(FORTUNE Magazine) – Because we do not have a monetary or banking system in the Soviet Union as you have, I came to the U.S. to study banking practices in the world's biggest market economy. Under the Soviet privatization policies enacted two years ago, we can now start certain types of private banks, and I plan to organize one soon in Tallinn. Imagine my surprise in finding out that you are cleaning up after a crisis brought on by the defaulting of hundreds of savings and loans. You pride yourselves on being such great capitalists and believers in the free market, yet your savings and loans came crashing down largely because of government interference and mismanagement. Not only did your federal government insure the deposits, but it also allowed the people who ran the institutions to take all sorts of imprudent risks with the money. Now you are faced with this huge bailout that will cost hundreds of billions of dollars, much of it to be paid for by the American taxpayer. It may surprise you to learn that this would not happen in the Soviet Union. Our new private banks -- we call them cooperative banks -- are more free- market oriented than yours! They are not insured by the government. The Soviet taxpayer has no liability. Each bank can decide how much interest to pay depositors and charge lenders. The Soviet Union has 51 such banks today, most owned by cooperatives or unions of cooperatives. Though they hold only a minuscule percentage of the country's deposits, they play a vital role in its growing private-sector commerce. As you might imagine, there is some risk involved both to the banks and to the depositors since this is a new situation that is only just evolving. Why would we take these risks? By law, the state-owned banks do not offer individuals or state-owned companies any interest (they are allowed to attract capital by paying privately owned member cooperatives interest, but the rate is a mere 0.05%). State-owned banks also hesitate to lend to the individually owned businesses. In fact, you can think of our state banks as big safe- deposit repositories! In them, your money is physically secure but it doesn't grow. The state banking system is so primitive and in such a shambles that the treasurer of even a large company is likely to pay his thousands of employees in cash. Our private banks are not the same as your American credit unions, savings and loans, or chains of banks. They often start with a small group of business depositors and lenders and then slowly open up to more businesses and eventually to individuals. Since the shareholders are usually enterprises that the bank will serve, they are investing not to earn dividends but to create organizations offering interest and loans they could not otherwise obtain. In my province of Estonia, for example, a private bank was recently established in Tartu, one of the larger cities. The city had a state-owned bank, but it was unable to hold on to its employees due to poor pay and working conditions. A businessman offered to take it over and restructure it into a private bank. He obtained working capital from local companies, to which he offered 3% to 5% interest, and from the state, which gets perhaps 2.5%. The Tartu Commercial Bank, as it is called, has total deposits of $50 million. (This is based on the official exchange rate. At the exchange rate for rubles on the streets these days, the value would be $5 million.) As chief financial officer of my member-owned cooperative, I have the same problems as other Soviet companies. Association Auto has some 2,500 employees in trucking and transportation, retail stores, and metal, wood, and textile manufacturing. At the end of every year I oversee the distribution of the profits from each of our 20 divisions to the cooperative's supervisory board. Then comes a cumbersome process in which the divisions petition the board to get money back! We may petition for the sum of the profits plus extra for growth, such as new buildings, more trucks, or manufacturing equipment. But the board decides how much to return, and further, how much goes to each part of our business. What each division gets may not reflect how well it did. As you can imagine, the process does little for efficiency or morale. So I intend to establish a private bank to finance our subsidiaries. (I will need the state bank's permission, but I don't expect any trouble in getting it.) The bank will be financed with about $1.25 million (that's at the official exchange rate) from the profits of the subsidiaries. It will lend to them and act as a 21st subsidiary. Any profits made by the bank will be plowed back into the loan pool. Since the subsidiaries have a vested interest in repayment -- they will have to chip in to cover any losses -- they will monitor the loans very carefully. The heads of the subsidiaries will elect the board members and the chief financial officer, who will actually run the bank. BY KEEPING profits of the subsidiaries within the bank, we will be able to grow our businesses. We will also encourage efficiency, since how much a subsidiary can borrow will be more directly connected with how well it does. Eventually we may open up the bank to our workers, and perhaps to other businesses and individuals. These plans owe a good deal to what I learned in America. My visit was on an internship as part of my management course at the Estonian Business School. I studied with top executives at banks and credit unions in the Santa Clara, California, area. Among the things I learned was what not to do. To steer clear of your problems, we will make much more conservative loans. We also will have no government interference or insurance schemes. There won't be pressure from absent shareholders to make big profits on risky loans, since our backers will have a direct interest in slow, steady growth. Our banks may appear risky -- we have no laws regarding bankruptcy, for instance -- but in fact the lack of safety nets will encourage prudent banking practices. If I were to give advice to America regarding your banking and savings and loan situation, I would say: Follow the Soviet model! Let free-market forces play themselves out. In a year or so, we in Estonia expect to have our own currency that will be exchangeable on the world currency market. In the meantime, we will be developing a banking system that may one day attract your money. That is, of course, should you have any left after you've paid for your savings and loans bailout.