"This Economic Disaster Demands Even MORE Aggressive Action Than Obama Has Taken"

[leftchick]

this is for the folks that think we can give Obama time to fix this mess. The "He has only been in office six weeks" crowd. We can't! It may already be too late.


Obama's Bailout

The Nobel Prize-winning economist says there's only one problem with the president's $787 billion stimulus plan: It isn't big enough

PAUL KRUGMAN

Posted Mar 03, 2009 9:48 AM

http://www.rollingstone.com/politics/story/26430979/obamas_bailout/print

If these were normal times, it would be ludicrous to issue a report card on the Obama administration's economic policies. Only a few weeks have passed since the new president was sworn in, and many important economic positions have yet to be filled. As some wags put it, we're still at the stage when officials are trying to find their way to the bathroom.

But these aren't normal times. Barack Obama took office in the midst of the worst economic crisis since the Great Depression, a crisis requiring immediate action. Indeed, some people, myself included, had hoped that the outgoing Bush administration would work with the incoming team, allowing Obama to take action before moving into the White House. But it soon became clear that as Obama tries to deal with the crisis, he will get no help from Republican leaders. Instead, he'll face obstruction and lies.

So our new president is on his own, scrambling to meet a crisis that is far worse now than it was when he won the 2008 election. How's he doing?

The short answer is, very well by any normal standard — especially when you compare it with what a McCain–Palin administration would have done. Indeed, not since FDR has a new president moved so aggressively on the economic front.

But the current economic disaster demands even more aggressive action than Obama has taken so far. What's truly scary is the breadth of the crisis. What began as a housing bust mutated into an implosion of the entire financial system. What began as a recession centered in the United States has gone global, with industrial production plummeting from Ukraine to Japan. Falling home and stock prices have wiped out a decade of savings, and consumers have slashed spending in a way they didn't in previous recessions. Losses from the housing bust and debt defaults have crippled the banking system; the resulting credit squeeze, in turn, has worsened the housing bust and fueled a sharp fall in business investment. And exports are plunging too, as the slump spreads around the world.

As a result, we're staring into the abyss: Without an effective response by the government, there's no telling how deep this slump might go. To promote more spending, the Federal Reserve has cut interest rates to almost zero and has vastly expanded its activities, financing everything from assets backed by credit-card debt to the operations of insurance companies. But while these efforts may have eased the credit crunch somewhat, they have been nowhere near enough to turn the economy around.

So now it's up to the Obama administration.

[opihimoimoi]

1. K&R #4

[Octafish]

2. Obama knows.

It's just that he has to get the rest of the government along with him, as well as the press, IMO.

You know what makes that so hard to do.

Through his articulate warning, Krugman's doing a yeoman's service toward making that a reality.

[librechik]

3. rec # 5--This seems to be true--and yet the shrieking about spending from the other side

is a distraction and a curb. Don't listen, Mr. President! Do the right thing!

[TBF]

4. I agree he needs to do more - but "stimulating" the banks hasn't worked very well

now has it? Now it's time to redistribute with some government checks to the other 99% of the country. Then maybe people could pay their bills, buy some food, a few who still have jobs might even go out and splurge at the local shops.

Obama's not giving it to the right people.

[leftchick]

5. we can only stimulate the banks by taking them

cleaning them up, fire management, and regulate the hell out of them. Every single economist of any worth has been calling for this for months now. I hope obama is not completely entrenched with the wall street crooks he can't see the forest for the trees. Hell practically his whole economic team of advisers are from wall street and made millions off this theft!

:argh:

[TBF]

11. I agree - even temporary nationalization to clean up would help.

The same people who caused these problems should not be sitting on their yachts watching everything crash. Time to "investigate" the hedge funds as well. They need to go into the most profitable ones with subpoenas for documents and figure out who to put in jail.

To start.

[leftchick]

6. Nationalize The Banks Already!!!

<snip>

There is one more option, however. The government could put money into the banks in return for a commensurate share of ownership. What that would mean in practice, for at least some of the biggest banks, would be nationalization. Think of it this way: Citigroup and Bank of America probably need hundreds of billions of dollars in additional capital, yet as of February 26th, their combined stock–market value was less than $40 billion — and even that figure was inflated by the lingering hope of receiving a government handout. There's really no way for the government to inject the capital these banks need without either providing that handout, on a grand scale, or taking ownership itself.

A number of people have followed this line of thought to its natural conclusion — including some people whose names might surprise you. Maybe it's no big deal that Sen. Chris Dodd of Connecticut has said that temporary nationalization may be necessary, but so has Sen. Charles Schumer of New York, usually a defender of the investment industry — and so has none other than Alan Greenspan.

At the time of this writing, however, the Obama administration still wasn't willing to go there. On February 10th, Tim Geithner, the Treasury secretary, purportedly laid out the administration's bank plan — but nobody understood what, exactly, he was proposing, probably because the administration itself hadn't decided what to do. Even Obama has been cagey about the matter, praising the "Swedish model" (Sweden nationalized some major banks in the early 1990s) but suggesting that the United States is different.

Why the hesitation? The bankers themselves, not surprisingly, insist that a government takeover would be a terrible idea. And then there are the cries of "socialism" coming from the usual suspects, along with assertions that governments do a very bad job of running banks. Actually, as many of us have pointed out, the lesson of the past few years is that bankers do a very bad job of running banks — it was the private sector, not the government, that lost all that money. And in an important sense, the banks are already socialized: They're getting lots of government money, and the government has made it clear that they won't be allowed to fail. In effect, the government already owns their possible losses; why shouldn't it own their possible gains?

[leftstreet]

7. The Predator Class luvz 'nationalization' if it's temporary. Screw that!

They don't mind if we the people temporarily take over their ShitiBanks, eat the toxins, then hand them back to the exalted 'private sector.'

No Orwellian Nationalizations!

[leftchick]

8. my preference

would be to keep the worst offenders nationalized and the ones that go back to the private sector are heavily regulated so they can not fucking steal what is left in the treasury.

[leftstreet]

9. You mean there's money left in the treasury?

I keep expecting the Team of Rubins to start holding bake sales.

:hi:

[biopowertoday]

10. thanks for the post. I agree.