Tax cheat aka Treasury Secretary Tim Geithner failed the laugh test today as markets sunk dramatically.
The supposed growth sector of our economy, the NASDAQ, is sitting at 1550, folks – down from its peak a decade ago at 5000. The Dow is now below 8000 and no floor has yet been established.
The big banks are sinking fast. As Paul Krugman admitted on the News Hour many of these banks are insolvent and will have to be shut down.
Yet it appears that Obama is dead set on avoiding the nationalization road. But there is no other way. The bad assets have to be dealt with – written off, so that new cash can come into the system and be invested in socially useful ways.
However, Obama and Geithner fear the political implications of dealing with those assets in a final and lasting manner.
To call for nationalization is to open up a new political debate that this country has not had since the 1930s – if the government takes over the financial centers then what will they do with them? Does it make sense to take them over – as even mainstream economists like Harvard’s Ken Rogoff suggested today should happen – and then clean them up and hand them back to a free market that caused the problem in the first place?
So while Obama fiddles and Rome burns, the markets today did what they do best – sent up a giant Bronx cheer to their former NY Fed friend Mr. Geithner. His plan was dead on arrival on C-Span.