From NYT writer, and Nobel economist, Paul Krugman:
So now we have a bank crisis. Is it the result of fundamentally bad investment, or is it because of a self-fulfilling panic?...What's most disturbing isn't that Krugman may be right. It's that we can't name a single senior Obama economic adviser who represents the Krugman/Stiglitz wing of economic theory and policy. It's not a matter of expecting Obama to buy, and implement as policy, every single thing that Krugman and Stiglitz say. But it's not clear that anyone is even listening to what they have to say, or representing their philosophy at the table when options are being discussed. That is scary. And it's what the last guys who messed up our economy used to do.
Now, early on in this crisis, it was possible to argue that it was mainly a panic. But at this point, that’s an indefensible position. Banks and other highly leveraged institutions collectively made a huge bet that the normal rules for house prices and sustainable levels of consumer debt no longer applied; they were wrong....
Why am I so vehement about this? Because I’m afraid that this will be the administration’s only shot — that if the first bank plan is an abject failure, it won’t have the political capital for a second. So it’s just horrifying that Obama — and yes, the buck stops there — has decided to base his financial plan on the fantasy that a bit of financial hocus-pocus will turn the clock back to 2006.
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