TARP II: Krugman Slams Obama Plan For Second Bailout

On Thursday, news came out that Treasury officials are planning a second bank bailout -- one that could cost another $1 to $2 trillion.

In a blog post titled simply "Bad," New York Times columnist Paul Krugman calls the proposal "Hankie Pankie II," and writes:

"[I]t occurred to me that an updated version of an old Communist-era joke may be appropriate: under Bush, financial policy consisted of Wall Street types cutting sweet deals, at taxpayer expense, for Wall Street types. Under Obama, it's precisely the reverse."

Krugman was not a fan of the first bailout either.

Comments

[research]

It's the Derivatives 600 trillion dollar debt.

Look it up.

[sdberg04]

As i overhear continued discussions regarding TARP, bailouts, economic troubles and job losses, isn't it odd that simplicity is overlooked?

If most agree that the housing debacle roots many problems, such as foreclosures, bad debt, loss of construction jobs-materials etc., and a defined stimulus program cannot be agreed upon and/or identified, why not implement the following:

A 6 mo.deferme­nt for all qualifying primary mortgages whereas, if the loan was issued within a predetermined "bubble time frame", primary homeowners could be eligible for a 6 month deferment.

all prevailing rates and terms may be applied. 6 mos. would be added to the term of the loan.

This would free up money, increase spending, create jobs, opportunities, and perhaps add hope to the struggling auto industry.

hope and faith would be restored. Since the banks are getting $trillion or so, and aren't receiving monies from struggling homeowners, the "good paper" could be preserved while the bad debt could be relieved while we sort out this mess.

THE ALTERNATIVE:

Paying banks with tax holder money and throwing the American public out of there homes could prove to be disastrous.

Stephen Berg
West Palm beach, FL

[MortgageHolder]

Perhaps my understanding, thinking and problem solving is too simplistic for the sophisticated, complicated mess that has finally erupted. But...How about this Mr Obama. Instead of giving these corrupt mega, multibillion dollar banks billions and trillions of dollar bail outs to lend out more money to keep the economy hopefully afloat, how about this.... Enforce or pass into a law that the banks, mortgage holders offer to these struggling homeowners a remortgage deal for a very small nominal fee the homes that were grossly, perversely over inflated. For example...­.If my current mortgage is $500,000 but now the property is worth $300,000 the bank should show some accountability for their greed. Many of the people were sold this over inflated nonsense based on the American Dream of owning their own home. All those involved in this crime should be ashamed, not to mention accountable. So much for integrity, honesty and the real American Dream....

[Rule Of Law]

For those of you who say Krugman offers no solutions, do a little work and at least read his articles on his web site. He and a group of the best non-Wall Street affiliated economists have offered much already. Do the work, stop your whining here, and look it up!

And for those of you who value "loyalty," whatever that means to you, over open and free discourse, remember that when Bush was running for office that the American Heritage think tank very forcefully suggested to him that he fill the positions in his White House with people who were loyal first, and competent if he got lucky. Remember "Heckuva job Brownie!" ? That's what you get when you go with loyalty over ability--every time!

[Lemmy]

And today we hear that Krugman wants Obama to act NOW on universal health care. Has he been paying attention? This is yet another example of how Krugman lives in his classroom and not in the real world.

[research]

http://krugman.blogs.nytimes.com/

spend 4 trillion investment in the real America, promote the general welfare.

nationalize the banks, at least for awhile, since they can NEVER pay their $634T OTC derivatives debt.

[steveinohio]

Could it be that his solution is to offer no solution? Let them deal with their own collapse?

[sueno]

I like Krugman, yet for someone who just won a Nobel,
I would expect more details rather than hot GOP air from him.
We are in a crisis and the best minds that we have,
grab the highest seats in the stadium, throw insults
rather than get in the game and help run the ball.
Until Krugman comes up with a plan, he needs to stop whining-

[Pharos]

I've generally liked Krugman's opinions but there is no substance here, in fact there is nothing at all. Saying something is a bad idea is worthless without explanations and alternatives. Krugman knows how to articulate his position. What's going on here? This is way beneath him.

[Doofus]

There is no (apparent) substance because Krugman, frustrated, is
addressing other economists more than us. There is a group of
Chicago School economists around Obama who vigorously
disagree with Krugman's ideas.

Do the Google on Freshwater Economics and Saltwater Economics
and you'll get some idea.

[Doofus]

Further...

Under capitalism, those who make investments are supposedly risking their wealth to possibly make profits, possibly lose their money instead. As has been noted, this model breaks down when those capitalists are so wealthy that when they lose, the capital markets collapse. 'When the Really Rich might get less so, then the Government can't let that happen.'

Krugman is suggesting: Let it happen, already. The Chicago School believes
in the success of markets, not 'markets failing'.

[Kiabell04]

Krugman...­.here's an idea. Stop whining and comeup with solutions.

[Carolab]

Treasury Discloses Secret TARP Documents

Tim Geithner is moving fast. In this addition to the US Treasury's website made available literally hours ago, he discloses a variety of TARP-related documents that had not been publicly available previously, most notable among them being this disclosure about the Targeted investment program that the Treasury has established w/r/t keeping Citi alive.

The following statement is Geithner's justification to maintain a "transparent" view of the financial system "In the coming weeks, we will unveil a series of reforms to help stabilize the nation's financial system and get credit flowing again to families and businesses. Included in those reforms will be a commitment to increase transparency and oversight. Today, we are taking a step toward increased transparency by committing to place all of our TARP investment agreements on the Internet so that taxpayers can see how their money is being spent and the terms these institutions must agree to before we invest taxpayer money."

