March 23, 2009

Krugman: Geithner's plan will almost surely fail

Posted: 08:30 AM ET

By NY Times columnist Paul Krugman

Over the weekend The Times and other newspapers reported leaked details about the Obama administration’s bank rescue plan, which is to be officially released this week. If the reports are correct, Tim Geithner, the Treasury secretary, has persuaded President Obama to recycle Bush administration policy — specifically, the “cash for trash” plan proposed, then abandoned, six months ago by then-Treasury Secretary Henry Paulson.

This is more than disappointing. In fact, it fills me with a sense of despair.

After all, we’ve just been through the firestorm over the A.I.G. bonuses, during which administration officials claimed that they knew nothing, couldn’t do anything, and anyway it was someone else’s fault. Meanwhile, the administration has failed to quell the public’s doubts about what banks are doing with taxpayer money.

And now Mr. Obama has apparently settled on a financial plan that, in essence, assumes that banks are fundamentally sound and that bankers know what they’re doing.

It’s as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street. And by the time Mr. Obama realizes that he needs to change course, his political capital may be gone.


Filed under: Economy • Paul Krugman • Sec. Tim Geithner

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Irene, TX   March 23rd, 2009 10:52 am ET

Make up your minds, people. He touches banks – he is a socialist. He does not want to touch banks – he is an incompetent fool. My God, you've been so busy ruining and destroying everything President does you can't even track your own logic.

I have a feeling that President Obama lives in a horror movie where he has to fight his way through slime, concrete and metal walls, alien monsters etc. It's kind of hard to get out of it squeaky-clean, untouched and unbruised, don't you think? There will be mistakes, mishaps and problems on the way, IT CAN NOT BE any other way considering the scale of current mess. Why don't you start thinking about America, not your sickening party priorities. Grab on to whatever good you see and help him to develop it further, unite, for God's sake! R & D, this is your job, this is what we elected you for! You sickening catfights are so low and so disgusting. Get it through your thick heads while we still have time.
I'm ashamed, it looks like American politicians are no better citizens of our country than Russian oligarkhs or Mexican drug lords are of theirs. It's all about money and power, at any cost. Shame, disappointment and sadness have been my prime feelings lately and I no longer watch any news...

Michael C. McHugh   March 23rd, 2009 11:08 am ET

I'm not all that worried if their paln does succeed. Frankly, I'd be happy if Wall Street and big business did not revive too quickly in this country, or in the rest of the world, for that matter. As long as they are weak and discredited, they will be in no condition to block necessary reforms in America and around the world, as they have been doing for decades. Moreover, as long as American big business is weak and discredited, so are the Republicans. You see what disarray they've been in for months? This should warm the heart of any progressive or reformer.

Now we might just have a chance to deal with the whole backlog of problems that have not been ignored since the 1960s: health care, education, housing, the environment, poverty, inequality and segregation, the huge disparity between the rich and poor in this world.

No reforms would be possible if Walll Street, American big business and the Republicans were in top form. They'd block every change, even every suggestion of change.

For this reason, I hope this Treasury plan doesn't work too well, too quickly, lest capitalism revive too fast. I know that it will eventually, but let's at least keep the monster down for a few years.

Valerie from Oklahoma   March 23rd, 2009 12:06 pm ET

You know when President Obama was first elected I was overjoyed with the possibility of change, but it has become quite evident to me that No.1 the Republicans don't want change. They want the President to fail at any cost which is ashame. 2nd. It seams as if the Democrats are just as corrupt as the Republicans with Dodd putting in the loop hole and lieing about it so that AIG could receive their bonuses.

I have come to the conclusion that everyone from the President on down through congress is corrupt and are only there for the money.

My excitement has now died. I don't watch much news now. I turn the channel everytime I see President Obama speaking, because I don't believe anything that any of them say now. If you ask me, they should have let AIG and all the other corrupt companies that received tax payers money to keep them afloat, drown.

America is known as the Land of the Free and the home of the brave. It should be known as the Land of the greed and the home of the shame. Shame on you Senator Chris Dodd. Shame on you Geithner. Shame on you Mr. President. If this is the change that you are going to give us, next time I want be voting and I am a Democrat. or should I say a former Democrat.

Terry, TX   March 23rd, 2009 2:22 pm ET

We have been Blagoviched with an "F". No more money...No more Pork...amend the bills to remove illegal aliens from receiving Pork money....No toxic assets...leave the economy will fix itself ....No more spending until we are healthy enough..stop all wish and welfare lists.

