Sunday, April 05, 2009

Bankers vs Economy

Distinguished economics professor at Berkeley, Brad deLong, in his famous blog, defended Geithner's Public-Private Investment Program (PPIP)  saying: "Do we want to revive the economy or do we want to punish the bankers?  I don't think we can do both."

Geithner's much criticized PPIP,  by many analysts including myself,  is an amazing Xmas gift to the "bad guys" on Wall Street and to an exclusive, privileged group of Wall Street investors who get to buy toxic assets largely with taxpayers' money with minimal downside risks but with substantial upside rewards.

Professor deLong's defense is disingenuous because the choice is not black and white.  

We are not punishing "bankers" in their aggregate, only those policy setting senior managers who oversaw the demise of Wall Street.  There are plenty of bankers who can stop up to the plate to run their respective firms if only they were given a chance.  

Obama did fire the chair of GM and demanded the board of GM to be replaced.  Yet, he did not do any of this for Wall Street firms receiving public aids.  On the contrary, he went out of his way to invite the 20 odd financial leaders to the White House asking for their "help" to  get out of the crisis.  He didn't do that for Detroit.

Asking for Wall Street help is roughly equal to asking the arsonists who had set fire to the building to help the fire department to put out the fire. 

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