fdicgf.org/
A. Proposal
Expand the FDIC to establish the FDIC Guarantee Fund (FDICGF) to stabilize the economy and to make money for the Social Security at the same time.
B. Method
1. Use the FDICGF to guarantee the solvency of those financial institutions and any other companies who request for the support in exchange for equity in the institution.
2. Control the Board of Directors and through them to keep the management responsible for result.
3. Sell the equity holdings at appropriate time to maximize the gains.
C. Reasons
1. Creating a Guarantee Fund: Any companies, including financial institutions and auto companies, can come to the FDICGF for support. It guarantees the solvency of those companies with cash infusions as needed. This allows them to maintain normal operations. In exchange, the FDICGF gets majority equity and has control of the Board of Directors in those companies.
2. Building CONFIDENCE: Lack of CONFIDENCE is the key issue to these financial woes in the market place. The FDICGF will build the confidence of these companies in the market place. They don't have to be forced to sell bad assets at huge losses. Investors and customers are assured with the future of these companies, so they won’t sell their holdings or withdraw their deposits.
3. Bringing Stability to the Stock Market: The financial market will calm down because financial institutions don't have to dump bad assets and investors don't have to sell their shares. Stability in the stock market and normal commerce are achieved.
4. Buying Time: Congress and Government will have more time to pass legislations to prevent this crisis from happening again. If they can regulate stock market, they can regulate anything. We have our faith in them.
5. Letting Taxpayers Share in the Reward: In any financial crisis, anyone who can come to the rescue will be rewarded. This happens every day with various companies who are in need of cash infusions. They go to venture capital funds look for money and give equity in exchange. What we have with the Bailout is on a national and global magnitude. Uncle Sam is the only place they can go to. So, it is logical for "Uncle Sam - the Rescuer" to be rewarded financially later on. Because the magnitude, the reward can be in the $Trillions. We can put that money into the Social Security for all tax payers. After all, Uncle Sam represents tax payers in this rescue mission. So, we, the tax payers, should share the financial reward.
6. Learning from Other Country’s Mistakes: In 1990s, the real estate bubble burst in Japan. It took Japan more than 10 years to come out of it. The process of recovery in the US may take as long. The US economy is fundamentally sound. With the support from the FDICGF, we can wait for its recovery. We have the sustaining power!
D. Advantages
1. Keep the Free Enterprise Spirit: The role that the FDICGF plays is performing as a venture capital fund which will take the risk and make a profit. The FDICGF will have ownership of assets in private companies, but it won’t get involved with the management of those companies. This is not a traditional government bailout or intervention.
2. Set Examples on Those Companies in Trouble: Any company who comes for support will lose its majority equity as a price to pay for their problems. This will send out a loud and clear message to every company what will happen if they get their business in trouble, regardless how big they are.
3. Keep the Management in the Hands of Private Enterprise: Who can manage the business better, government or private sector? Of course, it is the private sector. Let the professionals do their best. Just support them with the cash needed.
4. Control the Board of Directors: The Government can hold the management of those companies responsible for the results through the Board of Directors. The Board can also set policies for the management to follow. This is the same way as how the venture capitals operate.
5. Time for Legislations: Allows additional time for Congress and Government to do what they do best, passing legislation and regulating the private sector. Haste makes waste.
6. Supply and Demand: This is the law of economy. When too many financial institutions want to off load the bad assets, prices drop. There are two ways to balance the Supply and Demand. Reduce the Supply or increase the Demand. The current rescue package is emphasizing the later. We can accomplish the same goal by reducing the Supply. When the company is assured of its survival by the FDICGF, they don’t have to dump their bad assets onto the market. Shareholders don’t have to sell their shares onto the stock market.
7. Let the Company Choose: This is free enterprise system. Each company can decide whether to dump the bad asset and take a huge lose or get the FDICGF support and give up majority equity. These are difficult decisions which small companies face every day when they are in need of cash infusion. The only difference today is the “big guys” find themselves in that position. Why shouldn’t they be the same as the small guys?
8. Use the All Mighty Credibility of Uncle Sam before Using the Cash: Credibility is worth more than cash! No one has better credibility than Uncle Sam. The FDICGF can guarantee the survival of those companies in trouble. Through that the investors and customers of those companies are assured of their future and will continue to support those companies. Only very little money is required when needed. This works like the FDIC which insures the deposits in the banks.
9. More than $700 billion Buying Power: When you buy the bad debts, you can pay a dollar to buy a dollar worth of debt. Use the FDICGF to guarantee; only give out as needed by those companies. We all know that the bad assets are not all bad, may be only 5- 10% are uncollectable. We can guarantee more than $10 Trillion bad assets. This will build confidence in the financial market and calm it down.
10. Less Government: Leave the bad assets in the hands of private companies. Let them find ways to minimize the losses. They can do a better job. No need to build a new government agency from scratch and expect it to perform smoothly.
11. Separate the Guilty from the Good: Over 99% of the people working in the financial institutions are good and hard workers. They make the economy work for all of us. Only a small percentage of people are responsible for the mess created. Outlaw the loopholes and don’t make good workers lose their jobs.
12. Less Impact on Inflations: When we add $700 Billion cash into the financial system, it will increase the pressure on inflation which we don’t want.
13. Make Money for the Tax Payers: Don’t just save the skins of a few. Since Uncle Sam risks Tax Payer’s money, it should be held accountable to get returns for the Tax Payers. There is no difference between Uncle Sam’s money and money from venture capital fund.
14. Unlimited Staying Power: Cash is the King. Cash is what Uncle Sam has. Those companies come for support can be assured of their survival until the economy gets back.
15. $Trillions for the Social Security Fund: We all know that the economy will always come back. When the companies become profitable, Uncle Sam gets the dividends at the end of each year. When the economy gets back, Uncle Sam can sell the equities in the stock market at an appropriate time. If the return on investment is 10% a year, it doubles the money every 7 years. It’ll double again in another 7 years to become 4 times. This means income of $Trillions for the Social Security Fund.
16. Crisis vs. Opportunity: In every crisis, there always lays opportunities. The bigger the crisis the bigger the opportunity is and now is the great opportunity to raise money for the Social Security. Let’s don’t miss this golden opportunity.