So government tighten your belt... American Taxpayers do your thing.. vote these morons out of here. ...

Irene, TX   March 23rd, 2009 2:50 pm ET

Valerie, I would not be so harsh on President Obama. My disappointment has nothing to do with him. Anyone who can read faces without prejudice can see a very decent, honest and very intelligent American citizen in President Obama. I expected resistance and struggle, but what is going on is beyond comprehension. I also have my doubts today... that even with all the necessary compromises, forced half-measures etc. (let's not be naive, any politics calls for compromises) he'll manage to turn into Frodo, get there and destroy the power ring... Greed and power thirst of those on his way are, again, beyond any comprehension and human conscience. Anything goes – bashing, fear planting, lies and make-beliefs, any flee they catch is blown into an elephant. I wish Americans would stop watching all the news for a week to catch their breath, stop and think – my Lord, what has happened to us? Where are we going with all this mutual hate and distrust? Who, and why, is nailing all these negative emotions into our heads, a new one each 5 minutes without giving us a split second to analyze or calm down? Who, and why, wants us to be frightened ignorant halfwits? Why didn't we ever hear from anyone but President himself – yes, this is not perfect, yes, this is no panacea, yes, we slipped but let's roll up our sleeves together and fix it. We are all Americans. Mr. President, take our hands and let's keep working. Our people are suffering.

What is President Obama, an absolute monarch? Professor of all science there is? Is he responsible for every action and decision while they are responsible for pointing fingers only?
The corrosion is so deep it must be untreatable by now. Seems like anyone who has been in power in DC for over 3 years is permanently affected and has overstayed h/h welcome. Change? We need a full power of CDC (Center of Disease Control) on Capitol Hill.

JIM CARROLL INTERNET FREE PRESS   March 23rd, 2009 3:45 pm ET

Do I want to know the truth about politics, business, science, religion, morals and life; or do I merely want to prove that the notions I already have about these things are correct?
Am I willing to lay aside the convictions of a life-time and all the traditions and beliefs of history and all the customs of my social class when I come into the presence of a new fact long enough to find out whether or not this new fact ought to change my point of view?
Have I ever, without mental reservation, prejudice, bias, set notions and dogmas, surrender my mind completely to the examination of the reasons for my most cherished opinions; that is, have I surrendered my mind completely to an acceptance of the truth, whether it lead me to heaven or hell?
HOW CAN THE INTELLIGENTSIA OF AMERICA BE SO BLINDED that they cannot see that the Federal Government must have a money system that can create and maintain an equivalent ratio of money to the goods and services that its peoples’ hands and minds can produce? Nature’s Basic Law of Economics states: All goods and services flow from the action of people resources on natural resources— Money is the medium of exchange which should be equal to the value of the goods and services—and not to a gold standard or some other insane idea. Jim Carroll

VKL-TWP   March 23rd, 2009 4:11 pm ET


VKL-TWP   March 23rd, 2009 4:26 pm ET


Darrick Jamison   March 23rd, 2009 4:47 pm ET

Barrack has shown me on his road to the White House that he can not only adjust on the lamb but he can make winning adjustments. It's only been 60 days! hahahaha. Are you serious? You really believe that this man will fail? Do you really think this man would stick to a failing course until he has destroyed everything? hahaha. Ok. Well I will take my chances. The last ride I was on crashed and burned. It was called the Bush/Cheney coaster.

WC-TxFirefighter   March 23rd, 2009 4:47 pm ET

I am a 24 year old who works hard for my money. I am a firefighter in Texas. When I watch all of the news, noone is willing to discuss the long-term effect that all of this spending will cause; especially after Today's announcement, but for Me, I am a concerned. I do not want a good amount of my money that I worked hard for going to taxes.

If you believe that there will be no taxes or no significant increase in taxes then you are a fool and need to do your research. What bothers me the most is that everyone is Washington and on the news channels will say yeah, there will be long term effects but then thats it and then they change the subject. Why would they care about the long-term effect that it will have. Most of them will not be around for it to effect them.

Pietro Sirianni   March 23rd, 2009 6:38 pm ET

Irene's right on. Is Obama still a socialist to the republicants now? Bringing in private investors to partner with the government is "CREATIVE CAPITALISM" not socialism.

Pietro Sirianni   March 23rd, 2009 6:41 pm ET

Yes the liberal boogey-man is back and he is going to tax you to death and give all your hard earned money to unemployed welfare recipients. Grow up or you might get what you want; 8 more years of Bush.

