The following is a letter to the editor that the Washington Post refused to publish. So much for the search for new ideas.
All the solutions to the credit crisis proposed so far involve pumping money into the institutions whose lending policies got us into this fix. This is not surprising since the ideas come primarily from members of the financial services establishment. But there are other and perhaps better ways to restore liquidity.
One approach would be to lend money directly to average citizens for investing in shares of thrift savings plans and mutual funds. These loans would be secured by the shares in the funds, and would be repaid from dividends returned by the funds. This would restore liquidity for investment, but at the end of the day, individual tax payers would end up owning capital assets that pay dividends directly to them.
This is an idea that has been around for over 30 years. It was conceived as a means of expanding capital ownership to the point where most income for most people would derive from dividends and rent rather than from wages and salaries -- hence the name, Peoples’ Capitalism. See http://www.PeoplesCapitalism.org
Peoples’ Capitalism has always been dismissed as too radical, or too futuristic. But today, when the federal government is issuing hundreds of billions of dollars of credit to banks, issuing credit to individual citizens seems neither too radical nor futuristic. It is a simple matter of fairness. It would give average citizens the same opportunity to get rich as the rich already have, namely access to credit for investing.
James S. Albus
Senior Fellow
Krasnow Institute for Advanced Studies
George Mason University