TruthSavvy.

It is time to formulate alternatives to the flawed Paulson plan. Unless superior alternatives take shape soon, the Paulson plan will pass in modified form — the modifications sufficient to preserve Wall Street’s dominance of America’s capital markets. Paulson’s plan will prolong high inflation and lead to a weaker dollar. A weak dollar will produce higher oil prices, which in turn will undercut the economy while debasing the standard of living for most Americans. Thus, while Paulson’s bailout plan reinvigorates Wall Street, it means hard times ahead for most Americans. While a rejection of the bailout plan means a protracted recession, at least it gives America a better chance to regain control of its financial destiny.

The best alternative is to allow Wall Street to remain ill and become uncompetitive as a capital markets enterprise. A three year suspension of the mark to market rule along with a full disclosure and transparency requirement will keep Wall Street solvent (for the most part) while constricting its ability to generate new business. This assumes, of course, that the U.S. Congress will recover its senses and revise its 1977 mandate to the FED to grow monetary and credit aggregates. (See FED Governor Frederic S. Mishkin’s Nov. 5, 2007 speech in N.Y, available at www.federalreserve.gov.) The FED has interpreted this mandate as a requirement that it direct money growth toward the speculative “growth” enterprises of Wall Street.

The U.S. Congress should stimulate prudent market based banking alternatives to Wall Street. Many wonderful American corporations are sitting on huge cash war chests or strong cash flows. Provide these corporations with an incentive to use their financial power to create new national banks that can do investment banking as well as commercial banking. These corporations have been in the habit of using billions in cash to buy back stock. Now, open the field and allow them to compete with Wall Street for the banking infrastructure of America. Let Americans take their investment dollars to the John Deere National Bank, the Caterpillar Bank of America, the Parker-Hannifin World Bank, or the Hewlett-Packard Bank. All of these financially sound, well-managed businesses would be better stewards of America’s financial future than the soiled legions of Wall Street.