Change the rules to encourage loans

President-elect Obama announced the primary members of his economic team.

It has been widely reported that two of the main problems with our being able to "fix" our economy are:

(1) The scores of billions of dollars invested in our banks by the federal government (via purchasing their stock) has not made these banks issue more loans (credit) as desired and expected.

(2) More super large financial entities (like Citigroup) have lined up for government monies and gotten it; because they were deemed "too large to be allowed to fail."

How do we prod banks into loaning out these billions the government pumped into them? How about implementing a tiered system of FDIC insurance deposit rates? For example, assume our government was insuring all FDIC covered bank accounts up to $300,000 per account. What if the FDIC insured accounts in banks that were greedily holding on to almost all the government money they got, at only $75,000 per account? While it gave the full $300,000 per account coverage to banks which had aggressively made loans to qualified borrowers at reasonable interest rates. Those banks in the middle might be at $150,000 per FDIC insured account.

The second problem resulted from all the past years of unbridled merger-mania. Thus, we have far too many "too large to fail" financial entities.

At the earliest possible time, we need to break up these financial monopolies into smaller, more diversified ownership, corporate entities. Am I all wet, or does this seem reasonable for future financial stability?

Jim Peterson

Hoffman Estates