Read Krugman and you get the sense that he will sacrifice almost anything, logic included, to have another go at the George Bush administration. Many, many examples can be given. Let’s take the latest one: the column he wrote a day before he got the Nobel. Krugman praised the British government’s bank bailout strategy — buy equity and therefore infuse funds — and said the Bush administration was hamstrung by its ideology and is only now being forced into taking the same route.Let’s examine this a little closely. The Paulson-Bernanke plan on buying up toxic financial assets was greeted by howls of protest from the right and the left in America. The right protested because it didn’t want any Government support for failed firms. The left protested because it thought government support was a parachute for crooked, greedy bankers. Would a plan that from the beginning spoke of injecting government equity on a mass scale into all big US financial firms have found political acceptance at that time? Plus, it is not as if the Paulson-Bernanke team (Krugman blames Paulson more) was ideologically inflexible on emergency government takeover. What happened to AIG? What happened to Fannie Mae and Freddie Mac? And as for the apparently unwavering brilliance of Britain’s Labour government, it let Northern Rock go under when clearly it should have saved that financial institution.
The sensible thing to observe here is that in this crisis everyone is stumbling and learning, the Bush administration included. The Germans first said Europe could not have a financial crisis like America, then a week later rescued one of their biggest financial firms, then said a Europe-wide plan to buy equity into banks was a bad idea, and now has come up with a big chunk of money to do precisely that. Does that make the German government a schizophrenic incompetent or just another government trying to understand on the fly how to deal with a biggest financial crisis in 75 years? So why only pick on the Bush administration?
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