How to Make TARP Politically Acceptable: Add a Tax on Securities Transactions

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I propose that the Congressional leadership re-introduce the Trouble Asset Relief Program accompanied by a major new policy: a small tax on securities market transactions. This will accomplish the political goal of aiming a silver bullet into the heart of the (understandable) popular outrage that blocked passage of the TARP bill on Monday. It will simultaneously accomplish the fiscal goal of raising revenue in the future. This is revenue that the federal government would have sorely needed even before the bailout arose and will need even more if the taxpayer is to be protected against the risk of heavily subsidizing the financial sector. read more

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The Revised Troubled Asset Relief Plan Should Have Passed

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When the Treasury came out with its $750 bailout plan on September 22, I  thought it lacked so many necessary ingredients that it deserved a thumbs down.  (Many others had similar objections, including George Soros.)

But in the negotiations between the Treasury and Congressional leaders over the course of last week, most of the missing ingredients were inserted.    Starting with the additions that were most necessary on the merits, and moving toward the ones where the necessity was more political, they were: read more

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An Emerging Consensus Against the Paulson Plan: Washington Should Force Bank Capital Up, Not Just Socialize the Bad Loans

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In time of war, there is a tendency for both political parties to rally around the president, as we saw (all too well) in Iraq after September 11.In time of financial panic, there is often a similar inclination.The two presidential candidates, for example, are being careful in their statements.I don’t blame them.The issues are too complex to be taken on inside the context of a political campaign.Both candidates realize that the danger of a verbal misstep that the other side can try to blame for worsening the crisis is far greater than the likelihood that either one will come up with a brilliant solution that will gain widespread support or will solve the problem, let alone both. read more

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