The government can either act quickly, the way the Swedes did when they faced a similar financial collapse; or the government can belatedly take banks over after delaying and trying half-measures, the way the Japanese did it. The Swedish economy got back on track and the banking system was returned to private ownership in fairly short order. The Japanese economy bled for a decade.
Why is Geithner dithering? Because he is asking the wrong question. The question he is posing is: how can the government save Citigroup? The right question is: how can the government rebuild the banking system?
Some in the administration may be wishing that they hadn't called in so many chits with senators to save Geithner from the consequences of his failure to comply with the tax laws. On the ability of Geithner (or his successor) to get this job done properly hangs the fate of the banking system, the capacity of the economy to avert a depression, and the political fortunes of the Obama administration.
Monday, March 02, 2009
Liberals seem to be turning against Geithner...at least Robert Kuttner is.From the Huffington Post: