We Need a Better Wall Street Deal

"Daddy Doesn't Know Best," says Krugman on his blog this morning. I am feeling much better today, after seeing such deep resistance to Treasury Secretary Paulson's brazen power grab (and there's really little else it can be called). When you've lost Newt Gengrich to your cause, Mister Republican, the game is up.

So at least the chances are better for a good deal to be worked out, certainly one far better than this fit of madness from the Bush White House. I am so sick and tired of these petty princes who try to scare us into handing them a crown. America is still a democracy, last time I checked. Handing near dictatorial power to Treasury would be absolute madness, even more so than simply handing out free checks to Wall Street gamblers. We need a fair deal.

Here's Krugman's post in full:

I’ve had more time to read the Dodd proposal — and it is a big improvement over the Paulson plan. The key feature, I believe, is the equity participation: if Treasury buys assets, it gets warrants that can be converted into equity if the price of the purchased assets falls. This both guarantees against a pure bailout of the financial firms, and opens the door to a real infusion of capital, if that becomes necessary — and I think it
will.

Can this be done? Can the Paulson juggernaut be stopped? I’m starting to think yes. Paulson displayed a lot of arrogance here — he basically marched in and said Daddy knows best, don’t worry your pretty little heads about the details. He offered no, zero, zilch explanation of how the plan was supposed to work — just “it’s a crisis and we need to act now.” And he overreached, especially with that demand for immunity from any review.

Now we’ve had a lot of pushback from economists and financial analysts,
and the realization has sunk in that this particular daddy has shown very little
sign of knowing best. So there’s a real chance to do something quite different.