Last year, on July 20th, TARP Inspector General, Neil Barofsky was telling our Congress that the total cost of the Crash of 2008 could be as high as $23+ Trillion dollars! Yesterday, President Obama went to Wall Street to pitch the Democrat version of financial reform. As usual, he made another dull, professorial speech, riddled with inaccuracies. Obama is trying to create the atmosphere that if you are against the bill, then you must be a supporter of Wall Street greed. Maybe Obama should have gone to the SEC instead and lecture them about watching porn on government computers instead? After all, he, as Chief Executive, is responsible for their actions!

As pointed out here is previous articles, the Democrat financial reform bill will do nothing to prevent another crisis. In fact, it will create a permanent environment inviting further mischief and more bailouts in the future. At a minimum, the Crash of 2008 has already cost us over $4 Trillion dollars. Yet, NOTHING has yet been done to deal with the trillions of dollars of ‘toxic’ assets the banks still have on their ledgers, nor the trillions of dollars of bad loans on the books of Fannie Mae and Freddie Mac.

Republicans argue that a true financial reform bill must deal with ending bailouts once and for all, as well as dealing with Fannie and Freddie. I would that there should be other conditions to a minimum bill if we want to avoid a future disaster. So here is my plan:

1) Restore Glass-Seagall: banks engaged with any consumer-related activity, such as savings deposits, home and consumer (car, boat, etc.) loans, credit cards, etc., NOT be allowed to sell or purchase any investment products.

2) Only such consumer-banks would be able to participate and fall under the umbrella of the FDIC to protect depositor’s money.

3) Consumer-banks may NOT be leveraged more than 9 to 1 in loans/credit to deposits.

4) Investment-banks and firms are on their own. No more Federal bailouts.

5) The Federal Reserve will only lend money to consumer-banks.

6) The Federal Reserve, in conjunction with the SEC and CFTC, will monitor and adjust margin rates and ownership percentages for all stocks, bonds, investment funds, futures, commodities and derivative markets.

7) Any bank or firm which currently is involved in both consumer and investment products and services will be split up to conform with Points 1 through 3.

8) Fannie Mae and Freddie Mac will be broken up and handed over to the 50 states and other districts and territories to manage. Real estate is, by and large, a market based on local conditions. They are in a much better position to know their own local markets.

9) All entities which sell or buy financial services and products, including but not limited to consumer and investment banks, hedge funds and the Federal Reserve will update daily on websites their total credits/debts/assets and make this information available for public viewing.

10) Financial ratings firms will be subject to any liabilities and lawsuits resulting in misrepresenting any financial products or services they rate. All ratings issued must be approved in writing by the managers and CEOs of such firms and will be held criminally libel for any deliberate, false ratings.

I think this is a pretty basic set of rules that would help fix most of the problems which caused the Crash of 2008. They may not prevent a future crisis, nothing really can as there is always some risk in life, but would place the responsibility more squarely on those who cause the crisis. Transparency and vigilance is always an issue. Just look at the story today about SEC staff watching porn on government computers. Obama and our Congress need to better stewards of our economic system. The current Financial Reform bill falls far short of restoring confidence and responsibility.