Three years ago at the Kansas City Fed’s annual symposium in Jackson Hole, Wyo., Mr. Rajan — then the International Monetary Fund’s chief economist — delivered a presentation titled “Has financial development made the world riskier?” Among his opening lines: “People can borrow greater amounts at cheaper rates than ever before, invest in a multitude of instruments catering to every possible profile of risk and return, and share risks with strangers from across the globe. Have these undoubted benefits come at a cost?”
In his presentation (read it here), Mr. Rajan addressed many of the concerns that ultimately emerged over the past year’s financial crisis: incentives in the financial sector to take high risks that were concealed from investors, the “tail risk” of a bad economic outcome and doubts about whether banks can provide enough liquidity in a crisis.
What may seem clear today was not three years ago. At the time, the audience reaction was fierce. Lawrence Summers, the former Treasury Secretary, was the first out of the gates calling the paper’s premise “largely misguided” and called the suggested restrictions on markets “quite problematic.”
According to a new analysis by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, Democrat Barack Obama and Republican John McCain are both proposing tax plans that would result in cuts for most American families. Obama's plan gives the biggest cuts to those who make the least, while McCain would give the largest cuts to the very wealthy. For the approximately 147,000 families that make up the top 0.1 percent of the income scale, the difference between the two plans is stark. While McCain offers a $269,364 tax cut, Obama would raise their taxes, on average, by $701,885 - a difference of nearly $1 million.
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