Krugman on Paulson: Daddy doesn’t know best

[BurtWorm]

http://krugman.blogs.nytimes.com/2008/09/22/daddy-doesnt-know-best/

September 22, 2008, 6:11 pm


I’ve had more time to read the Dodd proposal — and it is a big improvement over the Paulson plan. The key feature, I believe, is the equity participation: if Treasury buys assets, it gets warrants that can be converted into equity if the price of the purchased assets falls. This both guarantees against a pure bailout of the financial firms, and opens the door to a real infusion of capital, if that becomes necessary — and I think it will.

Can this be done? Can the Paulson juggernaut be stopped? I’m starting to think yes. Paulson displayed a lot of arrogance here — he basically marched in and said Daddy knows best, don’t worry your pretty little heads about the details. He offered no, zero, zilch explanation of how the plan was supposed to work — just “it’s a crisis and we need to act now.” And he overreached, especially with that demand for immunity from any review.

Now we’ve had a lot of pushback from economists and financial analysts, and the realization has sunk in that this particular daddy has shown very little sign of knowing best. So there’s a real chance to do something quite different.

[BurtWorm]

1. kick

[jjanpundt]

2. Krugman just gets it everytime n/t

[tigereye]

3. I think Dodd is great - hopefully folks will fully think this one through...