Using Technology to Deepen Democracy, Using Democracy to Ensure Technology Benefits Us All

Saturday, September 20, 2008

Krugman Says "No Deal"

Not this time, crooks.
[L]ooking at the plan as leaked, I have to say no deal. Not unless Treasury explains, very clearly, why this is supposed to work, other than through having taxpayers pay premium prices for lousy assets….

[T]here’s nothing at all in the draft that says what happens next; although I do notice that there’s nothing in the plan requiring Treasury to pay a fair market price. So is the plan to pay premium prices to the most troubled institutions? Or is the hope that restoring liquidity will magically make the problem go away? ….

The Treasury plan… looks like an attempt to… convince creditors of troubled institutions that everything’s OK -- simply by buying assets off these institutions.

This will only work if the prices Treasury pays are much higher than current market prices; that, in turn, can only be true either if this is mainly a liquidity problem -- which seems doubtful -- or if Treasury is going to be paying a huge premium, in effect throwing taxpayers’ money at the financial world.

And there’s no quid pro quo here -- nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving.

I hope I’m wrong about this. But let me say it again: Treasury needs to explain why this is supposed to work -- not try to panic Congress into giving it a blank check. Otherwise, no deal.

Is the rapidly gathering storm of progressive pushback going to stave off total catastrophic capitulation for once? Fool me once, shame on…

No comments: