Monday, February 9, 2009

Radical Crisis Requires Radical Measures

Robert Kuttner writes:

Obama's problem is that his key economic appointees are averse to radical solutions to a radical crisis. Geithner and National Economic Council chief Larry Summers have both been quoted saying that governments "make poor bank managers." Geithner's own track record as point man for the rescue efforts of the Bush administration certainly proves his point, at least as far as his own work is concerned. But in fact, the Federal Deposit Insurance Corporation, which does take over failed banks from time to time, has an excellent record of sorting out their balance sheets, nursing them back to health, and then returning them to the private sector. The Treasury lacks this competence. This is all the more reason for government to build up the necessary expertise and then take over failed banks, rather than just pumping in money and intervening in fits and starts.

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