March 24, 2009

The Obama administration's Public-Private Investment Program aims to spur purchases of soured loans and real-estate-related securities. The two-part plan will use up to $100 billion of bank-rescue funds from the Treasury, as well as financial guarantees from the Federal Reserve and Federal Deposit Insurance Corp. Funds will be set up to buy and manage mortgage securities and the government will also provide financing to private investors to purchase the loans.

Up to five managers will help the government manage pools of assets that will be created by the plan.


A cap is a legal limit on pollution. There is no guessing what will happen -- the level of emissions is set in law, and enforcement of that limit proceeds accordingly. No air pollution problem has ever been solved except by imposing a legal limit on emissions. The essential nature of a cap-and-trade system is positive and therefore much more powerful than a tax. Behavior shifts not only to avoid the cost of emissions, but to achieve additional reductions below the required levels, which can be sold to others as carbon credits. The system directly engages the profit motive in pursuit of the environmental goal. In addition, establishing the cap level in law will give companies the certainty necessary to make major, job-creating capital investments now.

Environmental taxes have worked well to raise revenue, but without a cap they inevitably become a license to pollute in unlimited amounts.