On Mar 28, 2011, at 10:56 AM, MICHAEL YATES wrote:
>
> Interesting piece by Dean Baker criticizing Robert Samuelson'a argument about the low cost of the TARP:
>
> http://www.cepr.net/index.php/beat-the-press/
I agree that nationalizing the banks would have been wonderful, but we would have to be living in a very different country for that to have happened.
Dean criticizes Samuelson for not doing an opportunity cost analysis, which is correct, but he offers only a hypothetical in response. I don't recall the gov offering money at below-market interest rates - I thought they were market or a little higher. It would have been nice if he'd run the actual numbers, but that might undermine his argument.
Also, the counterfactual no-TARP unemployment rate of 11-14% isn't outlandish. Dean: "These numbers are based on a counter-factual in which the government and the Fed let the financial system collapse and then did nothing by way of response." What response, exactly? Had things gone way south, a lot of damage could have been done - just what would the gov have done in response? It's not clear that a post-disaster response would be more effective than a pre-disaster one. He sounds a little like Greenspan saying there's no sense in preventing bubbles from getting out of control, because we can always do after-the-fact rescues.
Doug