2009 March 1

I see the banking crisis as a repeat of the Enron affair.

G. W. Bush K. Lay

B. Obama J. Skilling

T. Geithner A. Fastow

Geithner, the Wall St wiz kid, has been asked to build a house of cards to cover up the banks' collapsed house of cards.

This doesn't work. Japans' banks' books were cooked, they never addressed it and after ten years they still haven't dug themselves out because their house of cards cancels the effectiveness of fiscal or monetary policy. There is no exit strategy to recover the government's infusion.

The foundation of the capitalistic free market is accurate accounting records. Americans believe in honesty and believe cheaters should get punished.

It is inevitable that the bank ownerships will change. The government is not tackling the banking problem in the right order. The government should restore the accuracy of banking records first. Then, it would clearly know how much to prop up the banks. With accurate records and government support, trust will be restored to the credit market, the banks can be sold at a better price because new owners don't have to the discount the unknown and the on-going shape of the market is heathy.

There is an honest approach to solving the banking problem. If you believe in capitalism, you will see that it is the right solution.

The government consolidates all bundled securitized mortgages, uses a task force of Audit firms to re-value them, then re-distribute the actual mortgages back to eligible holders.

The banks will properly show mortgages in their long-term assets instead of current assets when they held the securitized slices (An improper accounting shift to enhance executive bonus's).

We will end up with a mortgage market true to capitalism.

Detailed explanation.

Securitized mortgages means mortgages were bundled then tranches of the bundle were sold off. Every mortgage is local so this instrument is invalid.

1)Collect all bundled mortgages.

2)Classify the Mortgages

Within each bundle is a list of mortgages.

All the mortgages must be placed on a master list.

This list must be sub-divided in the following order:

Region/city New England, Rust belt, New York, East coast, Florida, Nevada etc

Interest rate Standard prime, escalating interest rates including subprime

Current market value divided by mortgage

Mortgagee income to mortgage amount -ability to repay

Within each region you will be able to determine three categories

Low, medium and high risk.

3)Calculate the write down.

4)Collect all holders of bundled mortgages

5)Pro-rate the write down according the portion of the bundled mortgage holding.

6)Classify holders

Banks allowed to issue Mortgages in US and those not allowed.

7)Re-distribute the gathered mortgages to the banks allowed to issue mortgages in the US.

The US government only has jurisdiction over banks allowed to issue mortgages in

the US. The other holders will get no mortgages, it's a risk they took. If this is too severe offer silent partner relationships with the banks with title.

The redistribution will have to depend on what the data looks like. Redistribution must be as fair as possible so should be done before a Judge (We want justice). Ideally regions would be distributed to a regional bank but markets may have to be tranched among several banks to fairly spread the risk.

The treasury will have to engage external auditors who just completed auditing the

bankers books to staff the project and will need information technology assistance.

Credit Swaps

Now that we have valued the bundled mortgages, the credit swaps can be valued. The swap issuers wanted to be unregulated, so be it.

There is no need for a government bailout. This government intervention is doing for the public what an individual citizen cannot do, in the fairest way possible.

We will have restored, as fairly as possible, a mortgage market true to capitalism.