Contrasting messages: Obama and Krugman

[ProSense]

Op-Ed Columnist

Financial Policy Despair

By PAUL KRUGMAN
Published: March 22, 2009

Over the weekend The Times and other newspapers reported leaked details about the Obama administration’s bank rescue plan, which is to be officially released this week. If the reports are correct, Tim Geithner, the Treasury secretary, has persuaded President Obama to recycle Bush administration policy — specifically, the “cash for trash” plan proposed, then abandoned, six months ago by then-Treasury Secretary Henry Paulson.

This is more than disappointing. In fact, it fills me with a sense of despair.

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Even more important, however, is the way Mr. Obama is squandering his credibility. If this plan fails — as it almost surely will — it’s unlikely that he’ll be able to persuade Congress to come up with more funds to do what he should have done in the first place.

All is not lost: the public wants Mr. Obama to succeed, which means that he can still rescue his bank rescue plan. But time is running out.

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Obama: Another Leg in the Stool

As I've said before, there are a number of legs in the stool in the economic recovery. Step one is making sure that we had a stimulus package that was robust enough to fill the huge gap in demand that was created by the recession. Step two was making sure that we had a effective homeowners' plan to try to keep people in their homes and to stabilize the housing market. Because of the work that's already been done, you are starting to see glimmers of hope in the housing market that stabilization may be taking place. Mortgage rates are at a very, very low level, and you're starting to see some activity in the housing market.

We then took a series of steps to improve liquidity in what had been secondary markets that had been completely frozen. And we are now seeing activity in student loans and auto loans. We announced last week a small-business initiative that ensures that we have more activity and you start seeing small businesses being able to get credit again in order to sell products and services and make payroll.

And this morning, Secretary Geithner announced the latest element in this multi-pronged approach, and that is a mechanism that he, in close consultation with the Federal Reserve and the FDIC, has initiated in order to allow banks to take some of their bad assets off their books, sell them into a market, but do so in a way that doesn't just obligate taxpayers to buy at whatever price they're willing to sell these assets; instead, involves a public-private partnership that allows market participants who have every interest in making a profit to accurately price these assets so that the taxpayers share in the upside as well as the downside.

And we believe that this is one more element that is going to be absolutely critical in getting credit flowing again. It's not going to happen overnight. There's still great fragility in the financial systems. But we think that we are moving in the right direction. And we are very confident that, in coordination with the Federal Reserve and the FDIC, other relevant institutions, that we are going to be able to not only start unlocking these credit markets, but we're also going to be in a position to design the regulatory authorities that are necessary to prevent this kind of systemic crisis from happening again.

Obama confident latest bank rescue plan will work

By BEN FELLER, Associated Press Writer Ben Feller, Associated Press Writer – 1 hr 1 min ago

WASHINGTON – President Barack Obama on Monday voiced strong confidence that his administration's financial rescue plan will get toxic assets off the books of banks in a way that allows taxpayers to "share in the upside as well as the downside."

"The good news is that we have one more critical element in our recovery," Obama said, surrounded by leaders of his economic team. "But we've still got a long way to go."

The plan's goal is to buy up the assets that are weighing on banks' balance sheets and are hampering banks' ability to resume more normal lending to consumers and businesses. The drop in lending has worsened and prolonged the recession. The plan seeks to draw in private investors with inducements like billions of dollars in low-interest loans to finance the purchases.

The government will take on a good share of the risk if the assets fall further in price.

Obama said the plan will be structured in a way that ensures that assets are sold at an accurate price, offering an upside to taxpayers.

"It's not going to happen overnight," Obama said, setting moderate expectations for the sale of the troubled assets. "But we think that we are moving in the right direction."

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[Democrats_win]

1. Will the M$M even tell us if it succeeds? They'll certainly tell us if it fails, even if it doesn't

The most famous case is when Ronald Reagan and his fellow travelers and millionaires in the media tried to tell us that we were worse off under Carter, when in fact we were BETTER off! Poof, they became billionaires and we got nothing.

