Proposal


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The short version of my current alternative proposal to the TARP remains:

  1. Normalize bank liquidity by allowing Fed member banks to borrow unsecured from the Fed in unlimited quantities.
  2. Have the Fed set term lending rates out to 3 months in addition to the Fed funds rate.
  3. Extend FDIC insurance to Fed deposits at member banks to keep any insolvency losses at the FDIC.
  4. Remove the cap on FDIC insurance to eliminate the need for money market funds.
  5. Declare a ‘payroll tax holiday’ and reduce social security and medicare payroll deduction rates to 0% until aggregate demand is sufficiently restored.

This would immediately end the current crisis.

Remaining issues include the increased demand for energy consumption as the economy recovers, and associated price pressures.

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