Stop Stalling and Nationalize Bailout Banks: Krugman
The sooner we take over zombie banks, the better, says Krugman
By Jason Farago,  Newser Staff
Posted Feb 23, 2009 9:24 AM CST
U.S. Treasury Secretary Timothy Geithner meets journalists at the end of the G-7 (Group of Seven) Finance Ministers and Central Bank Governors meeting, in Rome, Saturday, Feb. 14, 2009.   (AP Photo/Pier Paolo Cito)
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(Newser) – The case for temporarily nationalizing some of America's biggest banks is so persuasive that even Alan Greenspan, the baron of laissez-faire capitalism, thinks it's a good idea. Yet the Obama administration keeps proposing half-measures and workarounds. New York Times columnist Paul Krugman says the government should get it over with: "The longer we live with zombie banks, the harder it will be to end the economic crisis."

Citigroup, Bank of America, and other giant banks should already have failed, says Krugman, and only survive because "the government is acting as a backstop, implicitly guaranteeing their obligations." Only massive capital injections can save them—and for that price, the taxpayer deserves to own the institutions. The FDIC has already taken over smaller banks, Krugman notes; now, only temporary nationalization can prevent another Lehman-style collapse of banks "dangerously close to the edge."