Oh, and what about that Iraq war? Does it's "success" even mean anything? To most Americans it meant that we lost hundreds of billions to inflated gas prices.

So Obama's plan. If it is a success, then the economy will be humming along as before. But does that mean that over priced banksters will be buying over priced luxuries or that I'll be less worried about my credit cards.

Yeah, you know what it means. Nada.

I hope you're doing better; that's why I voted for Obama. But I have no illusions about who owns this country and what they truly deserve. Damn the economy, full communism ahead. Let's start living and let the banksters start suffering!

[Political Heretic]

2. What did you expect him to say?

[ProSense]

8. What?

So you believe he thinks the plan is "surely" going to fail, but is smiling in front of the cameras?

[Political Heretic]

11. No,

I don't know what he thinks, but I'm absolutely certain that his statements on camera are only going to say one thing.

[ProSense]

15. "I don't know what he thinks" Then how can ask "what do you expect him to say"?

I don't expect him to say anything. I have to accept what he says, it's his plan.

[Name removed]

23. Deleted message

Message removed by moderator. Click here to review the message board rules.

[ProSense]

24. That would be hard, since I don't have one.

I suspect the President said exactly what he wanted to say, again, it's his plan.

[Political Heretic]

28. I suspect that too. But he's not going to say anything else but that to the media...

...so, quoting it as some kind of revelation is sort of silly.

BREAKING NEWS: Obama supports own plan! Film at 11!

:D

[Cary]

3. Anyone else getting really sick of this?

I have no idea what's going to work or what isn't going to work and, with all due respect to professor Krugman whom I admire greatly, I seriously doubt anyone else knows a whole lot more than I do.

It could go very badly, making the naysayers look like geniuses. Or, it could go very well, making Obama look like a genius.

I am still confident enough in Obama's intelligence and judgment to say that I'm not ready to second guess him. I don't know what I'll do if it turns out that he's screwed up but I don't see why I need to declare him a failure right now and I sure as hell don't want to feed the rightist trolls.

Can you imagine if we had a president Grampa McSame? I can't.

[Political Heretic]

5. It's not alchemy. And the odds aren't 50/50.

Somethings have less of a chance of working, but are motivated by the vested interests of political power brokers. Other things have a greater chance of working, but are not supported by political power brokers.

Pretty much that simple.

So we're going to go with the plan that has less of a chance of working, but is favored by wall street fat asses who pay our government officials metric butt tons of money.

I hope it works, but I'm not holding my breath.

[ProSense]

9. "I hope it works, but I'm not holding my breath."

Statements like this and Krugman's "All is not lost" are a cop out. Either be definitive in claiming can't work or admit that the world isn't ending because the banks aren't being nationalized.

[Political Heretic]

14. Sorry, the world doesn't fit neatly into binary categories.

If it doesn't work, then we'll doing some form of nationalization next, because that will be pretty much all that's left. The world will not end if this doesn't work, we will only lose millions of jobs and throw away a trillion more dollars of taxpayer's money, spiraling our debt and still leaving us in a recession that by that time will likely be an inarguable depression.

So yeah, I'm a little bummed right now because I don't think this plan is going to work, that that means things are going to get worse - which I don't want for anyone. At the same time, I hope I'm wrong, and I hope it works for the very same reason - I don't want more people on the street or unemployed.

I'd rather we take care of real people than stand on an ideology - so if this works and the administration was right and I'm wrong, great! I'll happily stand there in my wrongness and be wrong and be really relieved.

[ProSense]

17. Oh, the irony. n/t

[Political Heretic]

19. Well argued.

[Cary]

21. What about. . .

"I don't know but I hope they know what they're doing?"

[Political Heretic]

30. I'm a little more informed then that.

I DO know and I hope this works... but doubt it will.

[Cary]

41. I'm not an economist, but I have a degree in economics.

I know some things, and what I know most is that you cannot predict the economy beyond maybe a few months.

I don't think anyone really understands this.

