Recapitalization of the banks

-A A +A
By Harris L. Mayer

Dear Editor,

Today one of the most important problems of the financial system is undercapitalization of the banks.  That restricts their ability to loan money to business, particularly short-term loans, the loans that contribute greatly to the flow of money in the system. There is an idea for providing that capital and reaping the consequent benefits.

The U.S. Treasury sells special “S’” bonds to otherwise solid banks and other savings institutions at the local level. But, and here is the essence of the idea, the banks buy them on the installment plan. Say they are 14-year maturity bonds paying 5 percent interest, and they are to be purchased gradually over the first seven years.

Just as a person can buy an automobile on time, use it immediately and pay later, a bank can use the total value of the bonds as collateral at once in financing loans.

As an additional financial aid during the first seven years, the bank will get steady guaranteed income from the 5 percent interest, even, before the bond is fully purchased.

Afterwards,  when presumably the bank will be healthy,  it can help the Treasury by holding the bond, to maturity. In essence, the future bounty of our healthy society will finance the current troubled, economy in climbing out of recession.

If you subscribe to the newspaper, you receive FREE access to all the exclusive content of the web site! Simply register to receive uninterrupted access to our award-winning and in-depth local online content!

Renew Current or Past Subscription / Register for Online Subscription

If you currently subscribe or have subscribed in the past to the Los Alamos Monitor, then simply find your account number on your mailing label and enter it below.

Click the question mark below to see where your account ID appears on your mailing label.

Newspaper Acct. ID:
Street Address:
(exactly as it appears on the label)

If you are a subscriber and you do not know your account ID or don't have a copy of your newspaper available that shows the information on the address label you can click continue below to search for your account.

New Subscription/30 Day Free Trial Account

If you are new to the award winning Los Alamos Monitor and wish to get a subscription or simply gain access to our online content then please enter your ZIP code below and continue to setup your account.

ZIP Code:

Create a limited access account.
Register to participate in community forums, post on the community calendar, blog etc. This registration does not give you full access to read our award winning content, etc.

The Los Alamos Monitor | lacirculation@lamonitor.com | 505-662-4185
256 DP Road, Los Alamos, NM 87544
Office Hours are 8:00 a.m. to 5:00 p.m., Monday through Friday