In the wake of the Madoff scandal, some people have discussed how “fraudulent conveyance” could be a major issue. The doctrine of fraudulent conveyance basically holds that after a fraud, someone who benefited should give up some (or all) of their benefits to those who were wronged, even if they had no idea what was going on. It’s a usful doctrine in a lot of cases — if Madoff, for example, had given his sons tens of millions of dollars but left others high and dry, it wouldn’t be a great plan to let them keep the money.

But what people don’t often mention is the big problem with fraudulent conveyance: it encourages people to look the other way… Read more…

A recent New York Times editorial recently made the case for a trading tax. Superficially, it’s tempting: if we have a way to make counterproductive gamblers pay up for their vices, why not use it? There are several problems with the proposal:

• As Christine Hurt at Conglomerate points out, this tax could hurt the traders who do the worst anyway: “We like to say that the “buy-and-hold” people come out on top, so then isn’t the tax regressive — taxing the silly speculators who don’t understand investing, just like lotteries are regressive taxes on poor people who are bad at math?”
• It’s a tax on liquidity, and we really need liquidity right now. One of the great

… Read more…