Enjoy the reading.

http://zerohedge.blogspot.com/2009/01/treasury-discloses-secret-tarp.html

[PhilipTaylor]

World Instrument Graph shows decent 2008 drop in amount of Toxic paper in this graph (still very BIG):

http://www.securitization.net/pdf/CSFB/ABCP_31Aug07.pdf

[Carolab]

Latest data:

http://www.securitization.net/pdf/CSFB/ABCP_23Jan09.pdf

[PhilipTaylor]

http://www.nakedcapitalism.com/2009/01/how-to-waste-350-billion.html

This illustrates my fear that Paulson had a bunch of lawyers and finance people go through every word in the 400 page TARP Bill and find a way to give his Bankster Friends a free ride with no strings attached.

I wish the FBI had taped Paulson like they did Illinois Gov.

[PhilipTaylor]

$4 Trillion can not scratch the surface on this $400 to $600 Trillion problem.

$4 Trillion could open up a "Lincoln-Type Government Bank"

This is exactly what the Government should do and let the BIG Corrupt Dinosaur Banks go down the path they have set for themselves.

Lincoln did it during the Civil War and issued the GREENBACK!

The Big Banks that survive can compete with the Government Internet Central Bank (ICB) who offers its services using the Internet and ATMs (no branches). Automated Loan apps on the Internet and Deposits and Withdrawals from ATMs. Credit/Debit cards for buying and payment. Low Rates and Fees offered directly to Consumers and Small Businesses.

Competition will keep rates and fees low, force "Truth in Lending", and contract simplicity!

This cuts out the need for long lines in Bank and removes the many of the Corrupt Middle MEN (Banksters)!

[HMDMSR]

Would the $600 trillion in world liabilities "problem" be settled by netting? Your U.S.Bank idea is interesting.

[PhilipTaylor]

According the the Basel II organization in 2007 the Derivative­s/Instrume­nts in the World was over $1 Quadrillion ($1140 Trillion). It went down in 2008!

The US portion is probably over half of the World amount!

See Graph:

http://www.securitization.net/pdf/CSFB/ABCP_31Aug07.pdf

[suzyku]

It's time that Krugman shut up! If he has something worth while to say let him contact the Obama administration and talk to them instead of whining and complaining in his column!

[flyingmonkey]

Yes, lets squelch all dissent, no matter how thoughtful or intelligent.
Krugman foretold this financial debacle before anyone else did.
He is neither whining or complaining. He's stating a valid, educated opinion respectfully. You might want to read his column instead of whining and complaining about it based on some Huffpo cliffnote version.

[gmtwin02]

I like Krugman but he does not want serve in the administration. Which kinds of pisses me off. If he has really good ideas he should have lobbied to participate in the admin. Why don't Americans take part and fix the problem instead of watching at home.

Republicans aren't Racists
Racists are Republicans

[senorlou]

It pisses me off too. We need this guy making big decisions right now. I don't know what he's afraid of. He said something like, "I can do more good from where I am right now." Yeah, writing columns has made him more famous, but let's put it into practice.

[moongal6]

Krugman didn't have to lobby, Obama asked him for his participation and help.
Apparently, Krugman decided he would just rather whine. Krugman is diminishing his own ideas and reputation with his attitude.
He must have a bee in his bonnet about Hillary.

[GrainOSand]

Mr. Obama,

I do not have my hand out to government. Government has not been a help but a hindrance (all my life). That has been my experience. I am pleased by your election to President of the United States of America. It is indeed a great moment when this country has finally come into kindergarten concerning the ability to judge humans. I build no statues in the park to commemorate this time. I build no monasteries to symbolize the greatness of America. Race should have never been a factor. Gender should have never been a disqualifier. Greed and self-interest should have never ruled the day. The campaign waged by McCain/Palin was indicative of all that is wrong with America. The game you have to play to arrive at fairness and decency in leadership is equally indicative. There is no partisanship, no Left or Right. Who has time for games of semantics? I do not, life is ever changing. If you learned anything as a community organizer on the south side of Chicago, you learned what suffering in America looks like. You learned the pervasive nature of evil plans hatched long ago.

Poverty is not a racial issue, nor is joblessness, homelessness, lack of health care, the inaccessibility of higher education, ignorance, fear, doubt, or despair. These conditions persist throughout America. My mother is my greatest hero and that is because she chose to love when sellout was easier. I trust you know this spirit President Obama.

[kgb999]

with $4 trillion, couldn't we just open up our own bank - the only one in the world with actual money?

[Carolab]

We could actually just buy the Fed, but since we are borrowing from the banks who own the Fed...well you see the problem.

We need our own currency..­..but the powers that be have an interest in keeping the dollar as the world's reserve currency.

And China has a lot of dollars:

"Increasingly, the Chinese will own a lot more of the world because they will be converting their dollar reserves and U.S. government bonds into real assets.

That changes the power relations. The powershift toward Asia is a consequence of the sins of the last 25 years on the part of the United States."

--George Soros

http://www.huffingtonpost.com/nathan-gardels/soros-end-of-financial-cr_b_134008.html

[Carolab]

Yes. We could issue our own currency, as the Constitution provided--not Federal Reserve debt notes.

[PhilipTaylor]

This is exactly what the Government should do and let the BIG Corrupt Dinosaurs go down the path they have set for themselves.

Lincoln did it during the Civil War and issued the Greenback!

The Big Banks that survive can compete with the Government Internet Central Bank (ICB) who offers its services using the Internet and ATMs. Automated Loan apps on the Internet and Deposits and Withdrawals from ATMs. Credit/Debit cards for buying and payment.

Competition will keep rates and fees low and force "Truth in Lending" simplicity!

This cuts out the need for long lines in the Bank!