As you know, I do not understand why President Obama is pussy footing around with the big banks like Citigroup.
If they’re insolvent, you let the FDIC seize them, clean them up, and sell them off. You don’t go into business with them, as the Obama administration has done, and make the nation’s taxpayers partners to their mismanagement.
(See my post Good nationalization or bad nationalization?”)
Ove the last week I’ve read some off-the-record comments from administration officials that try to justify their actions. Throwing Citigroup into conservatorship would cause chaos in the debt markets, they say, trigging the payment (or non-payment) of untold numbers of credit default swaps.
They can’t risk turning Citi into another Lehman Brothers, wreaking havoc on the world’s fragile debt and credit markets.
But that doesn’t seem to worry Paul Krugman. 
“When it comes to dealing with the banks, the Obama administration is dithering,” Krugman wrote in today’s New York Times.
“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,” Krugman says. “And temporary nationalization is still, apparently, considered unthinkable.”
You go Paul.
(6 votes, average: 4.33 out of 5)
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