Jon Stewart's solution to economic crisis - While interviewing Lawrence Lindsey, author of What the President Should Know, Jon Stewart's shares his solution for the economic crisis: Instead of paying bail out money to banks, pay the money to consumers, who will pay it to the banks to help reduce the consumers' loan debt. That way everyone (except for taxpayers) wins: the banks get the money AND consumers gets debt relief.

Lindsey, a finance savvy guy, sort of agrees, but argues that paying the consumers rewards consumers for bad behavior ("Oh, I can get a loan and get money from the Government to pay it off"). As Stewart quickly pointed out, same can be said for the banks.

Lindsey prefers an approach where consumers can renegotiate the loans AND agree to pay it off "no matter what." That "no matter what" phrase is the concern. Who would have thunk we'd come to the financial "no matter what" situation we have now? No one. And people are bailing on their commitments, just as they will bail again if another "no matter what" situation crops up.

Another critique of Lindsey's solution is that it puts the burden on consumers. The banks burden comes when consumers renegotiate the loans, and you can bet the banks (experts at negotiation) will get the better end of that deal. At the very least, banks will expect the government to cover any losses they might incur. Most likely, corporate welfare will take priority over consumer welfare.

But Stewart's idea has its own flaws. We gave money to banks with essentially no strings in hopes the banks would increase lending. Banks haven't. If the government gives consumers money without strings, how does the government know consumers will pay it to banks to reduce their debt? How do you put strings on the money you send to consumers? To avoid that, the government probably won't ever give the money directly to consumers. Instead, the government would broker a deal between the banks and the consumers. Hopefully, that would be a win-win deal, but even if it is, taxpayers will likely take the losses...again.

Source - Lawrence Lindsey - What the President Should Know| The Daily Show

What A President Should Know
An Insider's View on How to Succeed in the Oval Office
by Lawrence B. Lindsey & Marc Sumerlin

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