Chelsea Green Publishing

Chelsea Green Blog

The New Yorker: Did Geithner’s Plan Work? Bob Kuttner Weighs In

Experts agree the economy is slowly beginning to right itself, albeit without creating jobs (sadly, there’s no telling how long that particular indicator is going to lag). Can we conclude then that Treasury Secretary Timothy Geithner’s plan was an unequivocal success? The New Yorker asked Robert Kuttner, cofounder and coeditor of The American Prospect magazine and author of the forthcoming A Presidency in Peril: The Inside Story of Obama’s Promise, Wall Street’s Power, and the Struggle to Control our Economic Future, for his take.

Without a successful stabilization of the banking system, even a modest recovery would have been inconceivable. Still, some economists insist that nationalization would have produced an even better outcome. “While the Obama Administration had avoided the conservatorship route, what it did was far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses,” Joseph Stiglitz, a Columbia economist who served in the Clinton Administration, writes in his new book, “Freefall: America, Free Markets, and the Sinking of the World Economy.” Stiglitz goes on, “The government response has set the economy on a path to recovery that will be slower and more difficult than need be.”

Stiglitz could be right—since history happens only once, there is no way to know for sure. But his argument raises several issues. Contrary to widespread belief, the Obama Administration never ruled out nationalization; it simply made it a policy of last resort. Last April, at an off-the-record dinner at the Brookings Institution, Larry Summers was confronted by a number of economists who believed that the financial crisis would not end unless the government took over stricken banks. Summers told the critics that if they were proved right in the following months the Administration would move toward nationalization, and the wait would exact some cost to the economy. But if they were wrong and the Administration moved now it would be like amputating limbs that might instead be saved with strong medicine. “Today, with all of the major financial institutions having a market capitalization of more than a hundred billion dollars and the economy growing again, the judgment not to nationalize but to put an enormous emphasis on raising private capital looks to have been effective,” Summers told me a couple of weeks ago. “I think the critics were wrong, and that Tim’s leadership helped us avoid a lot of things that could have been very damaging.”

The experience of other countries that have taken over banks, such as Sweden, Norway, and the United Kingdom, shows that it can be done quite effectively. Northern Rock, which the British government nationalized in February, 2008, is operating fairly well. Conceivably, the U.S. government could have seized control of some big banks, forced them to boost lending more rapidly, and, eventually, split them into pieces and sold them off, thus alleviating the too-big-to-fail problem. “It would have been temporary ownership and genuine restructuring,” Robert Kuttner, the author of the forthcoming book “A Presidency in Peril,” said. “You would have had more money going out to the rest of the economy sooner, and you would have had an honest accounting for losses. The problem with doing what we did, kicking the can down the road, is that you have these wounded institutions that are very parsimonious with credit, and, even today, nobody knows what their real state is.”

Read the whole article here.

 
Related Article:


A Minority President: Why the Polls Failed, And What the Majority Can Do

What’s next for the majority of voters who didn’t vote for Donald Trump? There are plenty of takeaways from the 2016 presidential election, but here is perhaps the most thorough examination of why the polls failed, why Hillary Clinton’s campaign failed, and what the majority of voters can do going forward. George Lakoff is the […] Read More

Prehistory of the Next American Revolution

What now? A new Revolution? If we are to counter the dangers both of corporate domination and of traditional forms of socialist statism, decentralization is essential—both of economic institutions and of political structure. We are at a point in our nation’s history that could, decades from now, be taught as the prehistory of the next […] Read More

The Seven-Point Protocol for a Lean Economy

In the future, what will our local economies look like? How will they function if there is little, to no, state or national support? The late David Fleming envisioned a post-capitalistic society that we could call “deep local” — in which all needs are met at the local level — from income to social capital […] Read More

Happy Holidays from Chelsea Green Publishing!

Today we kick off our Holiday Sale — with 35% off every purchase at our online bookstore. Simply use the code CGS16 at checkout from now until the end of the year. Along with this great discount, we are offering free shipping on any order over $100*. Are there homesteaders or organic gardeners on your […] Read More

You won’t have a revolution if you don’t ask for one. So, what are you waiting for?

Get ready for the era of Big Organizing. In Rules for Revolutionaries, authors Becky Bond and Zack Exley lay out the 22 Rules the fueled the Bernie Sanders campaign and which provide a way forward for activists looking for ways to move forward post-Election Day. This model, which the authors call “Big Organizing” is the […] Read More
Follow us
Get every new post delivered to your inbox
Join millions of other followers
Powered By WPFruits.com