In Response to: Dear Mr. President

I am following up on PAW’s invitation to offer advice to the president (feature, Jan. 28). Don’t chain us to a corpse, Mr. Obama!

Since 1973, like clockwork, every eight to 10 years, the financial lemmings have jumped all together off some cliff, taking us with them. (See monoculture.html for my analysis of this “compulsory moral hazard.”) Now President Obama proposes to throw a total of $1.5 trillion into this black hole.

Every loan requires more to be paid back than was advanced to the debtor. In a shrinking economy, this money simply vanishes, leading us ever closer to a depression.

The solution? Think out of the box, like Princeton and other Ivy League universities who a few years ago set free their students by switching from student loans to grants. First, nationalize the zombie gigabanks. Since government is now responsible for liquidity in the economy, it needs the power to provide it.

When we seize the banks, what do we get? Hundreds of branch offices, each with loan officers at their desks. Now give every loan officer a new hat: grant officer. Her new job is to see that funding is provided to match the funds being sucked up by loan repayments. As small businesses are proposed, she picks the best and funds them by creating (not borrowing) money and purchasing equity. Since debt service is not needed, they are far more likely to succeed than debt-based startups, and their profits are shared with the bank.

Finally, when it’s time to reprivatize these banks, sell them to local interests only. Restore the Depression-era laws preventing interstate financial colossi. Only a local bank of the kind depicted in the classic movie It’s a Wonderful Life can nurture the variety we need in the 21st century.

Lawrence J. Dickson *71
National City, Calif.