Krugman: The Zombie Ideas Have Won. What a Terrible Mess.

[Karmadillo]

http://krugman.blogs.nytimes.com/2009/03/21/despair-over-financial-policy/

Despair over financial policy

The Geithner plan has now been leaked in detail. It’s exactly the plan that was widely analyzed — and found wanting — a couple of weeks ago. The zombie ideas have won.

The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.

To this end the plan proposes to create funds in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad — I mean misunderstood — assets. This is supposed to lead to fair prices because the funds will engage in competitive bidding.

But it’s immediately obvious, if you think about it, that these funds will have skewed incentives. In effect, Treasury will be creating — deliberately! — the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem.

more...

[MannyGoldstein]

1. Heads They Win, Tails We Lose

That's exactly what this plan is.

Motherf*#&ers.

I'm so angry that even I, an Obama supporter from the start, am beginning to think bad thoughts about his presidency.

[Dollface]

3. I have bad thoughts about it too. And then I consider the alternative.

[Oregone]

9. removed

Nevermind, misread...Im assuming you meant Republicans. There is only two options in America I guess.

[Dollface]

14. Pardon my ambiguity. I was referring to the Republicons.

Mr. President isn't off the hook however.

[lumberjack_jeff]

10. No kidding. I suspect McCain would have thrown huge bailouts to huge companies

Which would have misused them in a huge way, eventually leading to economic collapse.

Oh, right.

Well at least we're out of Iraq.

[Oregone]

12. He probably would of done the same thing as Obama, just spun it differently

So far, the approach isn't entirely different than the last half of last year. Its really a perfect policy continuation. You just have someone literate talking about it. But, I guess, Wall Street is still drunk and we are just going to help them sober up with our cash.

[tonysam]

17. The Warning Signs Were ALWAYS There About Obama,

but the alternative of a McCain presidency was simply too awful to contemplate.

Without a COMPLETE reversal of thirty years of disastrous economic policies, this administration is going to fail because the neoliberals have Obama's ear.

[xchrom]

2. recommend

[Skink]

4. obama must have the same guys working for him as Bush did.

I would say this is a failure I didn't expect from Obama. Though I didn't expect the pugs to dig in either they way they have. I thought their party might become atleast a little more progressive.

[MannyGoldstein]

6. Or Clinton.

Wait... he does!

[burythehatchet]

15. The same Clinton era neo-liberal policies. Thank you Bob Rubin

We're so screwn.

[Oregone]

11. Political parties have become so utterly obsessed about their social agendas,

that they neglect and sometimes forget what is going on with their economic ones. Its actually sort of funny, because this is the original aspect that is the foundation for the philosophies of each party. In the end, lately, it seems like both parties economic agendas are being controlled by the same shadowy hands.

[tonysam]

18. Actually, Many of These Politicians in the Democratic Party

have been bought off by the same interests who have supported the GOP. Meanwhile, everybody ELSE is being screwed.

[phantom power]

5. Our economy isn't bad. It's just misunderstood!

:rofl:

[G_j]

7. that was hilarious!

Delay is such a comedian!

[Gman]

8. or, the assets do bad things

like disintegrate into assets not worth the paper their written on with an insurance company that was riding the wave of enormous cash flow from insuring them thinking that nothing could ever go wrong with these assets.

[Oregone]

13. No, that couldn't happen, could it?

:)

You just don't understand these assets. They are a lot like impoverished children with criminal records.

[Turbineguy]

16. I think it's more like

Set a thief to catch a thief.

[glitch]

20. God I hope so. nt

[Tierra_y_Libertad]

19. It's the P.T. Barnum School of Higher Economics. Guess who the suckers are.

[leftchick]

21. it isn't the robber barons

they will prevail through this mess at our expense.

[Tierra_y_Libertad]

22. They're doing a helluva good job of it now with gov't throwing money at them.

By the bushels. "Our" money that is.

[leftchick]

23. k&r

watch out Paul, there are a lot of true believers who will call you a freeper for this.

[NJmaverick]

24. Krugman is a joke

I would listen to the thoughts from George Bush, than I would this clown.

[girl gone mad]

25. You're like his full time web stalker.

[NJmaverick]

32. The problem is supposedly good DUers bring his freeper bull shit

and pollute our boards with it

[leftchick]

26. because he has always been wrong??

lol. Krugman has called this meltdown from the start. It is a sin that the Obama Wall Street Team refuse to listen to him.

[NJmaverick]

33. He hasn't been right, we can start with that

he called the meltdown the same time everyone else did.

[leftchick]

36. no he did not

hmmmm, I have not seen any proof from you to believe any of your claims.

[specimenfred1984]

27. Odd how you can't address his points and instead attack the messenger

Shows how little you know about economics, the markets, the gov't and politics. Krugman is correct about the "fixes" being applied and how they are completely wrong. I'd explain it but it would require at least a 3rd-grade mentality which is lacking in your response.

[NJmaverick]

34. The guy is no different than your average freeper

it's an insult to DUers to post his trash here

[Jim Sagle]

29. There's only clown on this thread, and it ain't the Krug man.

[NJmaverick]

35. Look in a mirror

[Jim Sagle]

40. Pppffffffbbbbbttttt!!!!!!

[JanMichael]

39. That's Dr. Clown, Nobel Memorial Prize recipient to you

if you don't mind.

Yeah. I have read his bio-- clearly just made his way through a couple of diploma mills, and is a total moron.

[Richard Steele]

41. Self delete. nm

[merkins]

28. The bailouts go beyond moral hazard.

The government is actually an enforcer of the banking scam since we will all have to pay for the bad assets through our future taxes on our hard work.

[xchrom]

30. kick

[McCamy Taylor]

31. Don't forget the Zombie Master, Carlyle Group.

http://journals.democraticunderground.com/McCamy%20Taylor/381

They wrote the book on getting something for nothing...and then selling it at a profit. This one is for them.

[high density]

37. Too bad we can't automatically filter out posts on this board that have "Krugman" in the subject lin

He sounds like a whiny crybaby these days. Obama has been talking about his toxic assets plan for months now yet now Krugman acts surprised when he sees the (rather obvious) details of it.

We DO have a confidence problem and I don't know why Krugman can't see that.

[eridani]

38. Yep. He's a crybaby. Just like all the homeless and unemployed people n/t