Worried

Nobel Prize-winning eonomist Paul Krugman is worried Obama's team is barking up the wrong abacus for our banks. If it's really just a panic attack, he argues in yesterday's New York Times, then maybe the administration can get away with buying up toxic assets and "make the banks look solvent again." But if the banks really have made bad investments, "this won't work at all."

"To keep the banks operating," he argues, "you need to provide a real backstop — you need to guarantee their debts, and seize ownership of those banks that don’t have enough assets to cover their debts; that’s the Swedish solution, it’s what we eventually did with our own S&Ls."

"Why am I so vehement about this?" he concludes. "Because I’m afraid that this will be the administration’s only shot — that if the first bank plan is an abject failure, it won’t have the political capital for a second."