[empyreanisles]

12. Not everything is a Wall Street conspiracy.

Sometimes you have to deal with a problem given the tools readily available. We need to encourage private investment. This is a way to do it. It just so turns out a lot of those people are on Wall Street.

This is a one time thing to get us out of this grave, grave, situation. Regulations will ensue and what we saw before will not happen again.

[Cary]

16. At least until the pukes weasel their way in again.

They seem to have a knack for making Great Depressions.

[Political Heretic]

18. The difference between institutional analysis and conspiracy theory is:

institutional analysis deals with quantifiable facts and measurable outcomes. There are certain facts about how our blended government and business system operate, and the financial investments of business into government representatives is clearly and unquestioningly part of that process.

This has an effect on how policy gets made and implemented.


Now we could talk about conspiracy theories, for entertainment purposes I guess. I always enjoy the ones about the Illuminati that control everything, myself. But so far, I haven't been talking conspiracy theory, only institutional analysis

[Cary]

4. Anyone else getting really sick of this?

I have no idea what's going to work or what isn't going to work and, with all due respect to professor Krugman whom I admire greatly, I seriously doubt anyone else knows a whole lot more than I do.

It could go very badly, making the naysayers look like geniuses. Or, it could go very well, making Obama look like a genius.

I am still confident enough in Obama's intelligence and judgment to say that I'm not ready to second guess him. I don't know what I'll do if it turns out that he's screwed up but I don't see why I need to declare him a failure right now and I sure as hell don't want to feed the rightist trolls.

Can you imagine if we had a president Grampa McSame? I can't.

[Political Heretic]

6. If we had Gramps McSame he'd have announced this very policy

And everyone here would be trashing it.

[FrenchieCat]

10. To claim to know what McSame would do if he was president

isn't a reasonable argument, especially when McSame's has already stated what his plan would be,
to do nothing about the markets and implement a spending freeze.

So see, you did'nt even need to guess!

[Political Heretic]

13. The point is, its not about the plan is about a personality.

You take the same plan, and instead imagined it announced by George Bush. DU would be tearing the plan to shreds.

But its Obama, so now its sacrosanct. That's because the support isn't about the quality of the plan. It's about some people getting caught up in a cult of personality.

[Cary]

20. I don't think so.

If we were 9 weeks into the Bush administration I would have been skeptical but I would have given him the benefit of the doubt and I would have hoped he knew what he was doing.

One thing the right was kind of correct about: being a wind sock doesn't cut it. Of course it's difficult for me to give them credit for anything after all they've done. But I have to agree on this, to some extent.

[FrenchieCat]

22. It's not the same plan.

Doing nothing and implementing a spending freeze is not what
the President is doing.

So it ain't about sacrosanct, it's about reality.

[Political Heretic]

25. We are not talking about the same thing.

You take this plan. This one right here. Now imagine that it was announced under George W. Bush. If that happened, I believe DU would be shitting all over this plan, would carefully analyze it and finding it horribly lacking.

[FrenchieCat]

27. Sorry, this is too much speculation for me.

Hypotheticals are fine, but you can't insist on making an absolute point using such.
it's dishonest.

[Political Heretic]

32. I acknowledge its speculative.

It's not "dishonest" when your simply stating an opinion.

Be we can move on from this if you like to one of our many other "spirited" battlefronts. ;)

[FrenchieCat]

7. You are correct that President Obama has staked his presidency

on his ability to fix the economy.

I'm not sure what Mr. Krugman has at stake,

but if it is to fix the economy,

I think they can agree to that common interest,

and leave it there for now.

I'm sure if Obama's plan doesn't work,
he'll let Mr. Krugman know straight away.

Mr. Krugman can then wave his finger and say "I told you so",
and he can along with others vote Obama out of office in 2012.

[Political Heretic]

26. He doesn't have to leave it there. For fucks sake the country is ABOUT the right to participate!

What the fuck is up with everyone wanting people to shut up? I can't get over this. Omg silence the dissenters!

[FrenchieCat]

29. Sometimes it's about respect.

Mr. Krugman can continue till he is blue in the face,
and that will simply tell us more about him, than anything.

