This morning Paul Krugman complains that the Obama Administration is dithering instead of coming up with plans that actually have some chance of fixing the financial system:
The reality is that when it comes to dealing with the banks, the Obama administration is dithering. Policy is stuck in a holding pattern.
Here’s how the pattern works: first, administration officials, usually speaking off the record, float a plan for rescuing the banks in the press. This trial balloon is quickly shot down by informed commentators.
Then, a few weeks later, the administration floats a new plan. This plan is, however, just a thinly disguised version of the previous plan, a fact quickly realized by all concerned. And the cycle starts again.
Why do officials keep offering plans that nobody else finds credible? Because somehow, top officials in the Obama administration and at the Federal Reserve have convinced themselves that troubled assets, often referred to these days as “toxic waste,†are really worth much more than anyone is actually willing to pay for them — and that if these assets were properly priced, all our troubles would go away.
I suggested the reason for this some time ago: Tim Geithner continues to look at things from the point-of-view of a banker and the banks truly, genuinely do not want to mark these assets to their market value. If they did that, an enormous amount of water would simply disappear from their books and they’d be insolvent.
This is to be expected. People don’t stop doing the jobs they have been doing for their entire careers simply because their job titles change. Getting promoted means you’ve been successful and why change what’s been working for you?
Heck, people are reluctant to change what they’ve been doing even when they fail let alone when they succeed. Note, too, that this is the reason for the perpetual campaign. It’s worked so far, hasn’t it?
Waiting for Godot.
And we know how that turned out.