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Wednesday, September 24, 2008

What's wrong with this idea? Nutin!

The editorial page of the Wall Street Journal asks what's wrong with going thru the FDIC to clean up the mess, give taxpayers equity in assisted institutions, close rotten banks and recapitalized other banks with Treasury $ through the FDIC. Why didn't I think of this?

http://online.wsj.com/article/SB122221388577369225.html

5 comments:

Andrew_Grodner said...

It seems that FDICIA provision was introduced for exactly this type of crisis and maybe indeed Paulson is just reinventing the wheel with his new proposal. Here is an interesting discussion how it relates to the Paulson plan: http://everydayecon.wordpress.com/2008/09/23/the-savings-and-loan-crisis-the-rtc-and-the-paulson-plan/

Great link, thanks for posting.

Andrew_Grodner said...

After some research I realized that this summer both Bernanke and Paulson were discussing inadequacies to deal with the current crisis using FDICIA:
http://www.gracecheng.com/releases/2008/07/10/bernanke-paulson-press-congress-for-regulatory-reform/
http://www.forbes.com/2008/07/10/bernanke-house-transcript-biz-cx_0710bernanke.html

So maybe they have to sell, or actually explain "The Paulson Plan" a little better, or maybe they need to revise it, or at least put it better into perspective (keyword: educate the lawmakers). But they probably need to do it fast because it seems that SOMETHING has to be done SOON.

student said...

Paul Krugman brought up this idea almost immediately after the legislation was first announced.

Randall Parker said...

Paul Krugman is nobody's fool. When he sticks to economics he is a real resource. When he goes into political psychobabble, he is a terrible liability.

student said...

I couldn't agree more