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Originally Posted by mary
Has anyone read Krugman's proposal? He is suggesting that we just directly injecting financial capital into the banking system by buying equity in the banks. There seems to be alot of agreement among economists that this is a good idea.
Thoughts?
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that is the basic idea that is most appealing to me, overall.
the counterargument (that Paulson has outlined several times) is that this doesn't force the bad assets into the light of day.. it leaves them festering on the books with still uncertain and fluctuating value. In Japan the governemtn just kept on injecting capital into their floundering banking system after 1988, without ever forcing the banks to come to grios with their shitty assets... the reslut was that the banking system sort of limepd along festering for 2 decades (and Japan overall did as well)