10:55 p.m., Aug. 31
Two Nobel Economists Denounce Geithner Plan for Lining Wall Street Pockets
Nobel Prize-winning economists Joseph Stiglitz and Paul Krugman today (March 24) lambasted the plan by Treasury Secretary Tim Geithner to take more than $1 trillion of smelly assets off banks' books. The plan would use massive amounts of taxpayer funds to subsidize private sector buyers of the near-worthless debt. The subsidies could be as much as 90 percent. Thus, there is essentially no risk for Wall Street, whose stupidity and gambling proclivity have driven the global economy to the brink. Stiglitz of Columbia University denounced the "perverse incentives" of private investors getting all the upside without taking risks. It's "a robbery of the American people," says Stiglitz, who thinks it will fail once the taxpayers wake up. Krugman, a Princeton professor and New York Times columnist, says it is a "sweet deal" for Wall Street but bad for taxpayers. He likens it to earlier flops proposed by former Treasury Secretary Henry Paulson. The plan is grounded on the idea that the big market losses and economic declines are the result of "irrational panic." Through bribery, the government is trying to make Wall Street feel better (it rallied wildly yesterday; after all, it was getting free money). Supposedly, this will help everybody else feel better. However, the miseries of this recession weren't irrational and can't be wished away, says Krugman. "You can't have the centerpiece of financial policy based on hope," he says.