Other Ideas on How to Save Wall Street

Sebastian Mallaby's column today criticizes the scope and risk of the planned bail-out of Wall Street. But unlike many critics, he provides a couple of options that are apparently not being talked about.

The one I like the best is requiring the investment banks not to issue dividends. Retaining that capital for their own use is generally considered a "sign of weakness" on Wall Street, but it hardly seems logical for shareholders in these banks to continue to profit while the risk gets spread around to all the taxpayers.

The distinction he makes here between the RTC in the 80's (which assumed already failed loans and institutions) from what the new government entity here would do (assume loans/debt that is crappy and weighing down balance sheets, but that have not yet failed) is an interesting one. He decries what can only wind up being a subjective selection process that will have to be instituted to govern which debt is assumed and which is not. I wonder however, whether this isn't exactly what Fannie and Freddie (and the VA for that matter) when they back high risk mortgages? The government seems already to be in the loan officer job.