[WhoisAlanGreenspan?]

Not that I have a clue either;
The only way out of the upsidedown mortgage debacle is for the holder of the note to sell at the current rate. Someone has to take the loss, and it shouldn't be you and I. We the homeowners should be able to shoulder the burden if we want, we don't answer to shareholders. Government could step in and limit the losses by extending the time or amounts over time, but the banks own it. They should man up and go to bankruptcy if that's all they got.

Avoiding the fire-sales that should be happening, the ultra low price real estate that should be on the open market right now, should tell you something.

This is a system designed to keep certain people rich. And the rest decidedly out of the loop. It is not a system that even considers people who can't find safe havens for capital but might find bargain real estate interesting. This is fast becoming, or already is well beyond a free market.

It's a good time to consider what banking should really be. Our country, our free enterprise system, and our future depends on our banking system.
And we've never gotten it right yet.

[Norwegian Libertarian]

It's a good time to consider what banking should really be. Our country, our free enterprise system, and our future depends on our banking system. And we've never gotten it right yet.

I agree. So what do you think of my idea as it currently stands? I propose ditching bank-accounts as they are currently implemented, as they are to conductive to bank runs and other mayham, and instead have banks sell CDs with maturities no shorter than the assets backing them. The CDs would be tranched rendering the senior (most secure) tranches virtually risk free. The tranches would be split into shares (1 dollar each on maturity parhaps? or 1 cent?) and tradable on a market similar to the stock market. Possibly debit cards could be made to access funds by selling shares in senior tranches, thus making them effectively as liquid as bank accounts currently are. The benefit of such a system is that it would allow a bank to continue to function even if doubts were raised about its possition. A bank that suddenly is percieved to have a 10 % chance of not being able to cover all of its deposits, with a 3% shortfall expected for depositors in that event, would nevertheless experience a bankrun under the current system. Under my system the expected return on the most junior tranches of the CD's furthest from maturity would imediately loose value reflecting the reduction in expected returns. Holders of shares in those tranches would have to either sell out at a small loss, or bear the increased risk. Basically it would work like a low risk version of the stock market, with the senior tranches bearing virtually no risk at all.