Thoughts on the financial crisis
The current dilemma seems to be whether we nationalize the banks and how to make the public accept the cost of the bailout so that the financial system doesn't completely crumple and have to be rebuilt from zero. This problem of head I win, tails you lose in the financial system has to be rectified in the process. It'll be hard to sell the public on the premise that the plumbers and gardeners and teachers need to pay to bail out what the bankers and leveraged homeowners did. We're talking trillions of dollars that taxpayers have to shoulder.
The solution I like is still the idea of creating a Tobin tax on financial transactions to pay for the bailout. It could be .0001 percent of transaction price. When the market moves trillions daily, this is an easily tapped source of revenue. This solution to create a source of revenue while overhauling the banking industry can be political feasible and economically sensible. It won't hurt personal investments but it will make investment banks and trading houses pause to think about their investments just a little longer. Yes, it might drive some financial transactions overseas, but I think smart people can devise a way to limit that effect. Yes, the government will have to borrow the funds today to bailout the banks, but creating a tax on future financial transactions can be a way to fund today's bailout, mitigate the hit to the treasury yield, and insure that future financial fallout will have a similar stream of revenue to turn to when the next banking crisis hits. Think of it as an FDIC for the un-insured part of the financial system. The tax will also lessen the day-trading and might make markets less bubble-icious. Even after this episode of economic turmoil, you can be sure that the next financial crisis will always be waiting. Moral hazard is a tough problem to solve. So I think better it be heads you win (and I get a piece) and tails I lose than the current system.