Treasury can use the extraordinary powers granted in the Emergency Economic Stabilization Act of 2008 to solve several problems at once without increasing the risk to taxpayers or creating a moral hazard on Wall Street.

This legislation is mainly about toxic mortgage-backed securities, but it allows any distressed security to be purchased. If Treasury were to purchase municipal auction-rate securities directly from investors, it could provide approximately $60 billion infusion of liquidity through the taxpayers directly and lower taxpayer costs of the bailout both at the national and local level. It doesn't solve the entire problem the legislation is trying to address, but in this innovative way it uses the extraordinary new powers more efficiently and effectively.

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