Robert Reich has a list of conditions that he thinks should be applied to private sector banks should we wind up creating what he dubs a “Bad Bank” to dispose of all those nasty assets.
Until the taxpayer-financed Bad Bank has recouped the costs of these purchases through selling the toxic assets in the open market, private-sector banks that benefit from this form of taxpayer relief must (1) refrain from issuing dividends, purchasing other companies, or paying off creditors; (2) compensate their executives, traders, or directors no more than 10 percent of what they received in 2007; (3) be reimbursed by their executives, traders, and directors 50 percent of whatever amounts they were compensated in 2005, 2006, 2007, and 2008 — compensation which was, after all, based on false premises and fraudulent assertions, and on balance sheets that hid the true extent of these banks’ risks and liabilities; and (4) commit at least 90 percent of their remaining capital to new bank loans.
In common parlance, force them to behave like banks rather than criminals, while clawing back illegitimate salaries and other earnings.
Or we could just take over all the banks, clean them out and sell them. Things are so bad we might wind up having to do that anyway.