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1. Money fund issue:

   Remove the $100,000 cap on insured bank deposits. This adds no risk to government. And it will eliminate the need for money funds which the cap created in the first place.

2. Broker/dealers:

   Let them go. If they don’t survive, at worst their assets will be distributed by the bankruptcy court if it goes that far. They do nothing that I know of that serves public purpose and/or the real economy that banks can’t do. And the banks are already regulated and supervised.

3. Insurance companies:

   Policy holders should be government insured and insurance company assets, and capital regulation should be updated. You will know insurance regulation doesn’t go far enough if there are too many government losses to make policy holders whole.

   AIG got short credit (sold insurance on securities at low prices) and lost all their capital as risk and the price of insurance went up. Looks to me like a failure of regulation that allowed that much risk.

4. Home ownership:

   Continue to fund the agencies via the Treasury to keep costs of funds at a minimum.

   Have the agencies ‘buy and hold’ new originations, and thereby eliminate that portion of the secondary markets. The secondary markets serve no public purpose, beyond working past flaws in the institutional structure that should instead be addressed.

   Increase and enforce criminal penalties for mortgage application fraud. Its functionally the same as robbing a bank.

5. Banks:

   Lower the discount rate to the fed funds target rate and eliminate the need for collateral. This is how it should have been anyway.

   Bank assets and solvency are already highly regulated, and how they are funded doesn’t alter the risk of loss due to insolvency for the government.

   An interbank market serves no public purpose. Eliminate it out to six months by offering discount lending out to 6 months.

   In addition to the FOMC setting the fed funds rate target, it can also set the rate for 3 and 6 month borrowing at the discount window. This both gets the job done and also replaces the TAF and TSLF type of experiments.

6. Growth and employment:

   Offer (directly or indirectly) a Federally funded $8 per hour full time job to anyone willing and able to work that includes health care benefits. An employed buffer stock is a more effective stabilizer and price anchor. It’s also less costly in real terms, than the unemployed buffer stock we currently maintain.

   Eliminate the various payroll taxes as needed to sustain demand.

   Implement needed infrastructure upgrades and repairs.

   Eliminate health care as a marginal cost of production. People aren’t more likely to get ill if they are employed; in fact, the opposite is likely the case.

   The current system distorts pricing, and results in a suboptimal outcome for the economy’s ability to sustain prosperity.

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