Heads, Wall Street wins; tails, taxpayers lose: Obama/Geithner continue Bush/Paulson bank bailout plan
Progressive economists (Krugman, Reich, Baker, Stiglitz) warn that time is running out on the Paulson/Geithner approach of trying to bribe the Lords of Finance who destroyed the economy with hundreds of billions of taxpayer dollars to fix it. The standard approach in such situations is nationalization/rationalization/ reorganization — the government temporarily takes over insolvent banks, fires the management, wipes out the shareholders, liquidates their worthless holdings, recapitalizes and reopens the strong banks and closes the weak. Instead, the Bush and now the Obama administrations continue to throw good money after bad, trying to resurrect insolvent (”zombie”) banks, running up huge deficits and getting nothing in return. How long will the taxpayers’ patience last?
Paul Krugman: Financial Policy Despair. “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.”
Robert Reich: Obama’s Wall Street Bailout Failure. “Before it can clean up Wall Street or do much of anything else, the administration has to clean up the way it’s been trying to clean up Wall Street.”
Harold Meyerson, Washington Post: The Nationalization Option
Joshua Holland, Alternet: Nationalize the Damn Banks
Dean Baker, Guardian (UK): Time for Bank Rationalization