Thursday, September 25, 2008

Stretching the definition of "misguided"

The following wins first prize for "Silliest proposal" thus far concerning policy and regulatory responses to the Treasury plan. It shows a truly shocking level of misunderstanding by politicians.

Again, swapping Treasuries for MBS and other securities is not deficit spending. It MAY BECOME deficit spending in the future to the extent that the securities decline from their purchase price.

And the use of the word "avoidable" when describing the current malaise is an error of the 1st order. If it was so "avoidable" why did these same politicians not aggressively respond with policy prescriptions ex ante?

The perception of "doing something" and "punishing someone", no matter what tenuous causality they had to this situation, is producing some truly misguided policy measures that would be hilarious if they were not so dangerous.

Wire: BLOOMBERG News (BN) Date: 2008-09-25 16:17:10
Tax on Trades Should Be Part of Rescue Plan, Some Democrats Say

By Laura Litvan
Sept. 25 (Bloomberg) -- A group of House Democrats is
proposing to make Wall Street companies and investors pay more of
the cost of any financial rescue plan through a new tax.
In a letter sent late yesterday to House Speaker Nancy
Pelosi, 16 Democrats asked her to ensure any rescue legislation
include a ``transaction tax'' on all U.S. stock trades and on
other types of trades, such as credit default swaps, options and
futures. They are proposing the tax would be at a rate of one
quarter of one percent on all trades.
``The same Wall Street speculators and investors who are
principally responsible for having caused this avoidable
financial crisis and profited from it must now be required to pay
for it, not U.S. taxpayers,'' according to the letter, which was
signed by Representative Peter DeFazio, an Oregon Democrat, and
Representative Pete Stark, a California Democrat.

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