I Agree With Krugman

Shudder to think.

Yes, I just read a recent op-ed from Krugman - available here. I have to say, for the most part, I agree with him completely in this article. The Obama administration, in concert with the Federal Reserve, continue to "dither" along - avoiding the "bold action" which has been promised.

At this point, whether we like it or not, we must realize that ad hoc injections of taxpayer dollars will not fix the banking system and do not qualify as bold action. Despite Ben Bernanke's claims, we have a system of "zombie" banks. These banks are dead (bankrupt) and are being fed brains (taxpayer dollars) by the Fed and Treasury. And speaking of the Treasury, Tim Geither's claims that the "toxic" assets are undervalued is simply not a plausible explanation. Sure, some of the assets are undervalued, some are overvalued. But, it is nearly impossible to determine the value of these assets with the corporate lies, government guarantees, and lack of clarity which distorts market action.

The only bold actions which will help us at this point are ones which allow the market to cleanse itself. That means significant pain (we're going there anyways) by letting the banks go bankrupt. We need to put a bullet through the head of each zombie.

I'll leave you with Krugman's words:

[O]fficials still aren’t willing to face the facts. They don’t want to face up to the dire state of major financial institutions because it’s very hard to rescue an essentially insolvent bank without, at least temporarily, taking it over. And temporary nationalization is still, apparently, considered unthinkable.

But this refusal to face the facts means, in practice, an absence of action. And I share the president’s fears: inaction could result in an economy that sputters along, not for months or years, but for a decade or more.

Let's kill the zombies.