Friday, March 6, 2009

Let's get it over, already!

It probably somes as no surprise, but Paul Krugman is one of my favorite economists. His column today about the continued failure of the Obama Administration's financial rescue package is spot on.

See, being a mere oceanographer, I see it this way. the BUsh Administration started out to buy up the toxic derivative investment packages from the banks to free up the capitol markets and restart lending. then they realozed that meant something other thenthe market would be putting certain banks, investment banks and insurance companies out of business (plus it might well create a run on helathy banks). And they didn't want that. So they shifted to bank recapitolization. Mr. Obama hired Mr. Geithner to essentially continue that policy while they looked for something else that might work. After all, no one wants to bring down the economy and be blamed for a second Great Depression.

All that said, it's time to bring in the army of federal program analysts, budget formulators, and accountants, and take apart the banks books. We have to figure out who has what in order to sell it, and we have to sell it so banks will start lending to each other again (as well as to other business). Otherwise, AIG will still have to be on the public dole, GM won't be able to be liquidated in bankruptcy, and Cerebus won't put more money into Chrysler. Painful to watch - perhaps, but only if the government and media focus on the "losers" and not the healthy and solvent banks.

And yes Martha, there should be losers here - they mad bad, risky decisions driven by short term profit. they contributed to the downturn of the U.S. economy. They do not deserveto be rewarded fo rthose decisions by being allowed to continue to pretned they don't hold anything that's bad.

No comments: