Over the weekend, the Treasury hosted talks to help a group of banks set up a $100 billion fund to buy troubled assets in exchange for new short-term debt. The banks hope to have the fund up and running within 90 days.

According to people familiar with the matter, the Treasury hopes the plan, which could be announced as early as this morning, will jump-start demand for commercial paper, which froze up this summer amid the credit crunch that roiled global financial markets.

Companies depend on commercial paper to finance day-to-day expenses like payroll and rent. Some financial commercial paper -- known as asset-backed paper -- has been able to find buyers in recent weeks. But investors have remained skeptical of other types, including paper issued by certain bank-affiliated investment funds

The lack of buying signaled that the markets weren't working properly, despite the efforts of central banks, and that investor confidence was low, since commercial paper typically is considered a safe investment.

Some influential investors think the Treasury-backed strategy might work. Other object to the Treasury's role in seeking to help banks avoid a big financial hit for making bad bets.

The coordinated effort is a good way to help restart stalled debt markets, said Mohamed El-Erian, who runs Harvard University's $35 billion endowment and is set to become co-chief executive and co-chief investment officer of money-management firm Pacific Investment Management Co. in January. "No bank would do this on its own."

"The proposal has the potential to restore liquidity to a market," he added.

Four weeks ago, in an unusual move, Treasury officials convened a meeting of some 10 banks, including Citigroup Inc., to discuss a private-sector solution to the problems and sounded out other market participants about their views on a rescue package. The problems stem from affiliated funds called structured investment vehicles, or SIVs, which Citigroup and others set up as a way to make money without taking the risk involved onto their balance sheets. Such vehicles are formally independent of the banks that create them. They issue their own short-term debt, usually at relatively low rates that reflects their high credit rating. Then, they use the proceeds to buy higher-yielding assets such as securities tied to mortgages or receivables from midsize businesses seeking to raise cash.

The government isn't putting money into the plan but its role could be crucial in luring investors to buy debt issued by the rescue fund as part of the plan.

(The same holds for <a href="http://www.whitehouse.gov/nec/">National Economic Council Chairman Stephen Friedman.</a>) In fact, if we adopt the president's policies—which include a host of new tax cuts and massive new spending programs—the deficit won't fall 50 percent in the next five years."</i><p> It will grow substantially. And if President Bush and the Republican-controlled Congress weren't already quietly using every penny of the massive and growing Social Security surplus to cover operating expenses—and planning to continue this habit—the deficits would be even larger.

Back in 1983, as part of a deal to save Social Security from impending demographic doom, Congress enacted <a href="http://www.ssa.gov/history/1983amend.html">legislation</a> to essentially increase payroll taxes and reduce benefits. As a result, the government began to collect more Social Security payroll taxes than it paid out to beneficiaries each year. The theory was that the government would use these surpluses to pay down the national debt. That way, when baby boomers retire—and comparatively more people are collecting benefits while comparatively fewer people are working—the government would be in a better position to borrow the necessary funds to provide the promised benefits.

So much for theory. The reality? For the first 15 years, every penny of the surplus was spent, first by Republican presidents and then by a Democratic president. According to figures provided by <a href="http://www.crfb.org/">the Committee for a Responsible Federal Budget</a>, the surpluses were relatively insignificant for much of this period. Between 1983 and 2001 a total of $667 billion in excess Social Security payroll taxes was spent—about $35 billion per year. It was only in fiscal 1999 and 2000, when the government ran so-called on-budget surpluses, that excess Social Security funds were actually used to retire debt.

In the 2000 campaign, Vice President Al Gore said we should sequester the Social Security surpluses in a "lockbox" to prevent appropriators from spending them. Bush agreed in principle. But that commitment went out the window soon after the inauguration. In his first three budgets, Bush (who had the good fortune to take office at a time when the surpluses were growing rapidly) and Congress used $480 billion in excess Social Security payroll taxes to fund basic government operations—about $160 billion per year!

By so doing, Washington spenders have masked the size of the deficit. For Fiscal 2004—which began in October 2003—if you factor out the $164 billion Social Security surplus, the on-budget deficit will be at least $639 billion, rather close to the modern peak of 6 percent of GDP. And according to its own <a href="http://www.whitehouse.gov/omb/budget/fy2004/summarytables.html#table8">projections</a> (the bottom line of Table 8 represents the Social Security surplus), the administration plans to spend an additional $990 billion in such funds between now and 2008. That year, according to the Office of Management and Budget's projections, the on-budget deficit will be about $464 billion. Only by using that year's $238 billion Social Security surplus does the administration arrive at a total, unified deficit of $226 billion. And the ultimate on-budget deficit will almost certainly be worse. OMB has proven in the past few years that its projections can't be trusted.

The accounting for Social Security surpluses has always been dishonest. But in the past few years, the Bush administration has made this shady accounting a central pillar of its fiscal strategy. The unprecedented reliance on these funds hides the failure of the administration to ensure that there is some reasonable correlation between the resources it has at its disposal and the spending commitments it makes. Bush & Co. have redesigned the tax system so that collections of the progressive taxes that are supposed to fund government operations—like individual income taxes—have plummeted. Instead, with each passing year we rely for our current needs more on the regressive payroll taxes that are supposed to fund our collective retirement.

The persistence of the administration and its credulous allies in eliding these facts is flabbergasting. Of course, for the Bush administration to give an honest accounting of the deficits, and of the role that Social Security surpluses play in keeping them down, would be to admit the fundamental bankruptcy—no pun intended—of its adventuresome fiscal experiment.

