Could The Social Security Trust Fund Buy The Banks’ Toxic Assets?

This is such an off the wall idea that I am sure there are a thousand things wrong with it, or at least a dozen. But I’ve been turning it over in my head all evening and still haven’t figured out if it makes any sense once parsed. So I’m going to just dump it out here and ask anyone who comes across this blog what they think. Let me set the stage.

Geithner says that in one form or another he wants to get someone, preferably the private sector, to come in and buy the bad assets on the banks books. To do this, he seems inclined to guarantee the downside either through outright insurance or a financing scheme that accomplishes the same thing and leave the buyers with all of the upside. To be fair, there is some noise about the taxpayer getting a cut of the profits. Basically, it’s a sweetheart deal.

So here goes. Why not let the Social Security Trust Fund in on the action. There is a limited downside and the upside is pretty spectacular. At least it’s spectacular given the paltry returns that the Trust Fund currently earns. If it works out not only do you move this stuff off the bank’s balance sheets but you might well solve the entire entitlement funding problem.

This is not meant to be a frivolous suggestion. I am totally serious. Admittedly it’s a bit late and I haven’t thought it all the way through and I know there are lots of holes but just maybe it could be made to work. Tell me the big crater I’ve missed on this one. And if by some rare chance I haven’t then perhaps we should try and add some meat to these slender bones of an idea.

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