Of all the proposals to strengthen up the financial system, the most innovative to date is this: outsource the bank rescue to the U.S. Navy.
Think of the advantages: efficient execution, elimination of moral hazard, and a disincentive for copycat transactions.
Oh sure, there’d be some increase in bail out activity, but that’s just a short-term problem. Once the banks are shored-up, there’d be little difficulty in getting them back afloat.
With Seals as regulators, you could relax knowing that your deposits are safe. In fact, the FDIC’s slogan could be changed from “Safe and Sound” to “Bring it on!” And reviewing loan workouts with Navy personnel would reduce delinquencies and improve transparency.
There’s little risk that overpaid executives would take their bonuses and swim. As they say in Coronado: “You can run, but you can’t hide.” Executive bonus recapture would not be a problem. And there would be other savings as well: it’s been noted that Navy Seals can get anyone to speak English in minutes. You can lead a horse to water, but the Seals can make him drink.
Douglas R. Tengdin, CFA
Chief Investment Officer
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