Saturday on Moneytalk, Brinker said that as of now, the problem the government is facing is how to implement the second round of the TARP program. Brinker offered his own solution. Here are some excerpts of what he said from my Summary of the program:
Brinker said: "Obviously, the problem has been standing out like an 800 pound parakeet in the room since day-one of this problem has been, how do you get the toxic asset off the balance sheets of the banks, which will then allow the banks to resume normal lending practices. Which by the way, is the essential mission of the banking system. Until the banks feel that they are no longer bound by these toxic assets on their balance sheets, they are going to be recalcitrant when it comes to approving loans..........Automobile financing is just one of the significant areas of what is going on out there where the banks have pulled back on their lending practices......
......And the thing that is frustrating to me -- not that I believe anything I say on Moneytalk should carry any undue weight in Washington, because I don't believe that. I think that it's a good thing for people to express their views, come up with as many ideas as they can, and see which ones can see the light of day and perhaps contribute to a solution. And that's really our effort on the program......
......But I do find it frustrating that we've been talking about an RTC, a Resolution Trust Company Solution to this same problem of toxic assets on bank balance sheets since last autumn, we've been talking about it since last autumn [Honeybee EC: I have never heard Brinker say the words "Resolution Trust Corporation" or "Company" on Moneytalk. Perhaps I just missed it all these months, but I don't think so.] and we still have not seen anyone in Washington, from either party -- it's not a partisan deal -- come forth and lead the way to a Resolution Trust Corporation type solution to this problem. And that would simply be the creation of an entity -- back in the 80's we called it the Resolution Trust Corporation -- right now, you can call it whatever you want, but back then it was the RTC. And what they did back there was, they had the office of thrift supervision take over about 700 insolvent banks......in the S&L sector.....What happened was, they took the bad loans out of these companies, they transferred ownership of the bad loans to the Resolution Trust Corporation. And the RTC had the responsibility of managing the loans until they could sell them later on, and they did sell them later on......
......Now all was said and done, the Treasury lost over a $100 billion on the deal, but it solved the problem. It solved it in a relatively short period of time in the sense that it got the bad loans off the balance sheets of the S&L's. And that was it. That was the solution and why we've not had any leadership in Washington from either Party.... And they've had all this time.......It worked before and it will work again.....This is the way they are headed.They don't really have an alternative.....They must get the bad loans off the balance sheets of the banks.....That's the only way you'll get the banks to resume normal lending habits.....Because in the interim, the bankers are in a state where they are frozen. They cannot bring themselves to make major new loan programs to their customers because they are still worried about their capital......
......So what we need is a Resolution Trust type of solution. I don't care what you call it this time, but you should call it RTC2. I've been thinking about names for this entity and this is the one I like the best because it sticks to the knitting. It focuses on what we successfully did in the 1980's and 90's..... My favorite name for this is RTC2."
In addition to the above suggestion, Brinker recommended two tax-code changes that he believes would help with the financial/banking situation:
Firstly, he suggested that vehicle loans be made deductible again, like they used to be years ago.
Second, he thinks that depreciation should be accelerated for business vehicles.
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