JOHN PIERPONT MORGAN Glen Cove, New York

January 27, 1937. My dear Mr. President:

I and some of my associates regard your effort to decentralize wealth through the confiscation of individual fortunes in excess of five million dollars, gradually to be reduced even below that to something less than two million dollars, as one of the most autocratic governmental undertakings ever attempted in this or any other civilized country. We regard it not only as an effort to confiscate wealth, but as the first step in changing the economic order upon which all American progress has rested in the past.

We cannot lose sight of the fact that private capital has been the backbone of American progress in industry, commerce and trade. To seize it by governmental decree, we believe to be a violation of the fundamental guaranties of the American Constitution.

We are eager as individuals and good citizens to help our American government restore prosperity, provide ease and comfort for all our citizens through the orderly and constitutional processes laid down by our forefathers, but we shall resist any and every unconstitutional effort to seize the wealth, created by individual achievement in a wholly lawful and constitutional manner.

We believe that a full and free opportunity must be preserved in this country to win the traditional reward of superlative individual achievement, whether that reward be counted in hundreds of dollars or hundreds of millions of dollars. We do not express opinion now as to the advisability or constitutionality of a revenue law limiting the size of fortunes to be accumulated in the future. We content ourselves now with protesting against a law which would take from American citizens, in defiance of their constitutional rights, fortunes already accumulated.

We believe it fitting and proper for the federal government to impose inheritance taxes and estate taxes as a means of providing revenue, but we are forced, Mr. President, to resist in the courts your proposal to seize property outright, without due process of law. With the highest respect for your office, we feel compelled to notify you that we shall utilize every protection of the courts and Constitution to protect our properties against the seizures contemplated in your Share Our Wealth program.

Very truly yours,

( Signed) J. P. MORGAN.

Honorable Huey Pierce Long, President of the United States, The White House, Washington, D. C.

This threat from the dean of Wall Street's international bankers was the first sign of revolt against the Share Our Wealth program. I welcomed his declaration of war.

Calling a stenographer, I dictated the following reply:

THE WHITE HOUSE

January 28, 1937

My dear Mr. Morgan:

I am in receipt of your letter alleging that the Share Our Wealth program is unconstitutional, and announcing that you will resist its execution in the courts of the land. You are entirely within your rights in pursuing such a course.

I trust upon reflection you will perceive that I was the genuine defender of your wealth when I proposed a five million dollar limitation (gradually to be reduced below two million dollars) upon family fortunes in the Share Our Wealth plank of the platform upon which I was elected President of the United States. I will undertake sincerely to carry out the promise by which I secured my election. You are aware, or you would be if you had kept in touch with the sentiment of our American people, that there has been a good deal of whispered complaint against my plan on the ground that it is unjust to permit men of your kind to retain so much as five million dollars of wealth.

In the last campaign you will recall I was bitterly assailed by some speakers for not limiting wealth to one million dollars for each family. In the few days I have occupied the White House, there have been some newspaper editorial comment and numerous "letters from the people" published on editorial pages, demanding a reduction in the five million dollar limit of the Share Our Wealth program to a million dollar maximum at once.

One editorial that I hold in my hand asks this question:

"Why should anyone desiring justice start by proposing such rank inequalities between human beings, all of whom deserve the equal blessings of God and of government ?"

Before me is another newspaper in which a letter is published containing the following sentence:

"Is not our President making a mistake in starting his redistribution of wealth by allowing one family to have one thousand times as much share of the wealth as other families are permitted?"

If you observe the signs about us, my dear Mr. Morgan, you will see that the insignificant quantity of such muttering at this time is insignificant only because our American people as a whole believe they will secure happiness and the comforts of life through the limits placed on huge fortunes by the platform on which I was elected. I concede that my allowances were probably much too high, but I nonetheless told the American people that we could care for all of them bountifully and yet allow men of wealth such as yourself fortunes of about five million dollars, until gradually reduced below two million dollars. I also told them that we would limit fortunes only to the point necessary to guarantee comfort, convenience and education to the balance of our people.

I have felt that this moderated program, which allowed enough wealth to any family to inspire effort, service and achievement, but proposed such a limit as would curb needless greed, would create a proper balance between wealth and poverty, thereby insuring the maximum of inspiration to all our people. That being the case, I anticipate no difficulty from the common people of our country in securing to you the maximum limit of five million dollars of wealth, which the Share Our Wealth program would permit you to wholly own and manage in your own name until gradually reduced.

I am surprised, naturally, that as a banker and business man of reputed sagacity, you do not realize that my program is a real benefit to you. In my campaign for the Presidency I promised a return to Constitutional government. Needless to say, I am convinced the capital tax levies are constitutional. If they had not been, this republic could have never begun. I concede, too, that men may dieter with me on this legal question. I therefore shall be content to permit a test of its constitutionality in the Supreme Court of the United States before carrying it generally into effect.

We are about to engage upon a governmental survey of wealth and of the requisites of our common people for their comfort, convenience and education. When that is completed, Congress will reassemble and will enact the Share Our Wealth program. If in the meantime you should have a change of heart, Mr. Morgan, on the wisdom of resisting this equitable redistribution of wealth, I shall be only too happy to have you volunteer your services in helping to carry this program quietly into effect without needless disturbance of business, commerce or industry.

Very truly yours,

HUEY PIERCE LONG.