Wilbur Ross knows how to spot megatrends. For example, he built a steel empire – by purchasing bankrupt companies – and made billions. Oh, and he also predicted the current credit crisis.

Well, today Ross was on CNBC and provided some sage advice on the current economic morass. In fact, he discussed his straightforward plan on dealing with the credit crunch (which has been effect for about a year so far).



His proposal is called the "good bank, bad bank" approach. Essentially, it means setting up a third-party entity to take bad loans from Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Interesting enough, this was the strategy to deal with the S&L implosion during the early 1990s. And, for the most part, it worked.

According to Ross, the US financial system needs to focus on the good loans – which should stabilize things and lead to more lending. Ultimately, this should spark economic growth and get things back on track again.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.