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Wall Street Voodoo

"The old gives way to the new as the snow gives way to the spring." (Rilke)
"..(P)olicy makers possibly without realizing it are gearing up to attempt a bait-and-switch: a policy that looks like the cleanup of the savings and loans, but in practice amounts to making huge gifts to bank shareholders at taxpayer expense, disguised as "fair value" purchases of toxic assets.

Why go through these contortions? The answer seems to be that Washington remains deathly afraid of the N-word nationalization. The truth is that Gothamgroup and its sister institutions are already wards of the state, utterly dependent on taxpayer support; but nobody wants to recognize that fact and implement the obvious solution: an explicit, though temporary, government takeover. Hence the popularity of the new voodoo, which claims, as I said, that elaborate financial rituals can reanimate dead banks.

Unfortunately, the price of this retreat into superstition may be high. I hope I'm wrong, but I suspect that taxpayers are about to get another raw deal and that we're about to get another financial rescue plan that fails to do the job.


to read Paul Krugman's article published in: The New york Times, Jan 19, 2009, visit
 link to www.nytimes.com

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