Friday, April 10, 2009

The zombie ideas have won

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By John Nichols

Michigan Congressman John Conyers drew thunderous applause from a large, Obama-friendly crowd when he suggested Friday night -- on a stage we shared in western Massachusetts -- that Treasury Secretary Timothy Geithner has reached his sell-by date.

The next evening, at an event in rural Wisconsin, I made the same suggestion and got the same response. (The only louder and more consistent applause was for the suggestion that the United States should be withdrawing troops from Afghanistan, rather than sending them in.)

When you leave Washington, it very quickly becomes clear that Geithner -- and, more importantly, the Treasury secretary's approach to the economic meltdown -- has lost the confidence of progressives. He is Wall Street's man doing Wall Street's bidding, arguably as bad a player as anyone that John McCain would have put in the position.

Now comes Nobel Prize-winning economist Paul Krugman, with his assessment of Geithner's plan for using public dollars to help private speculators buy up toxic assets.

Krugman is brutal -- or, to be more precise, brutally honest.

"The Geithner plan has now been leaked in detail. It's exactly the plan that was widely analyzed -- and found wanting -- a couple of weeks ago. The zombie ideas have won," Krugman writes in his assessment for the New York Times.

"The Obama administration is now completely wedded to the idea that there's nothing fundamentally wrong with the financial system -- that what we're facing is the equivalent of a run on an essentially sound bank," the economist continues.

Krugman's bottom line:

"This plan will produce big gains for banks that didn't actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won't be able to come back to Congress for a plan that might actually work.

"What an awful mess."

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