I’m not an economist, but I read a lot of economists, particularly economists who saw the current shit show coming from a ways off and have been consistently right in their assessments of why various attempts by first the Bush administration and now the Obama administration are likely to fail. When Paul Krugman writes this about the new Geithner bank plan, I get worried:
Why am I so vehement about this? Because I’m afraid that this will be the administration’s only shot — that if the first bank plan is an abject failure, it won’t have the political capital for a second. So it’s just horrifying that Obama — and yes, the buck stops there — has decided to base his financial plan on the fantasy that a bit of financial hocus-pocus will turn the clock back to 2006.
It’s not just Krugman that is having a bad reaction. Duncan Black is bringing his trademarked gallows humor out in full force. John Cole does the same. James Galbraith call Geithner’s plan a “Rube Goldberg device.” As Digby says, “we are dealing with magical thinking again,” which would at least make the Goldberg Geithner contraption make sense.
There’s often a lot of funny talk about having faith in markets or not scaring markets, as if saying the wrong thing will somehow offend the Dow Jones Industrial Average and cause everyone’s stock portfolios to tumble. I’ve never understood that. But what I do understand today is that the apparent inability for leaders at the highest level of government to grasp the severity of the problems facing us is likely to produce bad results for the future. Using big words like “sub-prime residential mortgage backed securities” and “$1 trillion” can be much scarier than words like “nationalize” or “fundamental reevaluation.”
I just hope that either Geithner turns out to be right or the severity of our financial circumstances compels the Obama administration to master enough political will to do whatever it has to do when this big shot from Geithner misses. I don’t know where we are if they only get this one shot and choose to use it on something that everyone who’s been right so far says is a horrible idea…
Hold Fast 
I have been somewhat surprised that no one has been attacking the “nationalization” meme. Nationalization is the seizure of of private corporations as part of a political philosophy that values state ownership of various economic sectors. When the S&L crisis of the late ’80s and early’90s led to the seizure of various savings and loan banks and commercial banks by the RTC and other regulatory authorities that was not “nationalization” – it was the economic bankruptcy of financial institutions through their incompetence and greed and the resulting regulatory response. It is apparent that in a technical sense of liablities in excess of assets, many major financial institutions in this country are bankrupt. Their seizure and reorganization would not be “nationalization” as no one in or out of government is proposing that these institutions be run permanently as public entities. What could and should happen is that they should be seized, new management installed, toxic assets be transferred to a “bad bank” run by the Federal giovernment for orderly disposition over a period of years and the re-organized bank returned to private ownership with the public investment of taxpayer dollars returned to the public till over a period of years. The Swedes have provided the model; we do not to invent anything. To call this process “nationalization” is the political attempt to make the seizure of these failed institutions so untenable that it cannot be discussed in polite politcal discourse thus furthering the agenda of those that want to continue to shovel public funds into the hands of the very perpetrators of this financial disaster.
LikeLike