Do We Need A National Bank?

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November 20, 2008 12:21 PM EST

This goes against my core and every bone in my body, but today I'm calling for the creation of a national retail bank - let's call it "Big Brother Bank," or BBB for short. I suggest the government take the remaining $350 billion from the TARP and start its own bank that competes directly with the leftover loser banks.

BBB will have a clean balance sheet and will be able to effectively use leverage, which will add billions, if not trillions, in liquidity to the system.

The new national bank would lend to credit worthy people and businesses. That's right lend. Unlike the loser banks that were just given cheap money, but won't lend, the national bank will start pumping the system with money.

What the loser banks don't seem to understand is that if they don't lend, the assets on their books, which is the root of their problem, will fall even further. This lack of lending creates more write downs, more losses and more government hand-outs.

BBB will be net savvy, allowing businesses and individuals to start-up and manage accounts online. Eventually, BBB could start branches or buy branches from the coming wave of failed banks. The deposits will allow BBB to lend more, growing bigger.

BBB would also add jobs at a quick pace. BBB could hire jobless mortgage bankers, teach them how to evaluate good risks (this will require some work) and start the process of lending.

Some would argue that this is socialism. But I could argue that we are already there, buying capital in banks with the TARP money. You want more capitalism, let private equity firms and individuals invest directly in BBB. One day you could even spin it off.

Some would say the government can't run anything efficiently. But I argue that this would be more efficient. The banks were just given $350 billion from the government to lend out. They are supposed to be the middleman --- lending out the money, but instead they are sitting on the money. Take out the middleman and go direct - now this is efficient.

Some would say this would crush the other banks. I say this would help them. BBB would be the lender supporting assets prices, by giving money to credit worthy borrowers.

Of course this is a extreme view and a little facetious, but everyone can agree that something must be done to stop this downward spiral. Looking at creative and new ideas will help get us out of this mess. Doing the same-old, same-old will exacerbate the problem.