A better bailout
by Joshua • Sep 30th, 2008 at 8:25 am • 4 comments
A friend of mine spent a semester interning at the Center for Economic and Policy Research, an economic think tank in Washington, DC. She was convinced that Dean Baker is a brilliant economist, and because of my respect for her judgment, I often read his columns. Take a look at his latest, posted at Huff Po. Here’s a key element that may become part of the bailout plan:
How do we go about getting the banks in order? Almost every economist I know rejects the Paulson approach and argues instead for directly injecting capital into the banks. The taxpayers give them the money and then we own some, or all, of the bank. (That’s what Warren Buffet did with Goldman Sachs.)
Comment by Brian on 30 September 2008 at 8:38 am:
This is what Paul Krugman has been saying too. I can’t imagine they change the plan so drastically at this point, though. I suspect a largely similar version of the same bailout plan that just failed will be passed in a couple days.
Comment by Allan Niemerg on 30 September 2008 at 10:11 am:
Yes, it is certainly the best way to recapitalize banks. But it doesn’t do anything to break the logjam in the mortgage-backed securities market. And as long as those sit on banks’ balance sheets, it will severely limit their ability to make loans. Does that mean that the U.S. government should swoop in and buy them? I don’t know. So while direct re-capitalization would be superior, it only addresses one problem.
Pingback by Peter to Pay Paul : Urbanagora on 22 October 2008 at 3:48 pm:
[...] It has been suggested that if the United States just nationalize the banks by buying a shares in an effort to “fix” the banks and to instill confidence in the banks, much like Buffet has done in the past. Josh referred to an idea a while back in another post. [...]
Pingback by Peter to Pay Paul : Urbanagora on 22 October 2008 at 3:48 pm:
[...] It has been suggested that if the United States just nationalize the banks by buying a shares in an effort to “fix” the banks and to instill confidence in the banks, much like Buffet has done in the past. Josh referred to an idea a while back in another post. [...]