Krugman Praises Brown, Questions Bush and Paulson

On the day it was announced that he had won the Nobel Prize for Economics, Paul Krugman joins NDN in singing the praise of Gordon Brown and in asking the question the public, the media and Congress must be asking - why did this White House get it so wrong?

At a special European summit meeting on Sunday, the major economies of continental Europe in effect declared themselves ready to follow Britain's lead, injecting hundreds of billions of dollars into banks while guaranteeing their debts. And whaddya know, Mr. Paulson - after arguably wasting several precious weeks - has also reversed course, and now plans to buy equity stakes rather than bad mortgage securities (although he still seems to be moving with painful slowness).

As I said, we still don't know whether these moves will work. But policy is, finally, being driven by a clear view of what needs to be done. Which raises the question, why did that clear view have to come from London rather than Washington?

It's hard to avoid the sense that Mr. Paulson's initial response was distorted by ideology. Remember, he works for an administration whose philosophy of government can be summed up as "private good, public bad," which must have made it hard to face up to the need for partial government ownership of the financial sector.

I also wonder how much the Femafication of government under President Bush contributed to Mr. Paulson's fumble. All across the executive branch, knowledgeable professionals have been driven out; there may not have been anyone left at Treasury with the stature and background to tell Mr. Paulson that he wasn't making sense.

Luckily for the world economy, however, Gordon Brown and his officials are making sense. And they may have shown us the way through this crisis.

 

Comments

As the economic stimulus package moves to the Senate, the drumbeat is growing louder for new provisions that directly address the housing crisis. Foreclosure prevention has been a hot topic since the housing bubble burst.  The rate of foreclosure has gone up drastically, and a lot of people are wondering just how they can avoid it if they fall on hard times.  Well, those that qualify can apply for aid through the stimulus package, but you have to prove that you qualify.  You have to provide proof of financial hardship, and also that the mortgage payments, unsecured personal loans, or otherwise, have unreasonable rates.   If so, you may qualify for loan modification, which can lower the interest rates or extend the terms of the loan, which may keep qualified persons out of foreclosure.