In my previous blog I commented about Henry Paulson leading the U.S. financial bailout plan. He, and people like him, seems to be too dazed by their own interests to make the best decisions for Main Street, hence the continued skepticism of the bailout plan. Although passed, the brakes on the stock market plummet are still not working. Here's what Paul Krugman says in The New York Times:
"The U.S should have been in a much stronger position. And when Paulson announced his plan for a huge bail-out, there was a temporary surge of optimism.
"But it soon became clear that the plan suffered from a fatal lack of intellectual clarity. Paulson proposed buying US$700billion worth of "troubled assets" - toxic mortgage-related securities - from banks, but he was never able to explain why this would resolve the crisis.
"What he should have proposed instead, many economists agree, was direct injection of capital into financial firms: the U.S. Government would provide financial institutions with the capital they need to do business, thereby halting the downward spiral, IN RETURN FOR PARTIAL OWNERSHIP (uppercase my own).
"When Congress modified the Paulson plan, it introduced provisions that made such a capital injection possible, but not mandatory. AND UNTIL TWO DAYS AGO, PAULSON REMAINED RESOLUTELY OPPOSED TO DOING THE RIGHT THING (uppercase my own).
"But on Wednesday, the British Government, showing the kind of clear thinking that has been all too scarce on the US side of the pond, announced a plan to provide banks with 50billion pounds in new capital - the equivalent, relative to the size of the economy, of a US$500billion program - together with extensive guarantees for financial transactions between banks.
"And the US Treasury officials now say that they plan to do something similar, USING AUTHORITY THEY DID NOT WANT BUT CONGRESS GAVE THEM ANYWAY (uppercase my own)."
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Paul Krugman won the 2008 Nobel Prize for Economics. He is an economics lecturer in Princeton University since 2000. He is a blogger and he writes for the New York Times.