Roubini, aka "Dr. Doom," likes the bank bailout plan

Nouriel Roubini, who warned of the problem of foreclosures and toxic assets months ago, see positives in the current plan, which is now being called Public-Private Investment Program (It's a PIPP!).  Partly, this is because the public/private partnership aspect of the plan will help determine the best price for troubled assets, which means that banks' balance sheets will be public knowledge and we'll know which ones are truly in bad shape and which ones aren't, and partly because, for those that aren't, it also leaves the door open for nationalization.

“I see the option of nationalization” and the one presented by the Obama administration “as being complementary,” Mr. Roubini said. He believes that the stress tests the government plans on conducting on the banks will reveal which are solvent and which are insolvent.

In his view, those banks that are deemed insolvent will not participate in the toxic-asset plan and will be taken over by the government. Banks deemed solvent will be the ones that get to participate.

Comments

[Hypatia]

And in the meantime billions of taxpayer dollars are going God knows where. I wouldn’t go so far as to say Roubini liked it - his piece was heavy with qualifications – but he’s not God, anyway. As far as I can tell the only thing you can say is that it might work, at great cost and great risk to the taxpayers and great benefit to the bankers, with whom the government is now “partners” as Liddy put it to Congress the other day. Nice windfall for some people, crossed fingers and a big hunk of debt for the rest of us.

[John Petty]

I agree with you, but I'm holding out hope that the thing might work.

[Hypatia]

I guess it depends on how you define ‘work.’ As it is, it’s clear that the large sums of money Wall Street has given to both political parties and especially to Obama in the past election are paying off beautifully and even if the country survives this we have just had an impressive practical demonstration of the fact that the government of the United States is bought and paid for and the bankers call the tune.

[John Petty]

Funny you should say that. I was just thinking this morning about how the financial crisis could split the Democratic Party.