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Good analysis of bailout
From: David Farber <dave () farber net>
Date: Sun, 21 Sep 2008 10:39:55 -0400



Begin forwarded message:

From: "Dave Wilson" <dave () wilson net>
Date: September 21, 2008 9:52:04 AM EDT
To: "David Farber" <dave () farber net>
Subject: Good analysis of bailout

I'm speaking solely for myself here...

Paul Krugman, an economist who writes a column for the NYT, also writes a blog (how does this guy get his real work done? Actually, Dave, how do *you* get *your* real work done :-) ?)

Anyway, Krugman has a very interesting analysis of the bailout proposal here:
 http://krugman.blogs.nytimes.com/2008/09/20/no-deal/
Summary: He's terrified.

With regard to a question asked Saturday (how much will this cost) Krugman has a diagram here:
http://krugman.blogs.nytimes.com/2008/09/20/follow-the-money/
explaining where the money will come from and how it will be used, that gives a better feel for how the bailout will be funded. It also explains why it's difficult to even estimate costs at this point, since the entire process is supposed to take toxic items off balance sheets, hold them, massage them, and then put them back on the market at a later point for sale. As David M. Herszenhorn writes in Sunday's NYT, "The ultimate price tag of the bailout is virtually impossible to know, in part because of the possibility that taxpayers could profit from the effort, especially if the market stabilizes and real estate prices rise." http://tinyurl.com/3rhjsj

I personally think that's wishful thinking to the point of delusion myself, but it's certainly true that in the past when governments have taken over failing companies to steady markets and later disposed of their assets taxpayers have technically come out ahead.






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