The drunken boat that was the Modified Paulson Plan sank yesterday, capsized by a crew of pirate freemarketeers in the House. What this means: we won't be giving away a trillion dollars of taxpayer money to the world's largest investment banks until sometime after the Jewish New Year.
But in the brief pause between attempted capitulation to capital and its successful realization, there's an opportunity. A slim one, a brief one -- But a real one.
Even as Treasury officials reassured their investment banking colleagues on a conference call that none of the strictures of the negotiated bill matter at all, and that they fully intend to give the taxpayers' money to the wealthiest and healthiest houses first (read: Goldman Sachs and J. P. Morgan); even as the House Republicans proclaimed their undying love of the free market that was collapsing around their ankles; even as John McCain was lurching toward leadership while succeeding only in breaking the china; even as Nancy Pelosi was trying to sell a deal which still stinks on ice -- the outlines of something far better were beginning to emerge. Here are some proposals: two modest (but necessary); one immodest (and equally necessary):
When Warren Buffet invested five billion of his own money in Goldman Sachs last week, he got guaranteed ten percent interest and warrants to buy. Our money's as good as his, yes? So: just give us the deal that Warren got.
• Let Wall Street pay for itself.
Until it was phased out in 1966, we had a tax on stock trades of .25%. The UK and other international markets still have one. It was called STET -- the Securities Turnover Excise Tax. The idea behind it was to encourage investment, discourage stock-market gambling: in the words of J.M. Keynes, "mitigating the predominance of speculation over enterprise."
If we were to insist on one now as the price of Paulson's Wild Giveaway, we'd get back $150 billion a year. In the midrange, we'd actually get back (over several years) what we're about to give to them (over several weeks). Thom Hartmann at Common Dreams has a thoughtful and compelling outline on the historical background of the STET, and just how this would work right now.
• Cure the disease, not the symptom
As Digby proposes, do what FDR did: use the financial collapse to institute genuine reform--a liberal Shock Doctrine. Her eloquent and passionate piece is better read than summarized. (Digby now demurs that, Saknussemm-like, Rick Perlstein was there before her. His piece for The American Prospect is a must-read as well.) Since the problem in the markets is a reflection of the larger problem in the economy, why not fix the economy? Why not a new New Deal?
Alas, after all of the sturm und drang of yesterday, the most likely outcome is the saddest one as the markets are already predicting: sometime later this week, we get some version of the original Paulson plan, with a couple of stupid sops to the "free-market" Republicans. (Nabokov once said that "reality" was a word that only made sense within inverted commas. Surely "free market" can this week be added to the list.) But the opportunities here are far greater, and far more thrilling, than anything either of our political parties will put on the table.
If we don't use this crisis as an opportunity, the pigs at the trough certainly will -- as they did after 9/11, and as Paulson and his gravediggers have been doing for the past few weeks. If we do nothing -- or if we simply accede to the demands of the big finance -- then the best description of September 2008 will have been written by Antonio Gramsci, the political theorist (and founding member of the Italian Communist Party). Gramsci said, "The old is dying, and the new cannot yet be born. In the interim, a great variety of morbid symptoms appear." That will be our legacy if we lack the courage to stand up to the Large Houses. And it will be all we deserve.
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