MELTDOWN

Geithner Plan an ‘Awful Mess’

Krugman laments: Zombie ideas have won.

Remember a few weeks ago, when the markets tanked after the rollout of Tim Geithner’s plan to save the economy? Well, his rescue has now leaked in detail, and it’s “an awful mess,” writes Paul Krugman. “The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system.” Geithner is planning to create funds “in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad—I mean misunderstood—assets,” the Nobel winner writes. But instead of leading to fair prices, they’ll have skewed incentives—with the taxpayer taking on all the risk. The almost certain failure of Geithner’s plan, writes Krugman, will doom any future solution to an early death in Congress.