In his column today, Nobel laureate economist and intermittent critic of the Obama administration, accuses the President and his economic team of "dithering" in their approach to the financial crisis. Writes Krugman:
Many analysts agree. But among people I talk to there's a growing sense of frustration, even panic, over Mr. Obama's failure to match his words with deeds. The reality is that when it comes to dealing with the banks, the Obama administration is dithering. Policy is stuck in a holding pattern.
Krugman then goes on to explain this "holding pattern." He calls the administration out for presenting vague and inchoate proposals aimed at settling investors' nerves. When each new plan is shot down by "informed commentators", the administration simply replaces the old plan with a new one, which is actually just a slight variation of its predecessor -- and so goes the cycle.
Krugman then goes on to discuss "zombie banks" and suggests that the administration is in denial as to the full extent of the crisis:
So why has this zombie idea -- it keeps being killed, but it keeps coming back -- taken such a powerful grip? The answer, I fear, is that officials still aren't willing to face the facts. They don't want to face up to the dire state of major financial institutions because it's very hard to rescue an essentially insolvent bank without, at least temporarily, taking it over. And temporary nationalization is still, apparently, considered unthinkable.