Paul Krugman's blog has a very interesting post titled
Mysterious plans
I am an unapologetic Krugman fan. IMO his ability as a communicator equals his ability as economist. In this post he strongly confirms my sense about Geithner and the banks.
I’m trying to be sympathetic to the various plans, or rumors of plans, for bank aid; but I keep not being able to understand either what the plans are, or why they’re supposed to work. And I don’t think it’s me.
He goes on using a very simple graphic illustration to explain why switching government holdings in the troubled banks from preferred shares to common shares is simply a big time shell game.
He ends with this ringing statement:
I just don’t get it. And my sinking feeling that the administration plan is to rearrange the deck chairs and hope the iceberg melts just keeps getting stronger
.
If Paul Krugman can't figure out the point of this economic sleight of hand, then it seems unlikely that the rest of us are going to be able to.
What we have here is a case of the emperor's new clothes. That brings us series of diaries on Daily Kos telling us that these clothes are the latest thing in the height of fashion and that it is only out lack of faith in the wisdom of the Obama economic team that prevents us from understanding that.
Unlike some I am not inclined to ascribe nefarious corruption to Geithner and Summers. I think that in this situation they don't know what to do and the the administration is immobilized by internal dissension. This is not a situation that will benefit by people politely giving them more time. The problem is not one that will simply stand still. Delay and indecision are making it steadily worse.