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Treasury Secretary Tim Geitner has proposed a "1.5 Trillion Dollar Bad Bank" to purchase the toxic assets off the bank balance sheets to restore liquidity and prevent insolvency. At first glance this could sound like a good idea. Given the predicament we have been steered into it may be a better a idea than nothing at all however I believe this would perpetrate an even greater fraud to the US citizen than the collapsing "ponzi" scheme of a banking industry we have here.
In a nutshell, banks are lending approximately 9 times what they have on deposit. As one bank lends a leveraged dollar out it is then deposited into another institution where this leveraged dollar is again amplified with the same leverage. What you have is a loop of "ponzi" schemers pyramiding non existent credit onto itself. Now we are supposed to be paying the piper. The credit system if left to its own devices would unwind all this leveraged debt and destroy any institution tied to it and the free market would wipe the fraud out completely as a house of cards doesn't have a solid foundation so would the structure come crashing down.
Now this money that has been compounded upon by repeating the process above technically had the people of this country paying interest on money the bank never had to lend. This is what we call increasing the money supply or so they say. What Geitner proposes would stop the free market from destroy the "ponzi debt" and passing it directly to the US taxpayer by forcing them to pay for all the leverage nonexistent debt/bad assets with a loan through the government and make us pay the interest via collection through the IRS.
I hope that clears that up. They are making sure not to lose the interest on the leverage fictitious money by putting the all the bad bank loans through the government and collecting the interest anyway now from everyone. I'm sorry, when its all a sham then it should be allowed to fail even though it would be painful it would allow for a totally new system to emerge. Right now they are prolonging the inevitable and will destroy the entire fiat credit system that is in place.
