o My Bailout Plan

The $700 billion bail out plan is untenable, because most in Congress are uninformed in economics and business, plus they have a tough time making good decisions. I think every elected government official should hand in his/her resignation after this mess is over. So here is my bailout plan for these morons that stuck us into this quagmire.

1) Pricing.
Few even know what a credit default swap is and they definitely don't how to find its fair market value. Subpoena the quants from the top banks and trading firms to determine a market standard pricing model for credit default swaps and options.
2) Exchange and Clearing
Set up a credit derivatives exchange to trade these instruments in an open outcry or electronic market place. Set up a clearing house to clear all Over the Counter transactions. No more bilateral transactions for any type of derivative.
3) Transparency
Publish the settlement price for the credit derivatives daily. The information can be obtained from the credit derivatives exchange. All banks should publish their current position holdings in the derivatives so that risk can be properly measured. Publish historic and implied volatility numbers to help in the pricing of options.
4) Leverage
Reduce the leverage of banks over a 5 year time frame to 10:1. Require high margining for market participants.
5) Create a Hedge Fund
Instead of giving out a $700 billion handout, create a $100 billion dollar hedge fund. That hedge fund's governance is to make markets and provide liquidity in credit default swaps and options. The hedge fund will jump start the market for credit derivatives. The fund may take a hit in its first few years of existence, but at least it will have liquid and transparent assets on its books.

Any part of a bailout that does not address the above issues is a farce and should be looked at with extreme skepticism because it will not work in the long run.

Now can I get back to surfing YouTube? Or do I have to worry about my bank going under. Oh wait, it's Washington Mutual, it's already gone under. Thanks for ruining another one of my weekends, Hank "Free Lunch" Paulson, Bernanke, "no-oversight" Congress, Fed, SEC, CFTC and all you other jerks.