Having a superiority complex
doesn't always win the day.

[Political Heretic]

31. Do you ever think about what you are saying?

Respect is being silent when you disagree?

Out of "respect" for Obama Krugman (or anyone else for that matter) should stop giving their opinion on the economy?

Now finally after all this time I get it Frenchie. You literally think that those of us here who have critical questions about what the president is doing are being disrespectful.

Wow. Just... wow.

It's interesting that this is not an opinion shared by our President, Barack Obama. Interesting yes? Contrary to your feeling that respect is silent deference, President Obama has made it clear over and over that he not only welcomes criticism and debate, but also - according to him - he NEEDS it as part of the process he uses to make good decisions.

I fully suspect Obama reads Krugman, along with many others. He disagrees, great. I think he's wrong, but I hope he's right. The one thing I'm pretty sure about is that he isn't spending the amount of time you are trying to get people to shut up. He both welcomes and says that he needs criticism and debate.

Why do you keep trying to cut that off? Do you have a problem with the President on this? :)

[FrenchieCat]

33. LIke I said, he can just keep on talking.

I don't really give a shit.

I'm sure that Mr. Krugman won't be upset
if I have my opinion as to why he is doing it.

[Political Heretic]

34. Right he can keep on talking, but its "disrespectful" of him to do so.

I get it. :eyes:

[FrenchieCat]

35. Are you telling me that I am not allowed that opinion?

Wouldn't that be hypocritical of you?

See, I don't get what you get.

[Political Heretic]

36. Of course not. You're free to give opinions, I'm free to agree or disagree, and so it goes.

And the idea that "out of respect" someone should shut up is just not something I find to be particularly credible. No where in that statement is anything about telling you want you can or can't think, only about me giving my thoughts about it.

You're free to an opinion, and I am not required to find your opinion sound or valid, while at the same time not interfering with your right to hold it. But I don't have to share it.

[FrenchieCat]

37. Which is why we should agree to disagree....

which at some point is what Krugman should agree to as well.
But of course, that's his call.

[Political Heretic]

38. Except that, Krugman and others like him write for an audience.

He's not having an exchange with an individual where both reach an impasse. I'd argue we haven't reached an impasse yet either, though that's beside the point.

His opinion pieces are advocacy, and his opinion, whether your like it or not, carries at least some weight. Thus there would be no reason for him to stop writing, when he can potentially influence public opinion or even policy by doing so.

If I had his voice I certainly would never stop writing.

[FrenchieCat]

39. No one said that he should stop writing....

and if he wants to write the same thing everyday,
he should go ahead.

When Fox uses his commentaries,
that's ok too.

Like I said, at some point people will just stop caring about what he has to say,
if they already know what it is before he writes it.

[Political Heretic]

40. No, you just implied that continuing to do so was "disrespectful."

To which pointed out that Obama disagrees with you.

:shrug:

[FrenchieCat]

43. That's ok. I don't have to have everyone agreeing with me to

keep on living.

I'm sure that both Mr. Krugman and Mr. Obama agree with me on this.

Beyond that, I'll leave it there.

But thank you for the debate.
I appreciate it.

[depakid]

42. "be in a position to design the regulatory authorities that are necessary"

Some evidence that this is occurring would be go a long way to restoring the administration's credibility.

[dave_p]

44. Disrespect galore

Krugman's job is to warn, Obama's is to deliver. Sounds like they're both doing fine, given time and the confidence to do whatever's needed. They just need to listen to each other, and maybe give one another the time that it takes. And we've a couple more years of this ahead, so why panic? Leave that to the legislators, in a few months.

[yowzayowzayowza]

45. Bunk.

If this plan fails — as it almost surely will — it’s unlikely that he’ll be able to persuade Congress to come up with more funds to do what he should have done in the first place.

I'm so sure Congress'll just leave us to a decade or two of depression just to spite Obama. :eyes: It'll certainly cost Obama politically, but this situation will be dealt with one way er another. Failure is not an option.