Allowed To Fail
I'm being driven nearly mad by the new Republican line propagated by McCain and Shelby that we need to "let these banks fail" instead of nationalizing them. I'm an idiot when it comes to economics, but even I'm not that dumb. (And I didn't have nearly 50 million people vote for me for president either.)
On Shuster today, Krugman very calmly explained that if what they mean by "letting them fail" is that we put them into receivership, then they're right. After all that's what the FDIC is doing about twice a week now with banks all over the country. If it makes these bozos feel better to call it "letting them fail" rather than "nationalization" that's fine with me. Maybe that's a good way to phrase it. Unfortunately, it's pretty obvious that they don't understand it that way. They think these banks can go "bankrupt," just close the doors and stop operating like the corner hardware store. Apparently they don't understand that the government has to take over banks that are deemed to have failed.
Others much smarter than John McCain and I don't understand why the Treasury Dept is so reluctant to nationalize these big banks after all this time and money has been spent propping them up to no apparent avail. But the fact is that nationalization is exactly what will happen if these banks are "allowed to fail."
The campaign showed that McCain is one of the dumbest members of congress on economics and it's clearer ever day that the world dodged a bullet with that one. It's bad enough that we are all feel like our minds are swimming in quicksand when it comes to understanding this banking crisis. To have these "leaders" out there saying completely stupid things in the face of it is simply breathtaking.
Shuster also asked about John Boehner's absurd suggestion that we should freeze government spending. Krugman showed great forbearance, explaining the "paradox of thrift" and mildly suggesting that these people seem to be ignoring the last 80 years of economic thinking. I think it's actually quite clear that these self-professed guardians of the free market and the capitalist system know less about economics than the average high school sophomore. And that is profoundly disturbing.