Don't Listen to Krugman— This Plan Might Work

Pearlstein lays into fellow columnist
By Jason Farago,  Newser Staff
Posted Mar 24, 2009 7:51 AM CDT
Don't Listen to Krugman— This Plan Might Work
Paul Krugman, Princeton University professor of economics and international affairs, after he was announced the winner of the 2008 Nobel Prize in economics Monday, Oct. 13, 2008.    (AP Photo/Mel Evans)

Even before the full details were released, critics were bashing the Treasury's public-private asset purchase plan; Paul Krugman predicted it would fail and lead the country into depression (not to speak of the writer into despair). Steven Pearlstein begs to differ, and the markets seem to agree. For the Washington Post columnist, the Geithner plan is better than nationalization: There's now "a good chance of bringing significant amounts of private capital back into the financial system."

It's fair to say that the government is shouldering most of the downside risk—but Washington had to in order to lure spooked investors at all. With added liquidity we should see that asset-backed securities aren't worthless, and even for those that are, "nationalization doesn't make the bad loans go away." And if nothing else, at least "the conversation has turned from AIG bonuses to the question of how to revive the global financial system." (More Timothy Geithner stories.)

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