So I had the following idea for a model bank which I'll be adding to when I get around to it. I have some experience in banking and I figure that given that the property market is depressed in San Francisco (because it's a plague ridden hell hole among other reasons) I should write about how to do it correctly. One of the primary reasons that no one can open property in the city is that the puts (that is the insurance) on any building/business is too high given that the property market is essesntially a large ghetto and so no one can profitably afford to open a business. You can go to city hall and look up how much all the property is listed for (for tax reasons). Just between the empty mall and the Whitcomb hotel that's been abandoned on market street that's 2 billion dollars of empty property right there - most likely more since you would have to demolish the buildings and rebuild in the case of the hotel anyway.

The First National Bank fiasco is an object lesson in how to do it wrong. What they did in order to make more money is that they invested in a company called Silicon Valley Bank which itself was an overly leveraged high risk bank that invests in tech companies. On paper their balance sheet was OK, but they were overleveraged so that their liquidity was mismanaged. In other words, when the bill came due for deposits they couldn't sell out of shares of SVB fast enough and there was a run on the bank. Dumb. And it should have been an obvious fix - ie don't do that. Hindsight and all that. Most likely it was just greed, plain and simple.

The easiest fix for this is to create an options market for property but on the call side. Let's say that Alice wants to sell a property for 5 million dollars and no one wants to buy it for that price. A bank could buy an option to reserve the property for a month and then hold an auction for a property it doesn't own. To make it as safe as possible, the bank would never resell the option, it wouldn't repackage or sell pieces of the option. Nothing fancy. Rather it would solicit bids for the property. And then it would take the five highest bids (say) and hold a fair at the end of the month with buckets where people could put tickets in that they bought for a couple of dollars. Whichever company went over the asking price by the most amount of money from a combination of bidding and donations from the public is the company that would win the property. The bank would take a cut for organizing the fair and paying off the option, and if no one won - because no one was willing to pay what the seller was asking for even with the fair - then the money donated would be used to pay off the option and the rest would go to a local charity or organization. At the very least you'd have a party every week when another couple of properties would be auctioned off to the public.

And you make the governance of the bank as transparent as possible. Balance sheets open to the public on a monthly basis. You could make all the depositors co-op owners by the amount that they deposited in the bank - they could decide what property to buy and sell but not change the basic structure of the charter. You could set caps on what the bank owners could make. You would only let the bank buy and sell property within the city limits of San Francisco in order that the money put into the bank was used to put a price floor on the property market - no spreading risk between multiple cities like some of these other big firms do which own property in New York and Chicago that are selling and decide to hold onto empty buildings until the heat death of the universe.

Good idea, no? And it's simple enough that anyone could understand it and it only took a couple of paragraphs to explain. I'd also like to see the city of San Franciso institute a derelict property tax so that taxes are raised on any property that has been empty for more than a certain time (certainly a year) or it gets a "blighted status" or something else punative. Half of the city's property is abandoned and it's high time that shit changed. I don't want to live in a shit hole.