Krugman blogs on Geithner's bailout plan...

[flpoljunkie]

The plan deserves praise for what isn’t in it, at least as far as I can tell. There doesn’t seem to be provision for mass purchases of toxic waste at premium prices; there also doesn’t seem to be a massive “ring-fencing” guarantee against private losses on bad assets. In that sense the plan is better than what the last few weeks of leaks led us to expect.

What is in it, in reverse order:

1. Super-TALF: a big expansion of the Fed’s quantitative easing, with Treasury backing. I’m OK with that.

2. Private-public purchases of questionable assets; as I understand it, private investors would be the junior partners, so this is probably not a big giveaway (unless there’s huge public financing, in which case it amounts to ring-fencing after all). I also suspect it wouldn’t accomplish much, but no harm, no foul.

3. Stress test: everything depends on how this is actually implemented. What happens if, or more likely when, a major money center bank is stress-tested and found to have negative net worth? One possibility is that the auditors are told to come up with a different answer; that’s a big concern. The other is that the bank is effectively nationalized; as I read the language that could be achieved as part of the public capital injection.

So what is the plan? I really don’t know, at least based on what we’ve seen today. But maybe, maybe, it’s a Trojan horse that smuggles the right policy into place.

http://krugman.blogs.nytimes.com/2009/02/10/the-rorschach-plan-wonkish-or-at-least-hard-to-read/

[Beetwasher]

1. If Krugman Isn't Outright Shredding It, I'll Take That As A GOOD Thing!

The Krugman vs. Obama wars going on here piss me off. There's no reason why you can't appreciate both of them. They are NOT diametrically opposed forces. In a very real way, Obaman NEEDS and DEPENDS on Krugman, who is playing a very important role in this whole thing. I suspect both of them are very much aware of the nature of their relationship.

[Barack_America]

2. And what is the right policy? Nationalization of the banks?

That's the only possible Trojan horse I detect here.

:shrug:

[Beetwasher]

3. Yes. Krugman Is Pro-Nationalization

I suspect the "stress test" would lead to this if a bank fails the test. If that happens, the bank gets nationalized (I hope!). They would be VERY wary of actually SAYING that OUTLOUD at this point.

[flpoljunkie]

5. Economist Joseph Stiglitz says it's Wall Street vs. taxpayers and 'Wall Street wants us to lose.'

TPMtv: Stiglitz on the Bailout

02.10.09 -- 2:27PM By Josh Marshall

We interviewed Nobel Prize-winning economist Joe Stiglitz on Friday about the bank bailout. And I focused on two key questions. What's wrong with the idea of buying the 'toxic assets' from the banks? And just what happens if we let these banks go bankrupt instead of continuing to prop them up with continuing bailouts?

Video: http://www.talkingpointsmemo.com/archives/2009/02/tpmtv_stiglitz_on_the_bailout.php

[flpoljunkie]

6. Stiglitz also says another bank bailout just 'buying garbage in bulk.'

http://www.talkingpointsmemo.com/news/2009/02/tpmtv_stiglitz_on_the_bailout.php

[Better Believe It]

7. Absolutely!

But you're not going to sneak it in via a Trojan horse.

[Pirate Smile]

4. Well, this seems surprisingly, semi-positive so I guess that should be good news to people.