Doug Holtz-Eakin Talks Sense About AIG, the TARP, and Bank Nationalization

Now that the McCain Campaign Parasite has been removed from his brain, he is back to normal–and definitely worth listening to:>Doug Holtz-Eakin: I remain convinced that the financial crisis is the greatest threat to the U.S. economy. It should be the top policy priority and, since I think it will be very expensive, the top budgetary priority as well. Unfortunately, at the moment it does not appear that either the public or the Congress displays any willingness to devote more taxpayer dollars to addressing the crisis. We need to shift the policy tactics and the public perception right now.>The right thing to do is to apply the principles of responsibility and competition… failed, insolvent banks cannot be permitted to continue to operate using taxpayers’ subsidies. Letting these “zombies” walk the financial system was at the heart of the savings and loan crisis and the slow Japanese recovery from its financial crisis. These institutions should be taken over, their management and shareholders suffer the consequences of their failure, and the assets re-sold to private sector entities as fast as is feasible. That’s good policy: discipline failure, promote real competition, and use assets effectively in the private sector. (Adam Posen is really smart on this topic. Read his testimony, here.)>Doing business that way eliminates “bailing out the banks” and “saving AIG” from the public discussion, and hopefully will make taxpayers more willing to open their wallets to solving the problem….>The other key aspect of this strategy is the rapid-as-possible sale of assets to the private sector…


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