We urge the immediate enactment of the Too Big to Fail, Too Big to Exist Act, which directs the treasury secretary to compile a list of those financial institutions that are too big to fail in the next 90 days, and to break up these banks and insurance companies a year after the legislation is signed into law

You can sign Sen. Bernie Sanders’ petition for it.

Via Barry Ritholz.

To meet the problem of a community with no money was not easy, but we were presently confronted with the graver problem of a community with too much money. The greatly exaggerated reports of the loss of property and of human lives, the first press dispatches placing the number of the latter at ten thousand, brought a correspondingly great volume of relief.

That curious inconsistency which make human nature quite complacent in contemplating the annual slaughter of infants in our great cities, the physical, mental and moral

crimes involved in the employment of little children in industry, the menace to the race in over-working and underpaying women, and the terrible social consequences of forced unemployment of great numbers of men, but which moves it to frantic expressions of sympathy by the news of an earthquake, a fire or a kidnapping, caused the American people to empty their purses and their children’s savings banks for the benefit of Johnstown.

When it was known that three millions of dollars had been sent in, the town quit work and it seems as if every inhabitant was bent upon getting a share of the cash.

The hungry were fed, the naked clothed, the homeless housed, widows pensioned; charitable acts, every one, and made possible by a generous charity fund. But these expenditures didn’t exhaust it. They hardly made an impression on it.

Roads were repaired, bridges rebuilt, the river widened, cemeteries laid out, monuments erected, hospitals established; public work every bit of it with no legitimate claim on the charity fund. But still there was money left!

Three million dollars doesn’t sound like much when you say it, so familiar have we become with figures which represent the fortunes of the one hundred men whom Senator LaFollette named by name for the enlightenment of his professedly skeptical colleagues, but when you take three million dollars and go out to buy things with it, real material things, it turns out to be a very great deal of money.

When we had managed to use perhaps a million of the fund a meeting was called to decide what should be done with the rest of it. The situation was extremely serious. The flood of gold threatened as great disaster, though of a difference nature, as the flood of water had caused. The

residents couldn’t be induced to work and workmen had to be brought in from the outside, thus further taxing the capacity of the already overcrowded houses.

The Governor of the State, James A . Beaver, frightened us by counseling delay and investigation of individual cases. Others urged indemnification for losses. This was clearly as improper a use for a charity fund, a fund given to relieve actual suffering and immediate distress, as the public work had been.

Surely no body of men assembled in conference was ever faced by a more unique situation. At this meeting I shocked everybody by advising that the money be converted into silver dollars, since it could not be returned to the donors, loaded into wagons, hauled out and dumped into the streets where the people might literally scramble for it. It was now absolutely certain that nothing could be done until we got rid of it, and this plan had the merit of speed to recommend it anyhow, and I wasn’t at all sure that it wouldn’t result in about as full a measure of justice as any plan that could be devised after protracted investigation. Mr. Moxham and I were for any plan that was quick.

In the end the committee reimbursed losers, giving each a certain percentage of estimated losses. Before the people were completely demoralized the money was all given away or appropriated, and then the town went to work, went back to the sober pursuit of every-day affairs, and life assumed a normal aspect once more.

Lest some reader of the foregoing paragraphs think I condemn the motives which prompt charity let me disclaim that! It is not generous impulses, not charity itself, to which I object. What I do deplore is the short-sightedness

which keeps us forever tinkering at a defective spigot when the bung-hole is wide open. If we were wise enough to seek and find the causes that call for charity there would be some hope for us.

New money without real goods behind it means inflation, more imports with fewer exports, devaluation, and a real risk that our foreign creditors will rebel.

So how to free up credit?

pay down the national debt. It’s called “reverse crowding-out”

By raising taxes? Yes, but not taxes on productive activity.

Land value, we have seen, is fictitious capital, an asset and store of value for individuals that has no real social capital behind it. By taxing it and lowering its value we do not destroy any capital. On the contrary, we raise the owners’ propensity to save and create real capital to restore the missing store of value. We also raise revenues without suppressing or twisting the incentives of free markets, as generations of economists have shown and agreed.

And he concludes

The changes I propose are massive and radical, I know; but we have been massively, radically wrong, and the times call for equally massive, radical reforms. People will resist, will object, will twist and turn and contort in dozens of ways, as Washington now is, to protect banks and landowners and the current power structure, resisting the unwelcome inevitable. They have eaten, drunk and been merry on low taxes, cheap credit, foreign loans and rising land values. Meet The Great Reckoning: it is time to foot the bill. We can do it and turn America healthy in one stroke by taxing land values and rents to retire public debts.

Update 11/3/08:  Mason’s paper(pdf) is now posted on his web site so I have removed it from this blog.

A good balance between failing to adequately describe it and going beyond the readers’ attention span.  British, but comprehensible.