John from Iowa City   March 23rd, 2009 9:24 pm ET

I am a die hard republican but I yet have some faith in Geithner. He was selected by this administration due to his qualifications and so far he shows promise and real dedication. God knows that our past Treasury secretaries did much to improve our economic (if not only for a short period). These next few weeks and the end of next month will be the real time to judge this administrations policies in terms of the country's economic policy.

david   March 23rd, 2009 9:35 pm ET

Man this guy is great he can predict the future. I really think he has sour grapes I truly believe he wanted the Treasury Sec job. To the run up to the election Obama was his man he was right on point but now Obama team can't do anything right he sound like a spoil brat.

jaitori   March 23rd, 2009 9:37 pm ET

Give Geithner time to do his job. How many years did we give that other administration FREEDOM to ruin this country in so many ways?? Where were all these Republicans opposing Bush on his fiscal management? I laugh at their objections of the Stimulus program since it STARTED WITH BUSH. Didn't hear their mouths moving then...


CitizenAJ   March 23rd, 2009 9:42 pm ET

If Geithner's plan is such a failure we can always revert back to the plan that helped the economy get to this point and did not to strengthen it when the economy started tanking. That plan is the plan the republicans ran or failed to run for 6 years and the last two from the white house. So, the lead republican can "attempt" to rip Secretary Geithner's plan to shreds but he needs to remember, his plan, the republican's plan already shredded the economy. Secretary Geithner is trying to put it back together again and he needs all the kings horses and men!

Republicans and republican supporters, offer good ideas, solutions or continue to go off into the quiet of the night. Thank you very much!

Shirley Thomason   March 23rd, 2009 9:49 pm ET

It sounds to me like the Republicans just oppose everything this administration is doing without giving it a chance. They are just waiting to pounce on everything that is being done and really, I believe, just want failure. They ha ve not accepted the Democrats winning election yet. It's politics as usual. They are not serving their country well.

deb   March 23rd, 2009 9:59 pm ET

You are a bit late. Cuomo reports the bonuses will be returned!! Another success for the dems.

Judith   March 23rd, 2009 10:59 pm ET

I don't listen to all these know it alls about President Obama failing.
Where the heck were these people in 2007 when they all kept mum hoping that it fixes before the American people find out.The truth is the American people saw this bs that went down already in 2007 and could have been paid like all these know it alls on the shows.

Judith   March 23rd, 2009 11:03 pm ET

Terry from Tx. The economy will not fix itself.I understand your way of thinking.After all Bush came from Tx and he acted like it was going to fix itself.He kept saying economy is sound along with McCain who was campaigning at the time till all heck broke out.Guess all of them thought it would be fix before the American people would find out along with ones around the globe.

Judith   March 23rd, 2009 11:14 pm ET

President Obama did not make the mess.It was on the table waiting for him.All this bs didn't just come down the last 2 months.Obama before he because President said he's not saying nothing right now because Bush was still in office.He said we know it's not good but will not know UNTIL we go in.All going out Presidents leave a note for the next and I wonder why kind of excuse could Bush say in a note to Obama of what he was about to see.
Now Cheney is flapping his jaws with Fear.Cheney retired and should act like it.We had enough of him for 8 yrs.Rove too.
I think all of them are jealous that President Obama is a young man with great ambition and get do many tasks at the same time.
We all knew we were in a mess and that it would cost us bit $$ to get out of it.Anyones that thought different was in a dream world that doesn't exist.
The fights should Stop and we all should Unite for our America.

mcgary   March 24th, 2009 12:19 am ET

Look Judith. The breakdown started way before Bush got into office. First of all he took office during a recession. Eight months later we had 9-11. Everyone blames him for the war because he was Pres. If the same info came into the white house, the result would have been the same no matter who was President at the time. Were mistakes made managing the war, yes,but Bush was persecuted by the media and left wingers from day one. No one is supposed to say a negative word about Obama, but it was ok to bash Bush for eight years. As far as the housing market, some people were greedy and corrupt and the regulations were weakened in Clinton's terms. The republicans tried to put more restraints on Fanny about four years ago and the Democrats voted it down. The ones that are in charge of all the finance committees today are the ones that are being investigated for other fraudulent acts. It's all disgusting. As far as Obama goes, he lets Pelosi and Reid do their thing and then he says oh, well next time I won't sign the bill. The stimulus bill and the budget is the biggest bunch of crap there is and what is more disgusting is the Dems pushed it through with so much pork and nonsense and you and I as well as our kids and grandkids and their kids will be paying for it. Things will get so bad in the years to come, socialism will look like the best thing since sliced bread. So keep drinking the Kool-aid girl.

