Christina Romer, chairwoman of the White House Council of Economic Advisors, took umbrage with early critiques of the president's plan to buy up toxic assets from Wall Street banks on Sunday. Responding to New York Times columnist Paul Krugman, who declaring the blueprint an "awful mess," Romer called the administration's critics "just unfair."
Appearing on CNN's State of the Union, Romer pressed forward with promotion of the administration plan that would take a trillion dollars, culled from taxpayers and private investors, to buy up risky and distressed assets. When asked about the poor early reviews, she shot back.
"I think that's just unfair. Keep in mind why we are doing this. It's precisely because banks have these [toxic assets] on their books... We are trying to help the taxpayer by using the expertise of the market by trying to set the price for these toxic assets... It is going to be safe, we very much have the taxpayer's interest in mind, but we also very much have the interest in the economy in mind."
As Romer sees it, the taxpayer will be investing money -- in this case, a large portion of the $1 trillion -- but also receiving substantial opportunity for rewards. Removing the toxic assets from the banks' books will help get lending going again, the administration argues, and should those assets gain in value, taxpayers will stand to profit. But others aren't so impressed. And in his blog for the Times, Krugman took the administration to task for misunderstanding the key components of the current banking crisis.
"The Obama administration is now completely wedded to the idea that there's nothing fundamentally wrong with the financial system -- that what we're facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.... What an awful mess."