Update (11:42PM): Krugman offers lukewarm support for the plan in his new column, but warns that the plan isn't going to fix all our financial problems, putting a premium on who we elect as our next president:
The bailout plan released yesterday is a lot better than the proposal Henry Paulson first put out -- sufficiently so to be worth passing. But it's not what you'd actually call a good plan, and it won't end the crisis. The odds are that the next president will have to deal with some major financial emergencies.
So what do we know about the readiness of the two men most likely to end up taking that call? Well, Barack Obama seems well informed and sensible about matters economic and financial. John McCain, on the other hand, scares me.
Krugman says he wishes Obama had been more out front on the bailout bill (apparently forgetting that it was Obama who first used the line "no blank check"), but he saves the brunt of his ire for John McCain. Krugman details the long list of McCain failures on the economy, ultimately concluding that McCain's approach to modern economic issues is "frightening" and questioning whether McCain has "the judgment and temperament to deal with" them.
Original post:After reading the legislative draft, Paul Krugman offers a tepid acquiesqence to the bailout deal, but with a caveat.
On the deal itself, Krugman says:
The plan's real traction, if any, is in (2), which is a backdoor way to provide troubled firms with equity -- and the bill seems to say that taxpayers have to own this equity, although I wish it was clearer how much equity will be judged sufficient.
Not a good plan. But sufficiently not-awful, I think, to be above the line; and hopefully the whole thing can be fixed next year.
Krugman does offer a caveat, however:
House staff tells me that there are significant changes from this draft. More info when I get it.
The draft he was reading was posted on CNN.com and is an earlier version than the one on Huffington Post.
According to news reports, the deal has now been finalized, but no matter what they are saying, Krugman raises an important issue, which is that we need to be wary of any bait-and-switch efforts on the part of Congress, particularly on equity warrants.