I don't know if it will work (and I don't see why, to make it work, the government needs to spend all $700 billion). But I don't think both Krugman and Mallaby can be right about why it won't work.
5) Mallaby worries that the government might prop up "the sickest institutions." But in a "reverse auction," in which the government was not overpaying, wouldn't it be mainly the healthiest institutions who could take the low price and still be happy to get the toxic assets off their balance sheets? Or would, in fact, only the weakest and most desperate institutions jump at even a lowball offer?
I don't know the answer. If I did I'd have 13 cars by now. ...
Update: This WaPo analysis is very useful. It doesn't resolve any of the issues, but confirms that the issues, and others, really are issues! ... Key point-: A "reverse auction" is tricky because the securities offered will be different in complicated ways. Hard to compare. But the same--on a lesser scale--goes for houses, no? There's still a market for them. The government would presumably do the best it could, with more of a cushion for error than a typical private buyer (but also with a lot of discretion that could be used to reward friends, etc.).. .... 9:26 P.M. link
Friday, September 19, 2008
Don't unpanic yet, Dems: I know state-by-state polling sometimes lags. But after a week as tumultuously favorable to the Democrats as this past week, if I were an Obama supporter--wait, I am!- I'd want the electoral map to look a whole lot better than this. Or this. ... 3:19 P.M.
His theory is that when racially charged issues like welfare and crime dominated the political rhetoric, racial factors affected voting behavior and the Wilder effect asserted itself. But once welfare disappeared as a salient issue in 1996, political discourse was deracialized and race was less of a factor in voters' mind.
Such a deracializing effect was not unanticipated (if, for example, you read Thomas and Mary Edsall's Chain Reaction.) ... All the more reason for Obama to present himself as a strong welfare reform supporter, whether or not he actually was one in 1996. ... 3:11 P.M. link