Ron Knight   March 24th, 2009 1:04 am ET

Boy the Republicans and conservatives just don't get it, be they democrats or liberals.
George Bush and his band of thieves messed up our economy so bad that we should be thanking a man like Obama for even taking the job of U.S. Presidency.
Someone also need to remind the conservatives(Republicans) that they also put our trust and image on the line around the world with their fear of terrorism they somewhat created. Also, if Republicans are so worried about our security why didn't they implement a practical and reasonable style of diplomatic strategy when they were in office for eight loooong years? I'll tell you why, because because they had no clue and that's why they don't have a leader today.
President Bush is right not to comment on the new President it shows he is a respectful man. But Dick Cheney is a worm and always will be. Shouldn't he be in jail for that shooting incident?
Leave Tim Geitner alone and let the man do his job. America is full of player haters.
Last of all McCain's daughter is bright and intelligent, I'm not a Republican but she would be a breath of fresh air for her party.

Oldtimer   March 24th, 2009 1:58 am ET

Lary King you are an amazing host. If I was sitting there listing to some of the coments made in response to your questions by your guest with supposedly the "best minds", I don't think I could maintain my composure.
I appreciate the fact that you let your guest say their piece without trying to push your opinion on your guest and the TV audience. Listing to the opinions of your various guest and reading the different blogs, the majority of people do not understand the democratic process that was set up by our founding fathers in the constitution.
Also, some people do not like any thing that President Obama says or does. In their eyesight he Is "Damned if he do, and damned if he don't." "He's doing too much, he's not doing enough."
In my opinion, these people do not seem to understand that we are all oonnected, and when one fails, we all fail. With the rising nationwide trend of self-centeredness, I feel sorry for my great-grandchildren and my great-great-grandchildren because the value of an individuals' life is fast aproaching zero. Now days, people have so much disregard and hatred for each other that it makes you wonder when and where will it all end?

Derek   March 24th, 2009 6:04 am ET

Boy, I think all the AIG member who got the tax payer money should return it 100% and tax on it because they all knew the their company was going down .
President Obama is just at the right road at this hard time which bush and his people put the whole world into, and hear come Cheney talking about the situation what in goods name his he talking about after spending eight years in the house with is father bush

Tunde Arogunmati   March 24th, 2009 6:51 pm ET

The Republicans are a bunch of negatively motivated partisan benchwarmers who should be hiding their heads in shame.
They are past their sell-by dates and are determined to commit political suicide at all costs.

Rich   March 24th, 2009 9:12 pm ET

We need to have a "Depression"......Americans are spoiled!! If people can't pay their's time to move back in with the "in-laws".......No buying of government buyin "toxic assets"......Let the Chinese buy the McMansions.........we created this mess ourselves......we've got to get out of it ourselves!!

Dan   March 24th, 2009 9:38 pm ET

I think we need to call this "Bonus Gate"!

It's a crime against the citizens of the U.S.A.
$80.5M of the bonus has gone to foreign nationals and we can't get that back.

How is that good for the country?

If the stimuluous package was given a proper review instead of being rushed through, we would have had a chance to catch this.
Why do we have to bailout anyone? Can we just allow economic natural selection take over, but keep it American owned?

Barack doesn't know what he's doing. All he is is a spin doctor and that's a bad think for the country.

Tunde Arogunmati   March 25th, 2009 7:35 am ET

O ye hawks of little faith, give these guys a chance; having been there only for 60 days There's only so much they can do to start repairing eight years of Nintendo gone amok!!!!!!!!!

Dave of Detroit   March 25th, 2009 8:42 am ET

Mr. Krugman-What would you suggest to an open President as a remedy for is poor judgement? "Poor", of course, as your judgement is far superior as evidenced by the fact that nobody really has voted for you in any election and you can safely make these decisions as the country will not rise or fall based on your "opinions!" I ask all the other critics in this column the same question-President Obama is wrong-He should do what you think is the right course of action-Well, what is it? Speak up!

Carl Guenther   March 30th, 2009 3:43 am ET

The market up-move is a fluke. Obama's plan will not work. Mark my words and prepare for the greatest depression. The numbers don't work.

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